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Operator: Welcome to the earnings call of SUSS Micro SE following the figures of 2025. I would like to welcome the company's CEO, Burkhardt Frick; the CFO, Dr. Cornelia Ballwießer; the COO, Dr. Thomas Rohe; and IR, Sven Kopsel, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Kopsel. Sven Kopsel: Thank you so much, and welcome to our full year conference call after today's release of our annual report 2025, including our outlook for the new financial year. First of all, one personal note from myself after 3.5 years with SUSS in total, 4 annual reports, 2 Capital Market Days and yes, countless investor and analyst interactions, today marks my final conference call with SUSS. While I truly love the company, I have decided to take on an exciting new role in a different listed German company as of May. So April 24 will be my last day at SUSS, and my colleague, Florian Mangold, will continue to be available to you as your point of contact. Now back to the official part. As you probably know from earlier calls, this call is being recorded and considered as copyright material. It cannot be recorded or rebroadcast without permission and participating in this call implies your consent to this procedure. Please be aware of our safe harbor statement on Page 2 of the slide deck. It applies throughout the conference call. And now I hand over to Burkhardt, our CEO, for some opening remarks, followed by our CFO, presenting the financial development. Burkhardt, please? Burkhardt Frick: Sven, many thanks, and also thanks for your great contribution over the past 3.5 years. We really enjoyed you having on board, and I'm sure you will have an exciting future ahead of you. So thanks a lot from my side. Let's now start with an overview on the key financials for 2025. Our order intake ultimately came in at EUR 354 million, more on this shortly with a particular focus on the fourth quarter. Revenue recorded at EUR 503 million, once again, a double-digit growth and exceeding EUR 0.5 billion for the first time. Profitability with a gross profit margin of 35.7% and an EBIT margin of 13.1%, we came short of our initial margin expectations. However, we did meet our most recent guidance. Now a few more words on revenue. EUR 503 million marks another record revenue figure and an all-time high for SUSS. Even more important, we have increased revenue over the past 2 years from around EUR 300 million to EUR 500 million, an increase of EUR 200 million. SUSS is now a significantly larger and more capable company. We are a growth company, and we intend to resume this growth in the midterm. Regarding order intake, in November, I stated that we could achieve EUR 100 million in order intake in the fourth quarter. We now can confirm an order intake of EUR 117.5 million. The book-to-bill ratio was thus around 1. Both segments contributed to the improved order situation with AI being the dominant driver, both in terms of HBM and CoWoS. Further good news, this positive momentum has continued into the first quarter of 2026. Now on profitability. We explained the deviation from our original plans during the Q3 conference call. And as we said in the Capital Markets Day in mid-November, we introduced the new product generations and innovative solutions to achieve a substantial improvement in margins. That's why we are very much looking forward to the next 2 to 3 years and the multiple launches we have lined up. Now let's take a look at the performance of our 2 segments. First, Advanced Backend Solutions. Order intake was approximately EUR 25 million lower than in the previous year and was distributed fairly evenly across the 3 product lines: imaging, coating and bonding. Demand for our imaging systems, specifically for UV projection scanner used in CoWoS process remains strong. Demand for bonding solutions was lower than in previous year, but has improved since the fourth quarter. Revenue grew by 10.7% to around EUR 350 million, while bonding was below 2024. Imaging and Coating Systems contributed the most significant growth, each posting an increase of more than 50% compared to the previous year. Profitability was significantly lower than in previous year, primarily due to weaker product and customer mix, strong growth in Imaging and coating and the frequently mentioned increased temporary ramp-up support provided to our customers for already installed tools as well as the establishment of our new production facility in Taiwan. Now to Photomask Solutions. Order intake of approximately EUR 80 million was significantly down by EUR 43.5 million from the previous year. Out of this number, EUR 31 million was due to lower orders from Chinese customers. However, Q4 showed an improved trend versus Q2 and Q3. Revenue growth of 17.3% to over EUR 150 million is very encouraging. Thanks to our improved operational capabilities, we have further significantly reduced our backlog and accelerated the completion of customer projects. Higher sales volume and an improved product and customer mix also led to a 5% point increase in the gross profit margin and an 8% point increase in the EBIT margin. Now let's zoom in on the fourth quarter of 2025. I already mentioned the positive order intake of EUR 117.5 million, reversing the negative trend of the first 3 quarters. Of this amount, EUR 92 million was attributable, difficult word, to the advanced back-end solutions and EUR 25.5 million to Photomask Solutions. We once again received several orders for our UV projection scanner for CoWoS process as well as for HBM-related follow-up orders, particularly for one of our memory customers. Orders for our mask aligner from customers in mainstream applications have also improved significantly. It may still be too early to speak of a turnaround in this business, but this was certainly a strong intake quarter. Revenue of EUR 119 million was almost unchanged from the third quarter of EUR 118 million. This demonstrates our significantly greater stability when it comes to executing customer projects. Gross profit margin remained low at 34.9%, though it improved slightly compared to the third quarter, where we had 33.1%. EBIT margin was 9.8%, which was slightly lower than Q3, but still better than we originally had expected. To wrap up the first part, here's a look at our new production facility in Zhubei, Taiwan, which is already fully operational. Following the opening ceremony at the end of October, all relocation work has since been completed. As planned, we returned all existing locations to our landlords by the end of February. We delivered the first tool made in Zhubei, a UV projection scanner to our customer already in February. Production is now in full swing, as you see on this picture, about 10 tools were built in Zhubei during the first quarter in 2026. Further capacity increase is under preparation. Q1 '26 is, therefore, also the last quarter in which the P&L will be impacted by the implementation of the new site. And with that, I hand over to Cornelia for some details on our financial development. Cornelia Ballwießer: Thank you, Burkhardt, and also a warm welcome from my side to all of you. Here, you see our key financial figures. First of all, I would like to point out that the previous year figures have been adjusted due to accounting changes made in the connection of the preparation of the 2025 consolidated financial statements. These changes are explained in detail in the notes in our annual report, which has been published today. The adjustments for fiscal year 2024 in short are a sales adjustment amounted to plus EUR 0.5 million. Gross profit was adjusted by minus EUR 1.5 million and EBIT by minus EUR 0.5 million, and net income was adjusted by EUR 0.4 million. In a nutshell, the main changes are based on a more detailed approach to revenue recognition. In particular, installation service following the delivery of our tools and upgrades are no longer recognized on a point-in-time basis, but rather on a period basis. This is from shipment to final acceptance by the customer. The second significant change was made to the provision for the equity-based compensation, which is now recognized on a pro rata temporary basis over the entire 4-year period, the vesting period rather than at the time of the grant of the virtual shares at their estimated value. This resulted in an adjustment of plus EUR 1.2 million in EBIT. And now let's have a look on our financials here on the screen. The order book was EUR 266.8 million at the end of 2025. The vast majority of these orders will be produced, delivered and recognized as revenue throughout 2026. Expenses for selling, administration and R&D increased from roughly EUR 100 million to EUR 118 million in 2025. The main reasons were an increase in R&D, plus EUR 7 million spending to support several product and technology development projects and for IT and digitalization projects, such as the mitigation of our ERP system. But that's not all. There are some other systems we introduce. And the full cost impact of new hires made in 2024 has an impact or the full impact in 2025. Net profit amounted to EUR 46.1 million in 2025, down from EUR 110 million in 2024 when the sale of the MicroOptics business had resulted in a significant onetime gain. Cash and cash equivalents were at EUR 98.7 million and compared to 2024, reduced by EUR 33.5 million. And this mainly because of a significant lower prepayments from our customers and of course due to our CapEx in 2025. Net cash amounted to EUR 49.1 million in 2025. And this is because of the deduction of the leasing liability from the lease agreement for our new Zhubei site which caused this decline. Free cash flow from continuing operations was EUR 20.6 million (sic) [ EUR 22.6 million ] in 2025 and in total at minus EUR 26 million. The fourth quarter was cash flow positive at EUR 5.6 million, but that was not enough to bring the figure back to 0. As our dividend policy is based on free cash flow and is designed for a payout of 20% to 40% of this figure, a dividend of EUR 0.04 per share will be proposed to the Annual General Meeting in June. CapEx increased to EUR 23.2 million in 2025, driven in particular by our new site in Zhubei. Now let's move to the development of our main financial KPIs over the fiscal year. Please be aware of that the '25 quarterly figures are as reported. This means they are not restated. In our reporting, in 2026, all prior year figures will be restated. Burkhardt has already mentioned the significant improvement in order intake in the fourth quarter of 2025. While this can certainly be attributed to seasonal factors and a traditionally strong fourth quarter, it is all the more important that we are able to confirm this improved demand in the coming months. We have already discussed profitability in the past. This overview clearly shows that profitability came under pressure particularly in the second half of the year. The decline in the second half of the year is not unexpected. The weak order intake in the first 2 quarters and the shift in its composition as well as some nonrecurring items and extra costs are clearly evident here. To achieve a significant improvement, we are working on new higher-margin product solutions, which will only begin to gradually impact the P&L starting in 2027. In both segments, we have an order intake trend reversal with strong bookings in both divisions versus previous quarters, and this trend continues in the first quarter. Photomask Solutions benefited in the fourth quarter from product and customer mix, also in connection with upgrade and service business and from some currency gains. The fourth quarter of Advanced Backend Solutions, a lower top line in the fourth quarter than in the third in combination with very negative product mix affected gross profit margin and EBIT margin. There were a lot of UV scanner, but we had the lowest amount of bonus in the fourth quarter. As you know, the double rental costs for the new fab in Zhubei affected the result. And in addition, write-offs for clean room equipment in our old Hsinchu site, which cannot be used in our new fab in Zhubei. This impacted the result in the fourth quarter. And also R&D expenses rise in the fourth quarter to support future growth projects. The R&D expenses also left the mark on the fourth quarter, especially projects for left chamber improvements and for a CoPoS project. On this side, we see our order intake by segments and regions. The order intake by region shows a familiar pattern. The APAC region once again accounted for the largest share of new orders at around 77%, with Taiwan as a dominant contributor. The remainder was distributed relatively evenly between EMEA and Americas. Now I would like to present the main balance sheet developments. Total assets increased by EUR 7.6 million. For the noncurrent assets, the main driver was the Taiwan expansion with the right-of-use asset and CapEx for the interior layout of the building in Zhubei. And as well, there were some CapEx in Europe, around EUR 8 million, mainly in Germany. In current assets, we have a decrease by EUR 54 million to a total volume of EUR 386.7 million. Inventory declined by EUR 39.1 million on a year-on-year basis and amounted to EUR 171.6 million at the end of '25. Contract assets and trade receivables in total increased by EUR 20.6 million. Cash and cash equivalents decreased, as I said, by EUR 37.5 million and of course, due to free cash flow of minus EUR 26 million. And of course, of the dividend payments in the last year and some repayments of our financial debt together in the amount of around EUR 10 million. On the liability side, the main changes already happened in the second quarter with the inclusion of the leasing liabilities from the Taiwan site. In noncurrent liabilities, the main driver was this lease liability for the Zhubei site. Current liabilities decreased at the same time, minus EUR 60.2 million. Here, the major drivers were lower prepayments from our customers who supported last year's steep ramp. And now we have less orders from customers, which usually accept prepayments. Equity increased by EUR 32.5 million, and equity ratio was at 62.2% at the end of December '25, which means that we have improved the equity ratio by 5.6 percentage points. Net income contributed with EUR 46 million and other comprehensive income and dividend payments amounted to minus EUR 13.7 million. And finally, I would like to give you a brief overview of the new syndicated loan, which we announced back in mid-February. Despite the current healthy liquidity position, it is very important for us as a company to increase our financial flexibility to finance further growth and to maintain sufficient reserves to cover industry typical fluctuations. We achieved this with the new syndicated loan agreement and the volume has roughly doubled to EUR 115 million, thereof EUR 85 million for revolving credit facility and EUR 30 million for guarantees. The new contract has a term of 5 years with 2 optional 1-year extension periods. We are now even better positioned to support our growth plan and we have sufficient buffer against industry-specific fluctuations as well as against a general deterioration in economic conditions and economic cycles. Finally, we had significantly reduced the liquidity risk. And now I gave back to Burkhardt, who will present the outlook for 2026. Burkhardt Frick: Thanks, Cornelia. As you said, I now would like to come to the guidance overview. As said before, 2026 will be a transition year. After that, we expect to resume our growth path. Forecasted sales range of EUR 425 million to EUR 485 million, indicating a decline of 9.6% at the midpoint of the range. We see a broadly stable gross profit margin of 35% to 37%, but a declining EBIT margin of 8% to 10%. On the next 3 pages, I will provide a bit more color on all 3 KPIs. First, on the sales guidance of EUR 425 million to EUR 485 million. When we compare the starting points for 2024, 2025 and 2026, obviously, we are beginning the year with a significantly lower order book. You see a detailed comparison on the right side. As a result, visibility at the start of the year is lower. Therefore, we decided to expand the guidance corridor from previously EUR 40 million to EUR 60 million. The extent of the revenue decline compared to 2025 will highly depend on the volume of orders we will receive in the first half of 2026. Thanks to our improved operational flexibility and shorter lead times, we will be able to execute the majority of the orders between January and June within the same year and recognize them as revenue. On gross profit margin, we forecast 35% to 37%, and thus are broadly stable in our expectation. As said before, in the financial year 2026, we will be offering more or less the same portfolio as in 2025. For portfolio-driven substantial improvements, we will launch and ship our new product solutions in the next 2 years. A change in the product and customer mix could still affect margins during the year, depending on the order intake from the first half of the year and beyond. For example, higher demand for Bonding solutions would generally be beneficial for us. Then there are various effects that are likely to neutralize each other. On the positive side, fewer one-off events such as the establishment of a new site in Taiwan and a more normalized ramp-up support for our customers for already installed tools. On the negative side, the impact of the expected decline in revenue on the fixed cost coverage. Finally, our EBIT margin, which is forecasted to a range of 8% to 10%. We had already explained in the Capital Markets Day that the expected decline in revenue is likely to impact the EBIT margin development. In that regard, I don't think the guidance came as much of a surprise. A few analysts had already placed their estimates within that range. So here is what we do expect to happen. First, lower sales volume, combined with a broadly stable gross profit margin will weigh on profitability. We have made a conscious decision not to reduce the R&D budget despite the lower revenue forecast. On the contrary, we actually expect an increase in this area as we are setting the base for future growth in the coming years. At the same time, we expect only a slight increase in sales and administrative expenses, and I can assure you that we will continue to strictly manage those budgets. Now some words on the expected development in our 2 segments. First, Advanced Backend Solutions. Expected sales decline of roughly 10% versus '25 is expected. Slight increase in gross profit margin and a broadly stable EBIT margin as lower business volume will have an impact on profitability. We anticipate the following trends in the market demand. Imaging Systems, there we see a stabilization of the strong 2025 level provided there is continued CoWoS-related demand for additional UV projection scanners. Coating, we see a slight improvement expected provided that the mainstream business picks up alongside a continued strong packaging and OSAT business. And on Bonding, significant improvements versus 2025 are expected as HBM customers commit to add more capacity again after a temporary digestion period which we experienced last year. Secondly, on Photomask Solutions, we have similar sales expectations as in the backend unit with roughly 10% versus 2025. Profitability is expected to decline as a result of the lower sales volume. On the market outlook, I can comment that we expect an improved order situation as high demand for semiconductors, again, driven by AI requires additional front-end equipment, see also the strong ASML order trend and consequently, also additional mask cleaning equipment. Preparation of customers for the introduction of High-NA also can play a role. Potential for additional momentum from the launch of 3 new solutions like the high-end mask cleaner, the mid-end mask cleaner and the first wafer cleaner addressing the 200-millimeter market can also give us a boost. When looking at our guidance for 2026, some might think that this year represents a step backwards for SUSS. I personally don't see it that way. As said, 2026 is a transitional year or rather a year of preparation for further growth and a substantial improvement in margins by 2030. These goals, which we presented in November Capital Markets Day, remain unchanged and recently are even getting tailwinds. Thanks to a strong focus on R&D and the development of new innovative solutions and next-generation products for selected faster-growing markets, 2026 is an important year and a necessary stepping stone into our bright future. And with that, we are opening the floor to your questions. Operator: [Operator Instructions] We have already received some risen hands, for example, by Mr. Menon. Janardan Menon: Burkhardt, I just want to check whether you can give us any indication on how you would expect your sales and gross margin to trend through the year? Is it possible that Q1 is your low point for both sales and gross margin and then you will see a gradual improvement from there? Would that be a reasonable assumption? Or any other color how you see the first half versus the second half develop would be great. And I have a small follow-up. Burkhardt Frick: Janardan, that's a really good question. And of course, you are spot on. We see really us hitting in Q1 as a low point of the effects we saw last year. Remember, we had a 3-quarter declining order intake, and it started showing, of course, in the last quarter of last year, and it will extend into the first quarter. However, this is offset, of course, with a reverse trend in order intakes, which, of course, will take a couple of quarters to materialize in an improved situation. So we think we are approaching the bottom here and will climb up from there. Janardan Menon: Understood. And then I was in Taiwan recently, and there is some talk in the Taiwan market about TSMC looking to localize their equipment, especially on the backend where possible and working with some of the local companies. I was just wondering whether you have any thoughts on that. Do you see this as a potential threat? Or is this mainly in areas where SUSS is not involved right now? Burkhardt Frick: I see that as an opportunity because we are local at the doorstep of Taiwan with our main production site. That's, by the way, also where we are developing our next-generation EUV scanner also in Taiwan. So in that sense, you could even call us a local company. But at least on those products we are designed in, I think we have a fairly solid position. Janardan Menon: Understood. And last one, a short one. Is the prepayments that have fallen, is it mainly Chinese customers that give you prepayments? And is the cash impact because of lower China orders? Cornelia Ballwießer: Yes. Yes, it's the Chinese customers and Chinese demand is not that strong. But there are some other institutes like R&D institutes who make prepayments, but mainly from China customers. Operator: We have another question from Madeleine Jenkins. Madeleine Jenkins: I have a few. Just the first is on a slide you just showed on the different segments. And if I understand it correctly, you're saying that Imaging is going to be kind of roughly flat so as Coating and then Bonding is significantly higher than 2025. But then you've got your sales expectation down 10%. So I'm just trying to understand where exactly that weakness is coming from for that sales forecast. Burkhardt Frick: Madeleine, also good question. Of course, the lower expectations, they stem from the accumulated order intake we collected in the last quarters. So from this, we can, of course, pre-calculate what we have already in our books. The rest, of course, are orders which we have to collect in the running year, mainly in Q1 and Q2 and '26. And both together will, of course, create a forecast which we picked. We picked there a decline of 10% for both units because we see various effects, as I think detailed out in our presentation. For Photomask, it's the decline we saw from Chinese customers. And for the backend, it's really the combined effect of the low intake we have received so far. Now this trend, we see partially being now offsetted, but we need to know and, of course, experience how strong this new high order intake trend will last. Madeleine Jenkins: Perfect. Makes sense. And then my second question is just on HBM. I think you mentioned in your opening remarks that only one of the customers was really in the Q4 order book. Do you have any indication of when the second customer might come in? And also at your Investor Day, you mentioned the potential qualification of SK Hynix. Is that -- could you provide an update on that as well, please? Burkhardt Frick: Yes. As you know, the other Korean customer still sits on a lot of underutilized equipment. So we carefully planned in some kind of demand resuming in the second half of this year. But of course, that has to materialize. But I have some good news on the other -- the second Korean memory maker. There, we did receive some HBM-related orders. So basically, we can now claim that we are in all 3 major memory makers. Madeleine Jenkins: That's great. And just a final question quickly. On the wafer-to-wafer hybrid bonding side, there's a lot of talk recently on its kind of application in 4 F-squared in DRAM. I just wondered if you're kind of in any early conversations here. Do you expect to be inserted in supplier for this in the next few years as that transition is made? Burkhardt Frick: Yes. Hybrid bonding, as you know, Madeleine, is moving a bit sideways, a little bit away from die-to-wafer application because runways are extended for TCB bonding equipment and also some customers, they are struggling with the process. Therefore, wafer-to-wafer hybrid bonding also comes in because you can bond the wafers first and then do the die stacking. I think there's some momentum going on there. But I think it's still in a, I would say, more experimental phase where we do see some interest, but we haven't seen it materializing yet. As you also know, we are not at the forefront with wafer-to-wafer hybrid bonders. I mean there are 2 other customers -- sorry, 2 other suppliers ahead of us. But we have our systems at IMEC, where we are running tests, and we can provide very good data. So I also expect more momentum picking up on that side also where we can benefit from. Operator: We have another question by Michael Kuhn. Michael Kuhn: Firstly, on the transition year again, maybe you could provide us with an update on, let's say, which of the products, the renewed products or the all new products you expect to contribute to sales first? What kind of ramp-up costs you expect and whether you see, let's say, some cost portion that you incurred this year as kind of nonrecurring and also for the context of R&D, is that mostly on medium-term projects? Or is there also a bigger portion, maybe including some external providers for, let's say, final engineering steps ahead of the product launches? Burkhardt Frick: Michael, yes, that's quite a mixed bag there. So let me start with the R&D side. So yes, we have external and internal R&D. And I think we made very clear in our call here that we have not reduced our spend in R&D. In reverse, we increased the spending to make sure that we can stick to the launch timing of those products we have in our pipeline. The first products are coming out this year, and there are notably 3 Photomask products. One is the high-end mask cleaning, the MaskTrack Smart. There we received the first order also in the first quarter of a large memory customer. And so that's the first shipment we are preparing for the second half of the year. The mid-end mask cleaners, we also there, are working on the first systems because we have more than a handful of firm orders for that mid-end cleaner, which will replace also our aging mid-end platform, which we then take from the market. And the wafer cleaner, that's the third product, we also received first hardware, and we are doing our internal commissioning and evaluation before we send it to a launching customer. So there are 3 projects which are really in the final stage for rollout this year. And then there's a backend product, which is our EUV scanner, which is panel capable, 310 x 310 projection scanner, which will be launched in Q3, also, of course, with a large Taiwanese target customer who already has set up a pilot line to evaluate the panel application. So in that sense, 4 products, which are launching this year. Maybe we can squeeze in the fifth, but we have to see to get all these projects on the road. And that's also the reason why we deliberately in that sense, bit the bullet in high continued spend in R&D because we want to make sure we are not letting down the customers. And we anticipate, therefore, this gap or this drop in EBIT. But this is, in our view, just very short term until we can reverse the trend. Michael Kuhn: Understood. And then maybe a follow-up in that context on wafer cleaning. At the CMD, you mentioned you're obviously starting with 200 millimeter, but saw pretty strong demand also for 300 millimeter and also accelerate that project. Where do we stand here in the time line? Burkhardt Frick: Yes. I mean, as you rightly said, the launching product is a 200-millimeter product. We want to, of course, get some feedback first, a, from our internal evaluation and then, of course, also from the first customer feedback, which is then also an input for the design. But we are preparing the design phase for the 300-millimeter tool in combination with an external partner. And we probably will kick off that design in the second half of this year, and we should see first hardware in the first half of 2027. Michael Kuhn: And then last one on the new EUV scanner. My understanding is that the current product comes with a relatively low gross margin. So should we expect the new product to be launched in Q3 to have a, let's say, sizable effect on the gross margin then because it's probably a relatively big part of your top line right now? Burkhardt Frick: Yes. That was the point in also redesigning this platform, which really came to age. Unfortunately, of course, the current CoWoS run, I couldn't wait for that. That's why we have to ship the old version, and we probably have to keep doing so because the first product we are launching is the panel version, which goes into a pilot line and panel production is not going into volume until '28-'29 time frame. So -- but very shortly after this panel version, of course, also our wafer version of the UV scanner, the next generation is coming. But that launches in 2027. And that, of course, depending on the conversion rate will then also improve this very low margin for the current DC. Operator: We have another question from Mr. Schaumann. Malte Schaumann: First one is on timing for potential Photomask uptake in demand for Photomask orders. We have seen quite a strong Q4 order intake at ASML, obviously, with shipments mostly scheduled for 2027. Is that kind of supporting the assumption that you would expect an uptake in demand in the second half of this year for the Photomask cleaning business? Burkhardt Frick: Yes, Malte, that's a good assumption. Of course, we are loosely connected because lead times and cycle times are very different if you compare us with an EUV system of ASML. But ultimately, we should see these effects. And as a matter of fact, we already see those effects because despite our expected decline in China, we currently see Chinese customers speeding up again, especially for photomask tools. But we also see international customers considering to pull in orders. So we are in the middle of evaluating the impact of that, but that is a trend which started late in Q4 last year, and we see it continuing in this quarter -- in the running quarter. Malte Schaumann: Okay. And for the Chinese demand you alluded to, is that then linked to the new mid-end cleaner? Or would these customers still order the current equipment? Burkhardt Frick: Actually, both. Of course, due to the equipment in use in China, the mid-end cleaner is more suitable for that market. But we see still a fairly high amount of high-end cleaning demand picking up again in China, which we didn't anticipate. Malte Schaumann: Okay. A quick one on Hynix. Do you see or do you expect kind of more or less regular follow-up business when production lines get extended with the product you have placed at Hynix? Burkhardt Frick: No, we are only interested in one-off sales, Malte. No, sorry, but I make a joke here. So obviously, yes, that's the intent to see follow-up business. But I think for us, it was important to get back into the door. So we are not talking volume orders here, but at least we have our hardware place now in the most recent HBM R&D line, which we can then, of course, exploit and hope fully get follow-up business. Malte Schaumann: Okay. Then on the guidance, I mean, given the current strength in orders that has continued into the first quarter of the year, the low end of the guidance at the sales level, actually appears a bit low. Is that reflecting uncertainty at customer level you're recognizing? Or is that rather linked to the overall global situation, which is not that stable at the moment? Burkhardt Frick: Yes. We -- of course, one good quarter doesn't make a full year, as we all know. And although we really have a very strong expectation because the quarter is almost over for the first quarter in intake. We have to see how long this strong push remains. When we created the guidance and also set our budgets, we had quite some expectations, and there was also a certain concentration in the second half of the year. But now we got strong demand already in the first quarter. And we have to see if this is a continued trend because if the second half also remains strong, then of course, we can come up with better results. Also the mix will have an important contribution here. So -- it's too early to just base it on one strong first quarter in order intake, I must say, because in sales, we will not see a strong first quarter. Malte Schaumann: Yes sure. Okay. Last one on double costs or one-offs, which are baked into the earnings guidance for this year. So are you able to quantify an amount, which is linked to double rent ramp-up costs and the like? Cornelia Ballwießer: There are some one-offs regarding Taiwan, as you know, because in the first quarter, we have some double rent double cost. And yes, that's more or less what we included in our guidance. Malte Schaumann: And that is a low single-digit amount. Cornelia Ballwießer: Yes, it's 0.4, something like this. Operator: We're moving on to Mr. Ries. Johannes Ries: Also a couple of questions from my side. Maybe let's first start with Taiwan, a short recap. How high was this payment you had made for the leasing which reduced the cash significantly? Remind us, please, how high this impact was? And how high is -- how much capacity you have now finally in Taiwan only to a reminder because it gets more and more important. Thomas Rohe: So Thomas speaking. The investment in Taiwan was a low 2-digit million euro budget, which we invested into the clean rooms and all these kind of stuff. And the leasing contract is now for 20 years and about EUR 40 million of leasing agreement, which we have there. But the cash out is really only on a yearly base for sure, but the leasing has to be accounted in our books already for the complete period. And the capacity only to really make this clear, we are really fully loading the factory as much -- as soon as possible. Right now, we have a load of around, let's say, about 70% with the old sites, which moved all into the new sites. So we are really heavily working to fill it up completely by at least the end of the year. Cornelia Ballwießer: Sorry, I just want to add, as Thomas explained, of course, the leasing liability is booked. It's around EUR 40 million. But you asked for cash out, and cash out is around EUR 2 million to EUR 2.5 million this year. Johannes Ries: Okay. The reduction in last year, but you mentioned partly was the leasing reason that the net cash or the cash has come down heavily. So that's a booking effect. Cornelia Ballwießer: Yes. It's KPI net cash figure, but it's not -- yes, it does not really says something about the duration of the liability in this case. So it's just net cash. But cash out is over the 20 years. Johannes Ries: Clear. On the capacity, from a revenue, how much revenue you can handle with the capacity you have now in Taiwan? Is it -- I have something of EUR 150 million, EUR 200 million in my head. Is that right? Thomas Rohe: That's a really good question, but it heavily depends on the product mix. As you know, we are introducing scanners there, coaters and bonders. And so from that point of view, it's really hard to say how much really revenue we can generate with this. But in general, I would say right now because we have half-half between Germany and Taiwan. So from that point of view, it's roughly perhaps the right order of magnitude, probably a little bit higher. Johannes Ries: Okay. Half of the total revenue came already from Taiwan? Thomas Rohe: Not yet completely, but we are targeting for this. Johannes Ries: Super. On the OSAT business, we hear from the OSAT that they are Amkor and ASE that they definitely heavily increased their budget. How much you have already seen in your own order income is much more -- it's more to come in the coming quarters from this side? Burkhardt Frick: Johannes, it's Burkhardt here. We already saw it last year, and I think I also mentioned that we saw this strong uptick for our Coating and Imaging business, which was mainly on the coating side contributed by additional demand from OSATs. They are expanding in their existing sites in Asia, but also they are planning to expand in the U.S. as also some other companies are. So there also, we expect a continued strong demand. Johannes Ries: And you mentioned that the Coating and Imaging business, there's also scanner in, which is low margin, but there's one reason for the lower margin. I always in my head that the coating -- at least coating had a quite good margin. Has it changed? Or is it only that maybe the scanner has brought down this average margin of Imaging and Coating? Burkhardt Frick: Coating is kind of pretty in the center of our margin distribution. So it is not as good as the bonders, but by far not as bad as the EUV scanners. Johannes Ries: Okay. I expected this. And also for your forecast, you're expecting a stronger business with temporary bonding for this year, but the margin in Advanced Backend Solutions will nearly stay flat. What is the reason? Because last year, it was a pressure coming partly from the temporary bonding came down, we expect an increase. Why is not maybe -- why we couldn't see a little bit stronger margin development in Advanced Backend? Burkhardt Frick: It depends how many more orders we see, especially from the bonding side. When we set out these corridors, we assumed a certain mix. We now see strong intake also on the bonder side. But we have to see how sustainable this is, Johannes. As I said, one good quarter doesn't make a full year. If the other Korean HBM maker doesn't place orders in the second half of this year, then I think we did everything right in our prognosis. But a lot of things can be happening. And as we saw last year, where we had to go in and correct twice our guidance. This is something we don't want to repeat. Johannes Ries: It's clear. But the bonding business is still above average at the margin side. Burkhardt Frick: Yes, well above average. Johannes Ries: Last question, R&D, will it further increase this year and only feeling how much it could increase? It will further increase but how much? Thomas Rohe: So it will increase only slightly. There are no big change really planned for this year. That's much more than EUR 2 million or EUR 3 million in total in absolute values. But we try to keep the headcount stable and also the investment in R&D. Burkhardt Frick: Maybe to add, Johannes, since the top line reduces, so the R&D ratio increases even faster. Johannes Ries: That's a fair point. Very fair point. But finally now, because I will meet him in person in the weeks, but I think it's the last call maybe of Sven as IR. And I think maybe even in the name of all other participants, all colleagues, I really want to say thank a lot for his work and great support, and it was a pleasure to work with him. Sven Kopsel: Thank you so much, Johannes. It was my pleasure. Operator: We're moving on to Mr. Devos. Ruben Devos: I had one follow-up on the EUV projection scanner. I think you've provided already quite some indications, but I was looking or whether you were able to maybe quantify what the EUV scanners actually contributed to the top line last year and whether you could give us a sense of the 2026 order funnel because I mean, there's many growth parameters out there. I think in itself, the products could be quite sizable for you, not only this year, but in the next 5 years. So it would be very helpful if we know a bit where you are currently. Burkhardt Frick: Yes. It's, I think, fair to say that the revenue contribution of the EUV scanner alone was between EUR 30 million and EUR 40 million last year. And this year, this number will be larger. Ruben Devos: Okay. All right. That's very helpful. I think on the -- and then just thinking about your other, let's say, younger products out there, thinking about the hybrid bonders, but also the inkjet printers, like on a combined basis, are we thinking this is about 5% of sales in '26? Or how should we think about that? Burkhardt Frick: Yes, that is really a low contribution because we sold single units to customers who are evaluating those systems. So this is not what I call a volume state. We are at the very beginning of that. So we had last year 2, 3 systems we sold. This year, we probably also have a couple of systems, but it's in the very single-digit percentage range. Ruben Devos: Okay. Okay. And then just for the temporary bonder business, looking a bit further out, with HBM4E and HBM5 sort of requiring thinner dies and even more bonding complexity. Are the existing platforms already compatible with those, let's say, next-generational stack requirements? Or will there be a meaningful upgrade or new tool generation needed? Burkhardt Frick: Well, our current generation of temporary bonders is, as we speak, qualified for HBM4. Otherwise, we wouldn't have received those orders. But of course, we are continuously improving those -- our products and also listening to our customers, what else they need. So we have, in parallel, a flanking program to improve bond chamber performance to meet also future needs because we are working both with the volume side of those customers, but also with the R&D centers who already work on the next N+1, N+2 generation of HBM stacks. So we stay tuned. And then we work with our customers when are we phasing in which improvements. It can be a running change. It can also be introduced in the next-generation platform. So we do both. I hope that helps. Ruben Devos: Okay. Great. And then just a final question on, I think co-packaged optics, you also talked about in the CMD, specifically on co-packaged optics on the interposer as a potential future opportunity. I mean, in the last few months, excitement on co-packaged optics has quite strongly accelerated. So my question is like within that further integration complexity, do I understand it well that basically your EUV scanner and coating portfolio map well on to this? And what is generally the last -- the traction you've been seeing in the last 3 to 6 months on Photonics in general? Burkhardt Frick: Yes, you're absolutely right. There's a lot of hype there, and we are kind of positioned with our existing portfolio. But of course, we need to enhance or upgrade our portfolio to also serve the co-packaged optics market well. So -- but it's from our side, more kind of technical feasibility, what additional features are needed, which can be added to our existing portfolio to also play a role there. But it's too early to really turn this into concrete products. So right now, it's on our side in an R&D development stage. And as soon as we have something noteworthy to report, we will do so. Operator: I think Mr. Schaumann has a follow-up question. Malte Schaumann: One follow-up question on the orders in the first quarter of the year. I mean the environment is pretty dynamic. So a continuation of the trend can have several meanings. So maybe some more color on what does that actually mean? I mean, typically, Q1 is not the strongest quarter in terms of order intake. So despite that fact, should we expect kind of more or less stable order development from the fourth quarter and the first quarter, which would be already good? Or do you see even an acceleration? So some additional color would be appreciated. Burkhardt Frick: Yes. I was almost fearing that this question will come, but it comes late now. So the -- I mean, first of all, I can confirm that we are breaking with that trend that in terms of order intake, this first quarter in '26 is a really very good quarter since we are in the last 2 days of the quarter. Of course, we already know what's coming. We know most of it. And I can say that much that we will be well above the Q4 number of last year in terms of order intake. Operator: We have another question by Mr. Jarad. Hello. Can you hear us? I can see that you're unmuted, but I cannot hear you. Abed Jarad: Yes, sorry. I have a question regarding -- a follow-up question regarding the sales forecast. So maybe you can help me understand it better. But based on your order book of EUR 267 million and assuming like 18% of aftersales, your implied order intake needed in H1 to reach the midpoint is very, very modest. And you are saying that in Q1, order momentum was strong. Burkhardt Frick: Yes. Of course, we need to have 2 strong quarters to complete the year because only what we have an intake in the first 2 quarters, the majority of that, we can still turn around in products assembled, shipped and recognized. So the first quarter, if that is strong, definitely helps to secure the guidance we provided. If we have a second quarter, which is also strong, that pretty much gives us some assurance that we are safe with that guidance. But again, this is speculation, so I don't want to speculate. I can only see a strong order momentum carried over from last quarter into the first quarter. And based on these 2 quarters, we have made our sales projection. Abed Jarad: Okay. Maybe correct me if I'm wrong, did you just mention that Q1 order intake is above Q4? Burkhardt Frick: Yes, I did. Abed Jarad: Okay. Wouldn't this already put you on the midpoint of guidance? So EUR 267 million plus EUR 117 million, let's say, and 15% after -- even assuming conservative 15% aftersales, you are above guidance? Or am I -- like midpoint of guidance? Burkhardt Frick: Well, first of all, the EUR 117 million of Q4 already included in the order book. So I cannot follow your math there completely. But yes, of course, the first -- if we have a strong first quarter, that relieves some of the concerns because it's a continued reversal of the trend at a very high run rate. And if we can also get a decent second quarter in, then I would start agreeing with you, but we are not yet in the second quarter. Sven Kopsel: Maybe, Abed, if I may add one sentence, the order book number of our annual report also always includes service business. So if we get service business, for example, a contract for 2 years, the entire period, this 2 years period is included in the total order book number. So service is not getting on top completely. It's partially already included in order book. Operator: We have one more question in our chat box by Mr. [ Dion ]. He's asking, do you see competition of ASML in the scanner business? And do you think there could be a competitor in hybrid bonding as well? Burkhardt Frick: Yes. I think ASML was late to the party to also join the backend business with the recent announcements and also their focus in that arena. I mean they already have a scanner out there targeted for backend. But this one, we don't see as a competition in the CoWoS process we are currently involved in. However, that is, of course, competition for other markets, our real competition, which is Canon is facing. So that I don't see us as a threat. The other activities, I think it's too early to gauge where this is heading. But of course, I mean, there are other companies, whether it's AMAT or Lam and already TEL who is already active in this domain. So with ASML, this is just the last party -- the last company joining the party. And I think this ultimately will just help the ecosystem to get on common ground here. So I see this rather as an opportunity to collaborate than anything else. Operator: I guess we have one last question by Mr. Jarad. He is raising his hand again. Abed Jarad: Yes, my bad. That was a mistake. Operator: Okay. Thank you so much. Well, with no further questions, we have come to the end of today's earnings call. Thank you very much for your interest in SUSS MicroTec SE. And a big thank you also to you, Mr. Frick, Mrs. Ballwießer, Mr. Rohe and Mr. Kopsel for your presentation and your time. If any further questions arise at a later time, please feel free to contact Investor Relations at SUSS MicroTec SE. I wish you all a successful day, and I'm handing over to Mr. Kopsel once again for your closing remarks. Sven Kopsel: Yes. Thank you so much and nothing really to add. So take care and yes, get in touch if you have any more questions. Thank you. Take care.
Unknown Executive: [Audio Gap] I'm honored to become the host and to brief you on the performance of China Coal Energy, Shanghai Energy and Xinji Energy. We have this consolidated earnings briefing and to do the reports and outlook. We want to express our gratitude for the Shanghai Stock Exchange, Roadshow Center and all the live streaming platforms, and we appreciate your support for our group. Those attending our meetings, we have Mr. Gao Shigang, China Coal's Party Secretary, Board member; Ms. [indiscernible], China Coal's Independent Executive Director and CFO, Chai Qiaolin, [indiscernible] General Manager for the Chemicals Department; Vice Director for Marketing Department, Mr. Li Ping; China Energy's Chairman, Mr. Zhang Futao; Independent Executive Director, Mr. [indiscernible]; General Accountant, Mr. Zhang Chengbin, Energy General Manager, Mr. Sun Kai; Independent Executive Director, Mr. Yao Zhishu; Vice President, Guoxiu Zhang, General Accountant, Mr. [indiscernible], Board Secretary, Mr. Dai Fei and all the business heads for the 3 subsidiaries. We have 5 items on the agenda. First is the basics about China Coal Group, our performance in the 14th Five-Year Plan, our outlook for the next Five-Year Plan outlook. And then the 3 listed subsidiaries will brief you on our performance, our tasks completed and our work tasks for the 2026, and then we will have the Q&A session. Let's give the floor to Mr. Gao Shigang to give you a briefing about the China Coal Group, our achievements in the 14th Five-Year Plan and the outlook for 2026 and the next 5-year period. Shigang Gao: Distinguished Investors, ladies and gentlemen, good afternoon. Welcome to the 2025 Collective Performance Briefing for China National Coal Group's listed subsidiaries. I would like to express my sincere gratitude for your continued attention and support for China Coal. I will provide a brief overview from 4 aspects; the basic profile for China Coal and its listed subsidiaries, key achievements during the 14th Five-Year Plan and the development plan for the 15th Five-Year Plan and analysis of industry trends, outlook for 2026. First, overview of China Coal. China Coal is a key state-owned backbone enterprise under the supervision of SASAC as a central enterprise, covering the entire coal industry chain shoulders' important mission of ensuring national energy security. Our core businesses include coal development utilization and trading, electricity and heat production and supply, coal-based new materials and related chemical product development, equipment manufacturing and engineering and technical services. We have controlled proven coal resources reserves exceeding 70 billion tonnes with a total capacity of 310 million tonnes and annual trading volume of 400 million tonnes. We operate and construct 11 chemical projects with a total capacity exceeding 20 million tonnes we have an installed capacity of over 47 gigawatts for thermal power in operation and under construction and renewable installed capacity of 7 gigawatts. We hold controlling stakes in 3 listed subsidiaries, China Coal Energy, Shanghai Energy and Xinji Energy. By the end of 2025, the group's managed total assets exceeded RMB 650 billion with 120,000 employees. We have received an A rating from SASAC for operational performance for 6 consecutive years and have been listed in the Fortune Global 500 for 6 consecutive years. China Coal Energy, the core listed subsidiary of China Coal Group. It's a large-scale energy enterprise integrating coal production and trading, coal chemicals, power generation and coal mining equipment manufacturing. It was listed in Hong Kong in December 2006, and we returned to Asia market in February 2008. Shanghai Energy was listed on the Asia market in August 2001, primarily engaged in coal electricity, railway operations and integrated energy services. Xinji Energy was listed on the Asia market in December 2007 and became a holding subsidiary of China Coal in 2016, mainly involved in coal electricity and renewable. Second, the key achievements during the 14th Five-Year Plan period and development plan for the 15th Five-Year Plan. During the 14th Five-Year Plan period, China Coal and its listed subsidiaries diligently implemented the requirements from SASAC. We adhered to the general principle of pursuing progress while ensuring stability, enhancing efficiency from existing assets and driving growth through new businesses pursued 2 integrated business models, established and refined governance systems, innovative information disclosure, strengthened IR management, took measures to enhance market cap and promptly conveyed confidence while stabilizing expectations. We delivered remarkable achievements characterized by steady growth, structural optimization. The key features are: first, focusing on core businesses with enhanced core competitiveness with the mission of ensuring national energy security. During the 14th Five-year plan period, we fulfilled medium- and long-term coal contracts of 730 million tonnes, reserved 160,000 tonnes of fertilizers and supplied nearly 10 million tonnes of urea, and provided over RMB 110 billion in benefits to society. We completed investments exceeding RMB 200 billion and paid total taxes with over RMB 180 billion contributing to local economies. We optimized our industrial structure. Total coal production capacity reached 310 million tonnes per year, up by 22% versus 2020. Installed capacity of thermal power in operation and under construction exceeded 47 gigawatts, quadrupling versus 2020. Installed capacity of renewable in operation and under construction surpassed 7 gigawatts, achieving leapfrog development. Significant progress was made in the 2 integrated business models. Through coordinated efforts in resource and marketing, we leveraged the synergies of the full coal-based industrial chain. Distinctive integrated coal electricity chemicals, renewable industrial chain with China Coal characteristics has gradually taken shape. Second, we focused on strengthening our business, achieving improvements in scale and efficiency. The enterprise has grown rapidly with total assets increasing from CNY 400 billion in 2020 to over RMB 600 billion. Production volumes of major products achieved substantial growth. Since 2023, coal production has remained above 240 million tonnes. Power generation went up by over 80% and the output of coal chemical was above 10 million tonnes, maintaining a safe, stable, long-term full capacity and optimal operating status. The average annual operating revenue during the 14th Five-Year Plan period was up by 80% compared with the previous period. Profitability was enhanced with average annual total profit exceeding CNY 40 billion. Thirdly, we focused on value creation, achieving quality improvement for listed subsidiaries. During the 14th Five-Year period, China Coal achieved an average annual total profit of CNY 30 billion, up by 253% versus 13th 5-year period with market cap growing by approximately 200%. We consistently ranked among the top of the China Top 100 listed companies and received the Shanghai Stock Exchange's A rating for information disclosure for 16 consecutive years. Shanghai Energy focused on strengthening its fundamentals, making efforts in areas such as system optimization, lean management, policy utilization and bidding procurement, achieving cost reduction and efficiency improvement. Its average annual profit grew substantially, while its assets, market cap and stock price all maintained a stable upward trend. Xinji Energy promoted transformation and upgrading, advancing the integrated development of coal and power during the 14th Five-Year Plan. Its installed thermal power capacity went up by 298% from 2 gigawatts at the end of the 13th Five-year period to 7.96 gigawatts at the end of the 14th Five-Year Plan period, proving the effectiveness of the 2 integrated business models. Its average annual operating revenue increased with both average annual profit and asset growing. During the 14th Five-year period, the 3 listed subsidiaries cumulatively paid out dividends of CNY 30.9 billion, up by 360% versus the previous Five-year period. By the end of the 14th Five-Year Plan period, the combined market cap of the 3 listed subsidiaries reached CNY 176 billion. Fourth, we focused on problem-oriented approaches, achieving significant improvements in risk prevention and control capabilities. Safety supervision responsibilities were strengthened, safety awareness among all employees was enhanced, system support capabilities were reinforced. Overall safety production remained stable. We continue to strengthen pollution prevention and control, promoted application of clean production and energy saving emission reduction technologies, carried out mine ecological restoration, land reclamation, biodiversity protection and improved ecological environment in mining areas. Each listed subsidiary improved its ESG governance system, advancing specialized work such as climate change and double materiality analysis. Fifth, we focused on innovation-driven development, gaining momentum for transformation and development. The group refined its innovation system featuring a small internal brain plus large external brain. We established the National Natural Science Foundation of China Enterprise Innovation and Development Joint Fund in the field of Coal Energy, the National Key Research and Development Program, Disruptive Technology innovation key project, Energy Low Carbon Joint Initiative, reorganized the National Key Lab of digital and Intelligent Technology for Unmanned Coal Mining, established Energy and Low-Carbon Innovation Center of the Beijing-Tianjin-Hebei National Technology Innovation Center, got approval for the construction unit of the Central Enterprise Industrial green low-carbon original tech source and a leading technology-based enterprise with focused on national strategic needs. The development of original technology in the strategic emerging industries, the group increased our R&D spend by 2.2x compared with 13th Five-year period. Breakthroughs in key technologies were advanced, including special catalysts for polypropylene units filling the technology gaps. During the 15th Five-Year Plan period, China Coal and China Coal Energy will be guided by the Xi Jinping thought on socialism with Chinese characteristics for a new era, fully implement the spirit of the 20th National Congress of the CPC and its subsequent plenary sessions fully implement the new development philosophy, deeply implement the renewable security strategy of 4 revolutions and cooperation, respond to the major strategic decision of carbon peaking and carbon neutrality, fulfill our mission of ensuring national energy security, strengthening SOEs and state-owned capital and leading the high-quality development of coal industry, adhere to the dual wheel drive of efficiency gain of existing assets and transforming incremental assets practice. The 2 integration plus model build a hedging mechanism against the downward risk of the external market for own coal and against future carbon emission constraint, create an industry chain of coal, electricity, chemicals, renewable with China coal characteristics expand in emerging industry. Shanghai Energy will leverage its 3 major bases in Jiangsu Xuzhou, Shanxi and Xinjiang as strategic pillars to strengthen its coal power generation and renewable and integrated energy services. It will accelerate innovation, industrial transformation, achieving complementary advantages and tiered succession among its basis to become a benchmark for China Coal Energy's transformation in the Yangtze Delta region. Xinji Energy will focus on the Anhui and Jiangxi region aiming to create a CNY 100 billion level energy supply industrial cluster in East China. It will promote co-development of coal, thermal and renewable power with 7 major industrial bases in Huainan, Fuyang, [indiscernible] and Jiangxi, laying a solid foundation for high-quality development. China Coal will leverage the synergy of its listed companies to enhance high-end energy supply and service guarantee capabilities, striving to become a highly competitive integrated energy player by 2030 and by 2035, a world-class energy company with multi-energy complementarity, green and low-carbon exemplary leadership and modern governance. Third section, industry analysis. 2026 marks the start of China's 13th Five-Year Plan. China's development is characterized by strategic opportunities and risks with increasing uncertainties. The company's production operation reform and development will face a complex external environment. In macro economy, the world is undergoing accelerated changes with increasingly complex and intense great power competition affecting domestic development. At the same time, China has mismatched supply and demand and many risks and hidden dangers in key areas. However, the fundamentals supporting China's long-term positive economic outlook, including a stable economic foundation, numerous advantages, strong resilience and great potential remain unchanged. Supported by serious macro policies, especially the 15th Five-year plan, the development has great prospects. In terms of industry operation with profound adjustments in the global energy landscape and parallel construction of a new energy system, the green and low carbon transition is a long-term process. Ensuring energy security is essential for stable economic and social development and coal's role as a primary energy source and a safety net is more prominent. Considering international geopolitical tension, the supply and demand of China's coal market in 2026 is expected to be tight. The LTA mechanism for ensuring the supply of thermal coal will still be an anchor and the spot price of coal is likely to rise with more fluctuations. Looking into the 15th Five-year period, we are still in strategic window of opportunity. The foundational role of coal and thermal power will be strengthened and new power system with renewable as the mainstay is being accelerated. Technological and industrial innovation is integrating and a unified national market is advancing. This period presents both opportunities and challenges as well as pressures and drivers. Facing this new landscape, China Coal possesses the following advantages: first, resource and scale, abundant coal resources, ample production capacity, strong internal synergies, a solid development foundation and considerable industry influence. Second, value creation advantage. Lean management has been implemented with notable cost reduction efficiency gains and economic benefits and our operational performance consistently ranks among the top of the central enterprises. Third, industrial chain synergy. We continue to optimize our industrial structure, integrating coal, coal chemicals, renewables with more resilience. Fourth, innovation and mechanism. Investment in technology continues to grow. The science and innovation system is refined, giving us more momentum. Fourth section, outlook for 2026. In 2026, China Coal will adhere to the general principle of pursuing progress while ensuring stability, efficiency gains from existing assets and growth from new businesses focused on our core business, deepen reform and innovation, accelerate the green transformation, co-work development and safety, strengthen core functions and competitiveness, promote high-quality development and contribute to ensuring national energy security and achieving a good start for the 15th Five-Year plan. First, we will scientifically optimize production organization develop potential and enhance efficiency. We will carry out special actions to improve quality and efficiency, strengthen refined management and cost control. Second, we will focus on project development and advance strategy implementation. We prepare the 15th Five-year plan, develop the coal electricity, chemicals, renewables business, strengthen the modern industrial system, create new growth engines and enhance the hedging capacity. Third, we will consolidate and deepen reform achievements and drive reform to greater depth. We promote reform to the grassroots level, remove institutional and mechanism obstacles. Fourth, we will strengthen the management of listed subsidiaries and solidify investment value. We will improve the market cap management, enhance the quality of information disclosures, strengthen investor communication and maintain overall stability in operational performance, barring significant market changes. Dear friends, the development of China Coal is inseparable from your trust and support. We will always uphold the principle of openness, transparency and mutual benefit to continue to improve our management to accelerate green transformation and innovation and strive to become a trustworthy outstanding listed company with long-term investment value. We firmly believe that with the joint efforts of all shareholders, investors and all sectors of society, China Coal will take on greater responsibility and make even greater contributions to the advancement of Chinese style modernization. Thank you. Unknown Executive: Thank you, Mr. Gao. Now let me give you a presentation of the operating performance of China Coal Energy during the 14th Five-year plan and the work arrangement for '26. So dear investors and analysts, I will begin with the performance presentation of China Coal Energy. Unless otherwise specified, this is subject to the Chinese accounting standard. China Coal Energy has resolutely implemented decisions and plans of the Central Committee and firmly grasp the theme of high-quality development and earnestly practiced development strategy of improving efficiency in existing operations and transforming new ones. It has accelerated the advancement of 2 joint operations and actually building the 2 hedging mechanisms, continuously enhancing development resilience. First, high coal output and stable sales with enhanced efficiency during the 14th Five-year plan, the company resolutely showed the mission of ensuring energy supply and carrying out in-depth benchmarking of refined management, we have achieved a total of 639 million tonnes of commercial coal output, an increase of 43% compared with the 13th Five-Year Plan and a total of 1.4 billion tonnes of commercial coal sales, an increase of 52.7% compared with the 13th Five-Year Plan period. In '25, the company made every effort to ensure safe and stable supply of coal and fully release the production capacity of high-quality mines. To maximize output and benefits, the company strengthened the management of coal quality at the source. We have increased the mining area by 18%, optimizing the output. However, due to stricter safety supervision and changes in the geological conditions, the company's coal output decreased. The total commercial coal output was approximately 135 million tonnes, a decrease of 1.8% but still at a relatively high level in history. The company adhered to the general tone of a stable and refined sales, strengthened the coordination between production and sales and deeply implemented the marketing strategy of a segmented product and segmented markets. It innovatively launched a new trading model such as a virtual coal mines and maintained the sales base under the background of deep pressure in the industry. The fulfillment rate of the medium and long-term contracts for thermal coal exceeded 90%, fully playing a role of a stabilizer in energy supply. In '25, the total commercial coal sales were 256 million tonnes, a decrease of 10.2%. And the self-produced commercial coal sales were 136 million tonnes, a decrease of 0.9%. And the purchased coal sales were 109 million tonnes, a decrease of 23%. The average sales price of self-produced commercial coal was CNY 485 per tonne, a decrease of 13.7%. Among them, the sales price of the thermal coal was CNY 448, a decrease of 10.2%. The sales price of coking coal was CNY 949, a decrease of 24.3%. The sales price of purchased coal was CNY 492 per tonne, a decrease of 15.6%. Second, stable and refined sales in coal chemical industry and rapid growth in new energy business. During the 14th Five-Year Plan, the company's coal chemical business maintained a very robust curve. The total output of major coal chemical product was 28.9 million tonnes, an increase of 49.2% compared with the 13th Five-Year Plan. And the total sales volume was 29.545 million tonnes, an increase of 49.9% compared to the 13th Five-Year Plan. The total installed capacity of wholly owned and controlled coal-fired power plants under construction and operation was 53.9 million kilowatts, an increase of 58%. The total installed capacity of new energy has also reached 12 million kilowatts, growing from scratch. In '25, the company's coal chemical business adhered to the standard operations, strengthening basic management and successfully completed the national commercial reserve tasks. The total output of major product was 6.06 million tonnes, an increase of 6.5%. Among them, the output of polyolefins was 1.38 million decreased by 8.5%. The output of urea was 2.134 million tonnes, an increase of 14.1%. The output of methanol was 1.955 million tonnes, an increase of 13% and the output of ammonium nitrate was 0.58 million tonnes, an increase of 1.9%. The company continuously improves its marketing network, flexibly adjusted sales strategies, optimizing the layout and flow direction. In '25, the total sales volume reached 6.356 million, an increase of 8.8%. Specifically, the sales volume of polyolefins was 1.381 million tonnes, a decrease of 9%. The sales of urea was 2.423 million tonnes, an increase of 18.9%, the sale volume of methanol was 1.963 million tonnes, an increase of 14.4%, and the sales volume of ammonium nitrate was 0.58 million tonnes, an increase of 3%. The sales price of polyolefin was CNY 6,337 per tonne, a decrease of 9.4%. The sales price of urea was CNY 1,752, a decrease of 14.4%. The price of methanol was CNY 1,737 per tonne, a decrease of 1.1% and the price of ammonium nitrate was CNY 1,776 per tonne, a decrease of 13.5%. Thirdly, upgrading of coal mine equipment services and the prominent value of financial business. During the 14th Five-Year Plan, the coal mine equipment business promoted the improvement and expansion of joint storage and supply and intelligent transformation, achieving a total output value of CNY 50.41 billion, an increase of 56.6%. The financial business is centered on the construction of the treasury system and continuously improving the level of centralized and lean management, maintaining an asset scale of over CNY 100 billion, and net profit continued to grow steadily. In '25, the coal mining equipment business will accelerate its transformation towards intelligent manufacturing plus modern services, achieving a total output value of CNY 9.21 billion. We have also obtained international orders worth CNY 1 billion, an increase of 22.9%. We have also been highly rated by SASAC. Fourthly, in-depth promotion of lean management. During the 14th Five-Year Plan, the company deeply implemented standard cost management and all production centers established cost control mechanisms. In '25, in the face of a CNY 77 per tonne decrease in average selling price of self-produced commercial coal, the company deeply carried out the lean management approach. The unit sales cost of major product decreased significantly. In '25, the unit sales cost of self-produced commercial coal was CNY 251.51 per tonne, a decrease of CNY 30.2 per tonne or 10.7%. Specifically, material cost decreased by CNY 5.45 or 9.4%. Labor cost decreased by CNY 0.82 per tonne or 1.4%. Depreciation and amortization increased by CNY 1.76 or 3.9%. Maintenance expenses decreased by CNY 1.26 or 11.6% Transportation and port charges decreased by 1.82 or 3.2% and other costs decreased by CNY 22.63 or 43%. So this was mainly due to the company's implementation of cost management and also the optimization of production organization, which led to a decrease in the material cost per tonne of coal. Additionally, due to the need for safety production and future production continuation, the use of -- there's an increase of unit depreciation and amortization costs. And in 2025, due to the decline of the purchasing price of raw coal and fuel coal, the unit sales cost of some product decreased year-on-year, specifically, the unit sales cost of polyolefin was CNY 6,136, a decrease of 1.6%. The unit sales cost of urea was CNY 1,297 per tonne, a decrease of 21.7%. The unit sales cost of methanol was CNY 1,321 per tonne, a decrease of 35.7% and the unit sales cost of ammonium nitrate was CNY 1,412 per tonne, an increase of 7.4%. Number five, the company maintained a stable business performance and continuously optimizing the financial structure. During the 14th Five-Year Plan, the company strengthened the operation management and focusing on improving quality and efficiency. We have reached annual revenue of CNY 198.2 billion, an increase of 91.8%. And the average annual profit was CNY 30 billion, an increase of 253%. The weighted average return on net asset increased by nearly 6 percentage points compared to the end of 13th Five-Year Plan. The average annual net cash flow from operating activities was CNY 39.7 billion, an increase of 109%. The company's market cap increased by 209%. And the total net profit attributable to parent company over the past 5 years was CNY 88.7 billion, laying a solid foundation for the long-term development. In '25, because of the decline in the market price of coal and chemical products, the company achieved a revenue of CNY 148.1 billion, a year-on-year decrease of 21.8%. The total profit was CNY 26.6 billion, a year-on-year decrease of 15.7%. The net profit attributable to parent company was CNY 17.9 billion, a year-on-year decrease of 7.3%. The comprehensive GP margin was 27.5%, an increase of 2.6%. The basic earnings per share was CNY 1.35. Despite the overall pressure in the industry, the company still maintained a strong profit resilience. The company continuously strengthens cash flow management with a net cash inflow from operating activities of nearly CNY 30 billion, providing a solid support for business development and shareholder returns. The asset liability ratio further decreased to 45.8%. The capital structure became more stable and the risk resilience is increased. The changes in the total profit in '25 were as follows: firstly, the unit sales cost of self-produced commodity coal decreased, increasing profit by CNY 4.16 billion. Second, the reduction in taxes and surcharges increased the profit by CNY 0.8 billion. Thirdly, the power business increased the profit by CNY 0.7 billion. Fourthly, reduction in period expenses increased the profit by CNY 0.53 billion. Fifth, the reduction in impairment provisions increased the profit by CNY 0.426 billion. The main profit decreasing factors were: first, the decline in self-produced commodity coal pricing by 10.5%. Second, the main coal chemical enterprises reduced profits by CNY 0.36 billion. Thirdly, the decrease in the sales volume of self-produced commodity coal reached profit reduced profit by CNY 0.35 billion. Fourthly, the reduction in investment income reduced the profit by CNY 0.34 billion. Fifth, the decrease in nonoperating income and expenses reduced profit by CNY 0.087 billion. Number six, the company steadily advances the 2 joint operations and enhance the momentum for development. During the 14th Five-Year Plan, the company accelerated the 2 joint operation program and also being the 2 hedging mechanisms of coal electricity, chemical and new energy, accelerating the installation of key projects. In 2025, the company's CapEx plan was closely centered around coal, about CNY 21.678 billion. And during the reporting period, a total of CNY 19.92 billion was completed, achieving 91.9%. Relevant key projects were steadily advancing. For example, the Libi Coal Mine is expected to achieve the dry operation by end of '27 and the Weizigou Coal Mine is expected to achieve a try operation by end of '26. The Wushenqi power plant is expected to be in operation in the second half '27 and the Yulin Coal Deep Processing Project has entered the equipment installation stage. The company's CapEx plan for '26 was CNY 21.32 billion, an increase of 7.05% compared with 2025. By business segment, the Coal segment plans to allocate CNY 7.24 billion. The Coal Chemicals segment, about CNY 8.48 billion; the Coal Power segment, about CNY 2.18 billion; the New Energy segment, about CNY 2.6 billion, the Coal Mining Equipment and other segments, about CNY 739 million. Seven, the foundation of safety and environmental protection remains solid. In '25, the company has strengthened the foundation and consolidating the basics, increased the safety protocols and carried out in-depth safety production efforts with no major safety incidents. The company strengthened the pollution prevention and ecological governance and also established a long-term mechanism. The regionalization and specialization reform was deepened. And the company maintained a leading position in the top 100 Chinese listed companies and has received an A level information disclosure evaluation from the Shanghai Stock Exchange for 16 years in a row. Number 8, the dividend payout policy continuously been optimized. The shareholder returns remained stable during the 14th Five-Year Plan. The company's cumulative dividends were CNY 28.2 billion, an increase of 393%. And since its listing, the company's cumulative dividend has reached CNY 46.1 billion. In '25, to enhance the investment value of the listed company, the company's Board of Directors proposed to distribute RMB 5.07 billion in a cash dividend to shareholders in '25, which is 35% of the company's shareholders' share of profit. After deducting the interim dividend of CNY 2.2 billion already distributed, the cash dividend to the distributed to the shareholders is CNY 2.87 billion. Number 2, main work arrangements for '26. In '26, the company will continue to adhere to the general principles of seeking progress while maintaining stability, improving efficiency and striving to have a good start of the 15th Five-Year plan. The company plan to produce and sell over 130 million tonnes of self-produced commercial coal with 1.45 million tonnes of polyolefin product and over 2.03 million tonnes of urea under the condition that the market does not undergo significant changes, the company will strive to maintain overall stability of revenue and profit. And also the company will fully ensure a stable supply of energy to fulfill its responsibility of energy supply security, accelerating the transformation and upgrading of energy service business to ensure the efficient and smooth operation of the entire value chain from production, transportation, sales, distribution and usage. And second (sic) [ third ], we will deepen the lean management and the cost control for the Phase 2 of Yulin Chemical project. And number four, we'll steadily promote the 2 joint operation programs as well as the co-electricity chemical, new energy industrial chain to promote the green development. Number 5, continuously deepen enterprise reform and mechanism innovation to consolidate the achievements of reform and improvement and to stimulate organizational vitality and talent potential. Number 6, we also strengthen the level of digitalization, increasing R&D investment as well as to cultivate new high-quality productivity with Chinese coal industry characteristics. And number 7, we will also enhance the ability to prevent and resolve major risks. We will strive to further consolidate the foundation of market value management. And number 8, the company will continuously consolidate the foundation of market value management as well as the level of corporate governance and the quality of information disclosure. Dear investors and analysts, looking back to the 15th Five-Year Plan and 2025, China Coal Energy against a complex and dire market environment, we have demonstrated resilience. And in 2026, we'll continue to maintain this attitude to forge ahead and also to reward our shareholders with even greater returns. Thank you. Unknown Executive: Thank you. Now please join me to welcome Mr. Zhang Futao from Shanghai Energy to present the performance in '25 as well as the work arrangement for '26. Zhang Futao: Dear Mr. Gao, Mr. [ Jiang, ] distinguished guests, ladies and gentlemen. I will present to you the performance in '25 as well as the plans for '26 and the 15th Five-Year Plan. Firstly, we have intensified efforts to improve quality and efficiency, enhancing the level of operation. The company closely focused on the 1 profit and 5 raised targets. For example, we have embraced some cost-down initiatives such as blending inferior coal and reducing all the materials. We managed to reduce cost by CNY 500 million and the production cost of raw coal and the cost of electricity sales decreased by CNY 40 per tonne and CNY 0.012 per kilowatt hour, respectively. We strengthened the management of off-peak electricity usage, saving nearly CNY 13 million in electricity fees. We have also coordinated the use of safety and maintenance funds, reducing cost by CNY 50 million. We have also expanded new customers. We are also proactively adapting to the market. We have also improved the value added to our products. This has led to an efficiency boost of CNY 16.28 million. And also the raw coal calorific value has also increased by 164 [ Kcol. ] Additionally, the company has also achieved operating income of CNY 7.67 billion and net profit attributable to shareholders of listed company of CNY 220 million, total profit of CNY 150 million, total assets of CNY 1,900 billion and net asset of CNY 12.63 billion and earnings per share of CNY 0.31 and the asset liability ratio of 35.28%. We have also strengthened the coordination of production, transportation and marketing. Faced with this continued downturn in the coal market and unprecedented production pressures, the company coordinates production, transportation and marketing, optimizing the production organization and also we all aim to stabilize the production capacity. So in '25, the company's annual commercial coal volume is 6.13 million tonnes and refined coal output has also improved to over 4.47 million tonnes and also the power generation capacity, 4.24 billion kilowatt hours. Among them, the power -- new energy-based power generation is 536 million kilowatt hours. And thirdly, we have also solidified the reform and continuously improving the development momentum. Additionally, we have also increased -- vigorously promoted unified allocation of human resources, deployed 216 personnel between mines, including 87 technical personnels that are operating under the mine. The ratio of the 3 lines has reached by 1 x 1.7 x 3. And number four, we have also steadily advanced the key projects. The company took key projects as the basis to accelerate the construction of the 2 joint operation programs or demonstration bases in Xinjiang and the first mining project of Xinjiang Weizigou coal mine smoothly entered the construction stage. Additionally, the construction of a key new energy project has also been accelerated. The 165,000-kilowatt PV project in the subsidence area of Ningdong mine has been fully connected to the grid for power generation. The installed capacity of new energy under construction has reached 672,000 kilowatts. The Datang Power Grid renovation was also put into operation. Fifth, the company has continuously strengthened innovation and R&D. The company has continuously increased our commitment to this direction with our R&D expense increase of 4.12% and also has won 24 provincial and ministerial level and the industrial level awards with 8 achievements reaching a domestic leading or above levels. The company has also obtained 45 national authorized patents, including 10 invention patents and key science projects such as carbon storage space and virtual power plant have been implemented in an orderly manner. The source grid load storage coordinated regulation microgrid project has also been included. Number 6, the company has paid close attention to shareholder dividends. Since its listing, the company has achieved a cash dividend for 21 years in a row with a total dividend amount of CNY 3.91 billion, which is 4.46x the raised funds of CNY 877 million. In September '25, the company implemented a 25 semiannual cash profit distribution, distributing a total of CNY 65 million. This is the company's second interim dividend. From 2017 to 2024, the company's cash dividend ratio to the net profit attributable to shareholders of the listed company has exceeded 30%. In '25, on the basis of implementing interim dividends, the company distributed a total of CNY 217 million in cash dividends to all shareholders at a rate of CNY 2.1 per 10 shares, accounting for nearly 100% of the net profit attributable to shareholders. At the same time, the company distributed 3 bonus shares per 10 shares to all shareholders and increased the share capital by 1 share per 10 share through capital reserve. Number 7, the company has continuously strengthened market value management and fully met market expectations. The company accelerated the pace of external development and -- we have also kickstarted the Phase 1 of the 400-megawatt PV power generation project in Luxi C [ Qidong ] City, and it has been approved by the Board of Directors and also the company actively completed the share purchase by some directors or former supervisors as well as senior management and middle-level management, purchasing 623,200 shares with a total value of CNY 7.10 million. China Coal Energy has increased the holdings of Shanghai Energy shares by 2.43 million shares with a holding ratio of 62.78%. It has continued to introduce active shareholders. For the next step, the company will continue to take value creation as the core, continuously boost investor confidence and promote reasonable reflection of the company's quality and its investment value through standardized governance, stable operation and transparency. Second, Shanghai Energy's 15th Five-Year Plan. At present, the company has formulated a preliminary 15th Five-Year Plan. The overall thinking is to resolutely implement the strategic orientation for green and low-carbon transformation and also leading a core mission of high-quality development in the coal industry as well as to fully incorporate the ESG concept into the company's strategy and operation. And again, the company is building the 2 hedge mechanism and remain firm in the 1, 2, 3, 4, 5 development strategy without wavering. That is aiming at creating a new [indiscernible] mine, and we will build a hedge mechanism based on these 2 joint operation programs, creating 3 major bases in Jiangsu Xuzhou, and Shanxi and Xinjiang adhere to the regionalization integration principles and also strengthen the 5 coordinations of safety, stability, improving efficiency of existing assets and transforming new assets. We will also accelerate the expansion of external coal product from a single fuel to raw materials. We will also focus on researching and developing the technology of coal grading and quality differentiation. The 3 mines and the headquarters will remain stable production, increasing the planning of resources in [indiscernible] area and also promote the sustainable exploitation of resources in the headquarters. The 2 mines in Xinjiang will shift their focus to improving economic benefits, taking the path of differentiation and focusing on improving coal quality and also to achieve a key transformation from production growth to value creation. Power and new energy sector, we will adhere to our load-oriented approach, focusing on the load-intensive areas and also to build an integrated energy park service providers to meet the needs. The headquarters will fully leverage the integrated advantages and actively expand electricity customers. We will use different ways to obtain resources through investment acquisition and as well as building new projects in rural areas to obtain new resources. Comprehensively boosting the business for the energy service. We will firmly establish the concept of going out for development and also encouraging the high value-added and high-tech content business. Next, work plan for 2026. '26 is the starting year of the 15th Five-Year Plan. We will be guided by the Central Government to implement the spirit of the 20th National Congress of CPC and also requirements of the Central Economic Work Conference. We will comprehensively strengthen the party's leadership unwaveringly implement the new development concepts. We will also strive to improve the quality and efficiency of operation and with a focus on the [ 1233/6 ] tasks as well as accelerating the start of the 330,000-kilowatt PV project in the remaining area of the 1 million kilowatt ecological governance clean energy base in Peixian. Additionally, we'd also try to strengthen the 3 production keys of roof control, system optimization and advanced prevention. Dear guests, ladies and gentlemen, the achievement of Shanghai Energy today could not have been possible without your long-term care support and help. I would like to express my sincere gratitude. We will take this opportunity as we will take this performance briefing as a new starting point and carefully listen to the valuable input and opinions of all investors and draw on the experiences of China Coal Group. In the next step, we will continue to optimize the effort of operation, continuously improving our corporate governance and strive to create greater returns for investors. Thank you. Unknown Executive: Thank you, Mr. Zhang. Let's give the floor to Mr. Sun Kai about the performance of Xinji Energy in 2025 and the working plans for 2026. Kai Sun: Distinguished investors, good afternoon. I'm very pleased to meet with all our friends at the Xinji Energy performance briefing. I would like to extend my sincere gratitude and heartfelt greetings to all the friends from various sectors who have consistently cared for and supported the development of Xinji Energy. We forged ahead with innovation, achieving breakthroughs against challenges, marking a successful conclusion to the 14th Five-Year Plan. In 2025, it was a critical period for Xinji Energy as we navigated challenges and tackled difficulties head on. Our cadaries and staff united as one fully embodying the Xinji spirit of perseverance, resilience and dedication. We actively responded to multiple challenges, including a downturn in the coal market and spot market trading for electricity sales, achieving record results in key operating indicators. For the year, we produced 19.76 million tonnes of commercial coal and sold 19.69 million tonnes. We generated 14.2 billion kilowatt hour of the electricity and sold 13.4 billion kilowatt hours. We achieved operating revenue of CNY 12.3 billion total profit of CNY 3.1 billion net profit attributable to shareholders of the parent company, of CNY 2.1 billion and EPS of CNY 0.8 for the year. By the end of 2025, total assets reached CNY 53 billion liabilities or RMB 33.7 billion with a gearing ratio of 60%. Owners' equity attributable to the parent company was CNY 17 billion, up by 9% year-over-year. In 2025, it also marked the conclusion of Xinji Energy's 14th Five-Year Plan. During this period, all categories and staff implemented the strategy of enhancing efficiency for existing assets and driving growth through new businesses, and we had 7 major achievements. The first as we made historical breakthroughs in transformation. We established a new industrial structure with coal at the foundation, thermal power as the support and renewable as the direction. The coal foundation was strengthened with commercial coal production up by 1.7 million tonnes, a growth of 10%. The thermal power business achieved a leap from single point projects to clusters with controlled installed capacity increasing by 5.96 gigawatts, nearly fourfold. The renewable business grew from the scratch, establishing a demonstration base for the group's 2 integrated business models and now a crucial milestone. Secondly, we made significant improvements in production efficiency. We improved our production layouts and with commercial coal production achieving an average annual growth rate of over 2%. The calorific value of commercial coal was up by 392 kilocal per kilogram, generating over RMB 1.5 billion revenue from quality improvement. Equipment upgrades improved with all 5 operational coal mines passing intelligent acceptance inspection. Third, construction of an intelligent safety protection and control system. We advanced system governance and intelligent construction upgrading intelligent safety systems and disaster early warning platforms, advanced tools like AI intelligent identification and video surveillance, intelligent safety perception network covering underground and service operations was established, enabling real-time monitoring and intelligent early warning of gas, water hazards and ground pressure, taking our risk control capability to the next level. Fourth, we achieved leapfrog growth in operating performance. Total assets exceeded CNY 50 billion, nearly doubling total assets and profit versus the end of 13th Five-Year Plan. We entered a fast track for both scale and quality, achieving a dual breakthrough in asset and profitability. Gearing ratio was 63%, down by 9.55 percentage points. Labor productivity per headcount reached CNY 724,800, up by 69%. Fifth, we reaped the fruits from our reform efforts, a corporate governance system known as 1135/11 was established, comprising 1 charter, 1 measure, 3 rules, 5 lists, 1 menu and 1 completion. We were selected as a demonstration enterprise for grassroots corporate governance by SASAC. We completed our 3-year action plan for SOE reform with high quality. Sixth, we achieved leading progress in tech innovation. We invested RMB 330 million intelligent construction. We undertook 3 national key R&D projects during the 14th Five-Year Plan period with 10 world-leading technological achievements. We were selected as one of the first batch of pilot enterprises for digital transformation by SASAC and established the industry's first 5G plus smart power plant. Seventh, we owned our social responsibility over the 5-year period, 76 million tonnes of LTA coal were delivered, exceeding national energy supply assurance targets and fulfilling our role as a pillar in ensuring energy security. We spent CNY 450 million to improve our employees' sense of gain and well-being. We paid CNY 13.67 billion in taxes. We've consistently built an ESG governance system. In 2025, we received the highest A rating for information disclosure and got recognized as an excellent enterprise for national coal industry, social responsibility report released for 8 consecutive years. 2026, we are setting clear goals systematically planning, outlining a grand blueprint for the 15th Five-Year Plan. 2026 is a pivotal year for Xinji's energy transformation and development with firm and clear objectives. Comprehensively improve production quality and efficiency with commercial coal production less than 18.5 million tonnes and aiming for 19 million tonnes. Power generation, no less than 30 billion kilowatt hours. We'll make every effort to improve operational quality, optimizing the annual budget targets for the 5 rays indicator will develop at full speed, ensuring timely commissioning of 3 power plants. 2026 also marks the start of Xinji Energy's 15th Five-Year Plan closely aligning with national requirements for building a renewable and modern industrial system and Anhui, Jiangxi, development plan and leveraging the advantages of the coal-based full industrial chain, we've established a 1245/7 development strategy. The focus will be on the following tasks: First, focusing on stable production and increased sales to build up on our strength in coal. Adhering to the development principles of safety, efficiency, green and intelligence while improving the quality and efficiency of the existing 5 operational mines, we will advance the level deepening of [indiscernible] Xinji #2 mine and 1 mine or we develop [indiscernible] the coal resources and complete the integration of coal [indiscernible]. We focus on changes in coal products and categories to enhance our competitiveness. Second, we will focus on the 2 integrated business models to fully advance new project construction. We will strictly control the safety and quality of power projects under construction to ensure the timely grid connection and power generation of [indiscernible] power plant, accelerate the renewable projects, construct and strengthen the renewable industrial landscape, achieving leapfrog development. Thirdly, we will focus on industrial upgrades to explore emerging industries. Leveraging the resources in coal mining areas and our renewables development, we conduct feasibility studies combined with water electrolysis, hydrogen production and CCUS for thermal power centered on the strategy of building a new energy system and based on the regional industrial parks and facilities, we will promote projects for substituting clean energy in regional heating and achieve industrial upgrades. Fourth, we focus on innovation-driven development to empower high-quality development. We will expand intelligent control applications, data lake integration and standardized governance. We will plan for the construction of high-value AI plus scenarios, creating a smart support system covering production, safety and management. We will accelerate the construction of national key labs, establish experimental environments for technologies such as unmanned intelligent mining, intelligent rapid tunneling and adaptive and control deep mine equipment. Fifth, we will focus on the 3 defense lines and solidify the foundation for stable development. Safety is the lifeline and environmental protection is the bottom line and compliance is the red line. We will strengthen these 3 defense lines. Sixth, we focus on strengthening the enterprise through talent. We will improve recruitment model, systematically maintain normalized recruitment and try to meet the labor needs of grassroots units. We improved the compensation system, break the equal pay for all approach and effectively safeguard the income of frontline workers. We conduct scientific analysis, promote competitive selection for positions and build a talent pipeline for cadres. Seventh, we focus on party building leadership to forge strong entrepreneurship. We will always adhere to CPC's leadership over SOEs, ensuring high-quality development with party building. We deepen the comprehensive governance of the party, consolidate the political responsibility, improve party building quality, advance the scientific standardized systematic construction of party building, promote the deep integration of party building with production and operations. Looking back, we have overcome obstacles and achieved remarkable results. Looking ahead, we are full of confidence. 2026 is a crucial transitional year for Xinji Energy's transformation. We will maintain an unrelenting spirit to strengthen our confidence for ahead and work diligently. We will make every effort to accomplish all annual targets and write a new chapter for the company's high-quality development during the 15th Five-Year Plan. We will keep improving quality and efficiency, supporting market cap growth through solid operations and rewarding all shareholders and investors with strong performance. I wish all investors a smooth work, good health and abundant rewards. Thank you. Unknown Executive: Thank you, Mr. Sun. Now we'll open the floor for Q&A with both online and on-site participants. We will give priority to the on-site questions while also addressing some online questions, please. Unknown Analyst: Thank you, Mr. Zhang and management from China Coal. I am analyst from CITIC Securities. I have 2 questions about coal chemical. Since the conflict in the Middle East, people are concerned about the pricing trend of coal chemicals. So what will be the trend now compared with the last year for coal chemical pricing? And the second question is about the polyolefin business. So last year, the production and sales volume of polyolefin has dropped. Do you think that this year, the production and sales would rebound? And if that's true, will that lead to better economies of scale and thus lowering the unit cost of sales for polyolefin? Unknown Executive: Okay. I would like to ask [ Ms. Li ] from the marketing to address this question. Unknown Executive: Okay. Thank you for the question. the international conflict has indeed an impact on the chemical products as well as on energy. So for China Coal Group, the pricing of our urea and polyolefin has also been affected, even though recently, it started to rebound to a more reasonable level. We have made some price comparison on March 31. So urea pricing is basically flat with the same period last year. So in 2025, the urea pricing was relatively stable. So it went down, but it has rebounded. This has something to do with the supply control as well as additional export. For polyolefin, the pricing is more volatile. The price is like 10% higher than last year. That's for the polyethylene. While for the propylene, the price is actually still higher. It's like CNY 1,000 higher than same period last year. Even though recently, both futures and spot prices are falling. And also, I think that in the Chinese market, the capacity and the supply abilities are relatively sufficient. So in 2026, there are a lot of new capacity. So in the '26, the price would be more reasonable but it won't drop a lot because indeed, this conflict has a huge impact on the energy sector. Unknown Executive: Okay. So regarding the production and sales volume of polyolefin, I'd also like to ask Mr. Shu from the Coal chemical BU to address this question. Unknown Executive: Okay. So in 2025, we have 2 sets of our devices are under major maintenance or overhaul. So judging by the current circumstances, reaching a full load or full operation is very probable. So this year, we have a plan the production volume of 1.45 million tonnes. And I think we are able to go beyond that by around 60,000 tonnes. And secondly, after the device overhaul, the overall operation is becoming better. So that means the cost will be lower, and that also extends to next year. So that means we'll have better outcomes. gentleman in the first row. Unknown Analyst: Okay. Thank you, Mr. Gao and also thank management from China. I am [indiscernible] from the [ Yangtze River Metal. ] I have some questions. So firstly, a question to Mr. Gao regarding the 15th Five-Year Plan of the group. I understand that in the 14th Five-Year Plan, the group has a lot of investment in the coal chemicals, and people are also interested to find more about the directions of our investment and the volume guidance for the 15th Five-Year Plan for Coal Chemical as well as whether the dividend payout of China Coal Group would also change with the changes of CapEx. So that's my first question. And the second question is about -- we know that in Anhui province, the electricity price is turning down this year. And actually, judging by the performance last year, the integration advantage is quite significant. revenue stream was quite stable. So after the placement of several power plants, what will be the prospect for like the power generation segment in '26 and '27? That's my second question. Last question is about market cap. As mentioned earlier, the company will continue to do more in the capital market. So the current the ratio is like still lower than 1. So what will be the plan to improve the price-to-book ratio or any other additional plans in the capital market? Shigang Gao: Thank you for the question. So this is about the coal chemicals. It's true that we've been paying close attention to this segment. The chemical business is one of our main businesses. So apparently, we need to be aligned with the national strategy to remain committed and unwavering in this direction. We are paying close attention to a few initiatives. We have some production bases in the Mongolia and the Shanxi province. We're also interested to find more about the opportunities in Shanxi province and Xinjiang for some like early technical investment or some demo project. And second thing would be the coal-based LNG. We are also engaging in some research in North China because for coal chemical business, it has a high requirement for the quality of the coal as well as the maturity of the chemical technology as well as the equipment readiness. So we are also considering these aspects. And thirdly would be coal to oil. As we know, because of this international insurgence, now China we have like 77% of like oil dependency on the foreign countries and also over 40% of gas dependency on foreign countries. So from a strategic point of view, the nation is trying to improve the supply chain activity, in particular, in light of the current international conflict. So we have also made some attempts in the coal-based oil but the profit margin is not as high as coal-based methanol or coal-based olefins. If the technology readiness is not good enough, then it might lead to loss-making. So we are engaged in the R&D in this area. This is also actually our forte. So for China Coal Group, we've been cultivating in these areas for many years. So these will be the main directions. And the other thing, as mentioned earlier in a prior presentation, the coal-based hydrogen and then using the hydrogen to generate grain alcohol, we are making some experiments in order. If the technology becomes more mature, then we might to invest more in this direction. As to how to land this project, that will be dependent on the state's industry policies as well as our technology maturity and also the coal quality and whether it matches with our know-how in the chemical segment. So we would try to seize the right timing, and we are currently engaged in some preliminary research. But please rest reassured that coal and the power and chemical and new energy, these are the main businesses for China Coal Group. And we would steadily step forward in these areas. Thank you. Unknown Executive: Next, please. Unknown Executive: Thank you for your question. I'd like to address the question about the commissioning of the power plant. So the last year, the [indiscernible] power plant, the power capacity is 14.2 billion. And this year, for the Xuzhou and Shanxi, with these new power plants, our electricity -- the generated electricity would increase by 13 billion. So I think that means the profit margin for the power business would be better. And also the power business is also correlated with the coal cost. 75% of the cost is actually the coal. And because of our 2 joint operation programs, we're able to leverage this advantage. So our power plants is very resilient against the risk. And thirdly, for our power plants, I think we have over 1 million capacity and over 660,000 capacity. So these are very ideal for the spot market transactions. So I think the profit prospect of the Power segment is something that we could look forward to. Thank you. Now move to Shanghai Energy. Let me briefly address the questions. So for Shanghai Energy, we've been driving these initiatives there are still some gap from our targets. So in 2026, we aim to address the following initiative. Firstly, to improve our operational ability, which is like the value of a listed company. So that means we would stabilize our production capacity to improve the quality, to optimize the product mix and also the production efficiency and in work to boost our operation. And secondly, from a perspective of development, we would also accelerate the cadence mostly in 3 directions. Firstly, for the coal industry, in principle, we would want to stabilize the coal output. So capacity will be controlled within the number 709. And regarding the quality, we would also try to speed up like the contribution ratio from external projects, including the Xinjiang project. We need to speed up the construction of the Xinjiang project and also improving the quality of coal output. And also, we also wanted to speed up the construction of our facility in Gansu province and Shanxi province. And at appropriate timing, we would announce more details to the capital market. In the meantime, for our power business at the headquarter level, we would also engage in some major expansions. As you probably have noticed, we had like this MA project. And we would have even more MA projects for new energy as well as some of our self-developed projects. And all of these will be carried out. At the same time, our ESS project is also in the validation stage. And maybe very soon, we're able to disclose more details. And also regarding the construction of the new power system like the distribution network as well as the micro grid, we are working on these agenda. At the same time, we have also a new direction that is low carbon and green initiatives, including making use of geothermal energy as well as the recycling of the coal ashes or coal powder. So all of these are on the right track. So we aim to leverage this development to drive the market value. And thirdly, we would also strengthen the communication with the capital market so that our investors would understand and appreciate the value of Shanghai Energy. At the same time, we are also actively introducing more shareholders and to improve the branding as well as driving the market cap. Thank you. Unknown Executive: Thank you, Mr. Zhang. Next, please. The lady in the middle. Unknown Analyst: I am from [indiscernible]. I have 2 questions. First, about dividend payout because we have noticed that in the recent years, China Coal has been improving your dividend payout. And you had some special dividend payout after the annual result after -- for 2023 and 2024 and also last year when the coal price was low, but you still improved your dividend payout ratio from 30% to 35%. And these measures were well received by the market. And many of the long funds they have been paying attention to the changes we have been making. But in this year's annual payout, you have used the payout ratio of 35%. You're not improving it further. And we used the Hong Kong performance at a relatively lower base to do the payout ratio. So that means for the A shares market, the payout ratio is about 28%. And this for the long insurance-based funds, this is a bit stressful for us because we expect higher returns. So my question for the management team is what's your plan for the future dividend payout? And we also noticed how the finance ministry has adjusted up the payment ratio for SOEs and for those in coal sector, it's at 35%. So does that affect your payout ratio? That's my first question. For question number two, we have noticed you have many of the good quality assets. In May 2028, so your commitment about the noncompete with [indiscernible] will expire and the PBE in Asia market is at 1.5x and in Hong Kong Stock Exchange, it's 1x. So that means you're no longer under the pressure to do further asset injection and the external environment is good for you. So do you have any plans to inject the good quality assets into the listed companies? Unknown Executive: Okay. The dividend payout question will be taken by Mr. Li. Unknown Executive: We were listed in the H-share market in 2006, and we made the commitment to have a cash dividend payout ratio of 20% to 30%. And it is part of our company charter. And from that IPO year, although we made the range of 20% to 30%, but it has never gone below 30%. And when we make the dividend payout policy, we want to strike the balance between our development, operation stability. We want to maintain our high-quality development. And we have been asking for the inputs from investors from our shareholders, from the management teams and from the Board. That's how we made the dividend payout policy. And for your question, I have several points to make. So people might say that we have a lot of the cash reserves and with so much cash on hand, why don't we pay out more. RMB 90 billion of those money market funds, we put such of the finance management under the holdings company. So out of the RMB 90 billion, about RMB 40 billion belongs to the group level. So that -- not all of those cash reserves can be tapped into. And also, we have got the special reserve funds for safety and environmental compliance. So it's not the idle funds resting our balance sheet. And if you deduct all that amount, we have only about RMB 40 billion at our disposal. And considering our revenue size of at least RMB 150 billion, this is a good enough ratio here. and we want to further improve our operational efficiency to give better returns to our shareholders. I want to explain more about how we are using those cash reserves. It's not being idly held. And of course, about investor returns, at the end of the day, it all comes back to the high-quality growth. It's not just about the cash payout. You can calculate our payout ratio in the 14th 5-year plan versus the market average. We are always on top. In 2020, we paid out RMB 1.7 billion. And in 2024, it was RMB 6.3 billion, and we also offered some special dividends. Last year was also about RMB 5 billion. And through further improving efficiency and improving our growth, we are expanding the base for dividend payout. And no matter how violent the market could be, we still have a stabilized growth, and that's a better guarantee for your returns. And about whether we can further expand the payout ratio. Well, in the 15th 5-year plan, you have been asking about the M&A possibilities and asset injection possibilities. These are part of our plan, and they all need funds. They need liquidity. For a good enough asset, we need to at least have RMB 10 billion or even RMB 20 billion to be part of the bidding process if we want to acquire it. And for all the transformations and the development we need for the 15th 5-year plan, we also need the ammunition. So we have to factor in all those different variables and also getting the input from investors and shareholders. And we will definitely listen to the input from you and then we welcome all advices from you to formulate the payout ratio policy. About your second question, we have got a lot of attention from our existing assets and the injection of other assets. Yes, the group has some other coal and electricity-based assets. And you're wondering what would happen to them. This is something we have been studying at the group level. We do not rule out the possibility to securitize those assets or injecting them into the listed subsidiaries. But as to how does that happen through what channel and when we are conducting the researches here. We do not have a finite solution here. If we have come to a conclusion, we would definitely disclose it to the capital market. And about the noncompete commitment being expired, thank you for noticing that, and we have been discussing this issue. And we are studying all these issues. And again, if there are some concrete conclusions, we would disclose them in a timely manner. Unknown Executive: Okay. Let's continue. Unknown Analyst: I'm from Minsheng Securities. I have 3 questions. First question for China Coal Energy. Last year, the coal price was trending down, and you have made different efforts to cut costs. That is why you had good enough performance. And based on your 2025 financial report, you have lower levels of the specialized reserve. And in 2026, we have a lot of uncertainties in the external market and the geopolitical landscape. So can you give us some outlook about the unit coal cost? How would that trend? And second question is for [indiscernible]. In Q1, the power plant in Shanxi and Xuzhou has been put into operation. Another one will be put into operation in the second half. And in 2027, 2028, what are the new growth drivers? Or would you prioritize paying the liabilities, paying for liabilities or increasing the payout ratio? And the third question, Xinjiang [indiscernible] subsidiary was loss-making. It's tied to the Xinjiang 106 coal mine. And in 2026 with the coal mine will go live. It's also based in Xinjiang. And once it goes online, what's your expectation for the profit level? Unknown Executive: About unit production cost of coal. So we have used more of the specialized funds last year. And in the 15th 5-year plan, we had good cost control. It was very effective. It's not about how much we tapped into the specialized fund, but our mines are modernized and highly efficient and production technologies and designs are very advanced. That matters. So no matter how strict or severe the circumstances are, we could have stable operation, and that's the most important foundation for the good operation. For the specialized funds, it mostly went to the inspection and safety. And we do not get to decide how to spend it. There are some strict state-level rules about how to spend it. So we have a very detailed rule about spending it. It's all going according to rule. So we do not get to decide to use it more or less based on the market trends. There is rules about this usage. And last year was -- last year for 14th 5-year plan, so we decided to invest more into safety and inspection so that we would have smooth operation for the 15th 5-year plan. Every year, there are different focuses for such investments. That is why it seems that we used more of the specialized funds. As for the smaller balance, starting from last year, we took some big measures. One part of the cost would be about the finances. We have unified. We have got a transparent procurement for all the raw materials and eliminating 90% of the middlemen. So we're connecting directly to the vendors, and we can have better management of the vendors. Last year, procurement cost was reduced by more than 7%, and we continue -- we will continue that trend this year. And we have done the online procurement for such procurement so that we can keep tabs on procurement. So that's what we have done from the source. And we have standardized cost control. And over the years, we have established a good SOP there. And Mr. Gao is being hands-on in monitoring this system, making sure that each step of the process, we can scientifically squeeze the costs. And this is still an ongoing process. We believe we can effectively control the costs here. But I want to emphasize, it's not about how much more you can squeeze the costs here because margin is also tied to the selling prices. The unit coal shipping fees could be tied with the sales. And we -- there could be different pricing for different varieties of the coals, and we could shift the manufacturing capacity for different varieties. And last year, we increased about RMB 800 million in profit through shifting the capacity for different varieties of coal. So it's not just about cutting costs, this one dimension. We have multiple levers to pull. Unknown Executive: Question about Xinjiang. Thank you for the question. In Q1, our Shanxi and Xuzhou power plant went live. This year, we increased the power generation by 30 billion kilowatt hour in Q1, up by 2 billion units. So that ensures our future profitability. Your question about our investments during the 15th 5-year plan. Mr. Gao in his report has mentioned our Xinji 1, 2, 4, 5, 7 strategy and the 2 hedging system. We have -- we're aiming to build the industry cluster in East China, and we will have 2 transformational sites. And we also have the coal power chemical renewable. We have got installed capacity for thermal plants, and we want to make a thermal power plant base. And for the coal-based chemical, it's also an important component. And for our coal production capacity, we are tying it with the chemical production and renewable production so that we can be better hedged against the future risks. And in the 15 5-year plan, we are adding another some incremental capacity. And in the 7 bases we have, we are conducting new businesses there. Question about Shanghai Energy. [indiscernible] company sustained loss last year. It had 1.8 million tonnes of capacity. And in 2025 because of the complex geological structure, it affected our production capacity. And also the 1.6 mine, there was an incident with a higher carbon monoxide level. And to prioritize safety, we had this thorough inspection and governance. And these 2 factors led to only 960,000 tonnes of 47% reduction versus our goal and also coal price was reduced a lot. In 2025, it was RMB 195 per ton, 30% down year-over-year. That is why mine 106 sustained losses in 2025. As for the WISCO mine, it is in the same region with Mine 106, but it has some features. It has bigger capacity, 3 million tonnes of capacity. And also during the construction of WISCO, we added the washing -- coal washing plant -- but for Mine 106, there is no washing and selection. But in WISCO, we have added the washing step, so it's more differentiated. So it's possible that we could use it for chemical coal. We could change our sales strategy. And we are also planning for a cost control here to better ensure cost reduction after it went online to achieve good efficiency. Unknown Executive: In the interest of time, let's have one last question. Unknown Analyst: I am from [indiscernible] Securities. I am [indiscernible]. Two questions for the management team. In the past decade, we saw how the 3 listed companies have got very advanced footprint. You're present in Shanxi, Xinjiang and in other regions in China. You're more advanced than your peers. And -- in the presentation, you said in the 15th 5-year plan, you have presence for coal power chemical renewable. But after 2030 when peak carbon emission has been reached, do you have any changes to coal power chemical renewable business? Are you adding new things? Or are you putting a stop to any of these sectors, any of these businesses? Question number two, Xinji is aiming to build 100 billion energy cluster. How do you make that happen? Shigang Gao: So you're already asking questions about the 16th 5-year plan. It's beyond 2030. So you're asking a very sharp question, tricky for us to answer. But based on what I have learned, this is from Mr. Gao and based on my knowledge about the group strategy, let me give you a response. About coal power, chemical renewable strategy, we have the 2 integration and 2 hedging system. So during my prepared remarks, I have mentioned the 2 integration coal plus thermal power so that we can be better protected against the changing prices of coal. If the coal price goes up, electricity could be sustaining losses. If the coal price goes down, it could be loss-making for coal. But if we tie the 2 together, we produce the coal and we use it ourselves so that there's less price fluctuations affecting our performance. And making sure that our margin would be steadily trending up, less fluctuations here. Second integration is thermal power being tied to renewable. Why do we do this? It's about the carbon emission restrictions here. We are onboarding many of the renewable projects. They are part of the green energy. It can offset some of the CO2 emissions from our thermal power generation. So this can address the carbon emission restrictions for us. That is why we set the 2 integration strategies, 2 integrations leading to the 2 hedges. As for -- in 2030, how will we develop the coal power, chemical renewable strategy, we have another strategy about efficiency gains from existing assets for our existing businesses. You already know that. But for our future growth, you have the thermal power and renewable. These are the focuses. Where is our leverage here? For the coal business, we want to use less human labor. We want it to be even unmanned. We want higher unmanned intelligent solutions so that we can have more efficiency gains. As for thermal power generation, many other power companies have high coal consumptions for the new power generation units, they could be reducing coal consumption by 10%. By consuming less coal, it means less carbon emission. And we also have other steps like desulfurization and that can also further be even more environmentally compliant. And as for the chemical, we are combining biomass with chemicals. We make hydrogen with green energy, and then we add hydrogen into our chemical devices. You're all experts here. And in the chemical process, hydrogen is used a lot. But the hydrogen we have now is gray hydrogen made out of coal. But now -- but in the future, if we have the green energy-based hydrogen and we add it into the chemical process, it can help reduce our carbon emissions, too. And through -- this is our rationale and our strategy. For carbon peak emission and carbon neutrality, this is the trajectory that we are on. We're not just grounded. We also have high ambitions. In the renewable sector, we are also making some explorations. For example, the gas, natural gas and also biomass-based protein and the green ammonia and green hydrogen. We're following those technologies, but they are not part of our main business just yet, but we're considering those new advancements. Unknown Executive: Thank you, Mr. Gao. The question about Xinji. Thank you for your question. About our 100 billion cluster in the 15th 5-year plan, we're headquartered in Huainan. And the Huainan mine should be -- we're trying to make it amend. And for the Fuyang green mine, we are trying to combine coal with renewables, and there was a new policy targeting it last year. And about the [indiscernible] industry, cycling industry for the Weixin power plant, where it is based, we are combining it with another coal energy. We're providing the local government with cheap energy and also heat generation. And fourth, around the Xuzhou factory, there is a zero carbon industrial park and we can combine it with heat generation and renewable. And for our Luan power plant, after putting it into operation in H1 this year, we could expand its possibilities based on what's available to us locally. And for the Tengchong base, it is around a development -- economic development zone. We could provide that region with thermal power. And it's the same story for [indiscernible] because renewable energy is taking some share from thermal power in the future, we want to work better with the government so that we can gain more inroads through such introductions. Unknown Executive: Well, let's wrap up the Q&A session. Dear friends and investors, the management team from the -- from our group has answered your questions. But in the interest of time, I know if you have some unresolved questions, you can keep in touch with us. You can reach out to us. We're happy to address your questions. Again, thank you for your questions. Thank you for following our development and participating in our earnings briefing. Thank you.
Operator: Thank you for standing by. This is the conference operator. Welcome to the NOVAGOLD's First Quarter 2026 Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie Hennessey: Thank you, Galen. Good morning, everyone. We are pleased that you have joined us for NOVAGOLD's 2026 First Quarter Webcast and Conference Call and for an update on the Donlin Gold project. On today's call, we have NOVAGOLD's Chairman, Dr. Thomas Kaplan; President and CEO, Greg Lang; and NOVAGOLD's Vice President and CFO, Peter Adamek. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received via e-mail and the webcast. I would like to remind you, as stated on Slide 3, any statements made today may contain forward-looking information such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings and forward-looking disclaimers included in this presentation. With that, I will now turn the presentation over to NOVAGOLD's President and CEO, Greg Lang. Greg? Greg Lang: Thank you, Melanie. On Slide 5, we highlight the key attributes that make the Donlin project unique in the gold industry. Donlin has a combination of scale, grade, long life, low operating costs and significant upside potential in the exploration areas, and we're in a safe jurisdiction. With about 40 million ounces of reserves and resources at 2.25 grams, Donlin has got grade better than twice the industry average. Our known resource occupies only 5% of our total land holdings and there is considerable potential to increase the strong reserve base. We're also fortunate to have long-term committed shareholders who understand the value in an asset like Donlin. Moving on to Slide 6. This chart illustrates the value of Donlin and a variety of gold prices. With today's gold price approaching the upper end of this chart, the project has a net present value of almost $24 billion at a 5% discount rate. This underscores the leverage and significant economic potential of Donlin in the current gold price environment. As highlighted on Slide 7, Donlin will be a big mine. It will average over 1 million ounces a year during its 30-year mine life and about 1.3 million ounces the first 10 years. This asset production makes it really unique and stands out in the gold space. Grade is one of the most important attributes of a mining project. At 2.25 grams, Donlin is twice the industry average. It's this high grade that contributes to Donlin's very low operating costs at less than $1,000 an ounce. This slide really highlights the significant exploration potential at Donlin. Our known resources reside in the ACMA and Lewis areas, as shown on Slide #9. These areas represent only 3 kilometers of an 8-kilometer gold bearing system. When the time is right, we will continue to explore both along strike and at depth, and there's tremendous potential right in our own backyard. Turning to Slide 10. This slide is a summary of the status of our permitting. We've completed the federal permitting process and we're wrapping up the state permitting. We've worked well with the federal and state agencies over the years, and our permits are in good standing. The only remaining permit in Alaska is for the dam safety certificates and the design packages have been submitted to the state, and we anticipate approval well in advance of needing this permit. Slide 11 highlights a recent statement from Governor Mike Dunleavy up in Alaska. Governor Dunleavy as well as the other elected officials in Alaska have long been staunch advocates for the Donlin project and the importance of what it can mean to the state of Alaska in the Y-K region. On Slide 12, we highlight our long-standing engagement with our Native Alaskan partners, Calista owns the mineral rights and TKC owns the surface rights. We've got a life of mine agreements in place with both of these entities. And it's really important to remember that this is private land that was designated for mining activities. Both Calista and TKC have an owner's interest in seeing this project go forward. Moving on to Slide 13. We are starting to fill out the Donlin Gold feasibility team. Frank Arcese is our project manager. He's been around the industry for almost 40 years and is very well seasoned with big projects in remote locations. We've hired Fluor, one of the industry's leading engineering firms to lead the bankable feasibility study. Under Fluor, we have 3 specialty firms, Worley, who was responsible for the pipeline; Hatch, who is a leader in pressure oxidation and oxygen plants; and WSP, a firm specializes in, among other things, power plants. These are all industry-leading firms that will help us with the bankable feasibility study and taking the project forward into construction and, ultimately, operation. I will now turn the call over to NOVAGOLD's Vice President and Chief Financial Officer, Peter Adamek. Peter? Peter Adamek: Thank you, Greg. Turning to our operating performance on Slide 15. NOVAGOLD reported a fiscal 2026 first quarter net loss of $15.4 million. This represents an increase of $6.3 million from the comparable prior year period primarily due to higher expenditures at Donlin Gold following the commencement of the bankable feasibility study related activities including hiring for key roles on the Donlin Gold project team and higher G&A expenses at NOVAGOLD. The company's share of Donlin Gold expenses in the first quarter of 2026 was $3.9 million higher than the comparative prior year period due to camp remaining open this winter and increased project activities following Fluor being awarded the lead engineering role for the Donlin Gold bankable feasibility study in early February 2026. Unlike the comparative prior year period, the company's first quarter results also reflect NOVAGOLD's 60% interest in Donlin Gold. NOVAGOLD's G&A expenses increased in the first quarter of 2026 by $3.9 million from the comparable prior year period, primarily due to higher professional fees and share-based compensation. Professional fees were elevated during the first quarter but remained in line with quarterly cadence expectations and are expected to decline from first quarter levels during the remainder of the year and remain within previously issued 2026 guidance. On Slide 16, our treasury increased by $277.4 million to $392.5 million at the end of the first quarter, primarily due to closing of a private placement of approximately [Technical Difficulty]. NOVAGOLD intends to use the net proceeds from the private placement for expenditures associated with Donlin Gold activities, exercise of the company's prepayment option on the Barrick promissory note and general corporate purposes. Excluding the financing, corporate G&A costs during the first quarter increased by $3 million, and our share of Donlin Gold funding increased by $11.9 million compared to the prior year. Moving to Slide 17. Our treasury at the end of the first quarter sits at a robust $392.5 million. NOVAGOLD is well funded, enabling it to complete the Donlin Gold bankable feasibility study in 2027 and exercised its option to prepay the Barrick promissory note later this year. Our operating cash expenditures in the first quarter of fiscal 2026 remained in line with our 2026 budget and guidance. And with that, I will now turn the presentation back over to Greg to discuss first quarter highlights. Greg Lang: Thank you, Peter. Slide 18 highlights our continuing engagement with the communities in and around Alaska. We work closely with Calista and TKC on all of these programs as well as preparing them and the local people for ultimate employment at the mine. All of these programs are a testament to our commitment to total engagement with the local communities and ultimately preparing a workforce for the Donlin project. Turning to Slide 19. During the first quarter, we announced the advancement of the Donlin Gold bankable feasibility study as well as additional engineering firms have been engaged for very specialized components of this study. This integrated approach leverages the deep technical expertise that all of these firms bring to the bankable feasibility study. On Slide 20, another development we follow with a lot of interest is the proposal to bring gas down from the North Slope into the Cook Inlet, ultimately tying into the header that will feed the Donlin project. We've got a nonbinding letter of intent with Glenfarne to evaluate natural gas supply from this proposed pipeline. This pipeline has the potential to be a real game changer for Donlin, giving us access to cheap, reliable and long-term natural gas. We will continue to advance discussions with Glenfarne as the project moves forward and where they might potentially fit in supporting the infrastructure for the Donlin project. Last year was really a transformational year for the company. Post the Barrick transaction, we've steadily made meaningful progress to advance the Donlin Gold project through a bankable feasibility study. We're building up the team with expertise to do this. In a while, we will continue to engage with our local communities. Turning to Slide 22. This highlights our top shareholders, we have always valued their long-term commitment to the project into the company. I think it's important to note that Paulson, who is now our 40% partner with Donlin has been a major shareholder in NOVAGOLD for over 15 years. This slide also highlights the coverage that NOVAGOLD has from various banks. NOVAGOLD is focused on delivering on every single commitment we've made, advancing the Donlin Gold project through a bankable feasibility study and achieving all of these milestones. Operator, we are now prepared to open the line for questions. Operator: [Operator Instructions] Our first question is from Francesco Costanzo with Scotiabank. Francesco Costanzo: I'll just start with the BFS. I appreciate that you'll be giving a more fulsome update on the BFS time line around midyear. But given that you've now awarded the engineering contracts for the project, can we consider that the clock on the 12- to 18-month time line to complete the BFS has now started? Greg Lang: I would say, yes, certainly, we have got all of the firms in place to do the bankable feasibility study. Fluor hit the ground running. They're obviously the key driver in this. And from where we're sitting today, I'd say, give or take a year, we will have it wrapped up. Francesco Costanzo: That's great. And my second question is just going to move to project financing. Just this week, we saw Perpetua Resources announced the approval of a $2.7 billion loan from EXIM. Now though the projects are obviously different, I'm wondering if you see any read-throughs on the potential debt financing availability for a project that offers significant domestic investment in the U.S., such as Donlin? Thomas Kaplan: Shall I take that one, Greg? Do you want to begin? Greg Lang: Sure. Go ahead, Tom. Thomas Kaplan: I think that it's very fair to say that when you're building the biggest gold mine in the United States, you're going to have multiple sources of financing that come to the floor. And if I had to hazard a guess, I would say that governments will be a very large component in that. There is, of course EXIM. I believe that EXIM is very well aware of our project. And for many reasons that you've cited, the domestic component of this story, not only being the largest gold mine in the United States, but being located in a place where it becomes a nexus for the energy story in Alaska, which is of extraordinary importance to this administration. Yes, I think it is fair to say that we should expect that the U.S. government has a serious interest in this story. But equally, I would point out that at least 2 Asia Pacific countries, Japan and South Korea have made very substantial commitments to investment in the United States. $550 billion in the case of Japan, $350 billion in the case of Korea. And both of those have advanced in terms of execution over the last several months. I think that it is fair to say that one of the things that we do expect them to be interested in is being able to make quite a statement with Donlin as the biggest, but also as enjoying the fruits of location, location, location. If you're on the Pacific Coast of Alaska, you have an opportunity to really develop relationships that are natural in terms of meshing together. The Japanese are very large buyers of gold and the South Korean Central Bank. Several months ago, announced that it was going to go back into the market to add to its reserves. Their timing was actually quite good. The prospect for us to be able to utilize the benefits, for example, of offtake agreements of 1.3 million, 1.4 million ounces a year, clearly make us a bit of a unicorn in terms of the ability to attract financing. And I'm not even talking about the other traditional sources. I hope that helps. Operator: The next question is from Soundarya Iyer with B. Riley Securities. Soundarya Iyer: Congratulations on this, the quarterly update. My question is on the exploration work. So as you mentioned in your opening remarks, the current resource is just 5% of the land package. So have you planned any 2026 exploration drill program or budget to test further targets? Or is that a priority after the bankable feasibility study? Greg Lang: I'll start with that one. We have putting together an exploration plan, more I would describe it as general reconnaissance work throughout our land holdings and the area in and around Donlin. So I think that's getting started. But you have to remember, I think there's a lot of snow left on the ground in Alaska. So it will be another month or 2 before we really can get on the ground. But it's more general recon. We've been studying Donlin. We believe the next Donlin is at Donlin, and we're in a modest program starting to evaluate that. Thomas Kaplan: If I may add just a few words on that because the drill bit has been my best friend over the last 3 decades. If I may echo Greg's comment, and this is obviously a very forward-looking statement. But being that for reasons belonging to Barrick's ultimate belief that this would fall into their lap one day or the other. The 95% of the property that's been unexplored is all prime real estate. And we believe that in addition to what we see as low-hanging fruit to add tens of millions of ounces within the 8-kilometer belt, 5 kilometers of which just simply have been drilled, shown mineralization, but there was never any follow-up because the deposit was already so big that it was thought you leave that for later. But in addition to the 45 million ounces of resources that we already see, it's low-hanging fruit to add, in our view, tens of millions of more ounces. But we are looking for that at Donlin. In a bear market, people really don't care about exploration results. And so I'm very glad that you asked that question because in a bull market, great drill results can cause the stock price to double or more. And we do expect to be adding a lot more ounces in the immediate vicinity of the property as we go from the 3 kilometers to the 8-kilometer mineralization. But at the same time, what Greg is referencing is that we are undertaking a project or property-wide analysis in order to identify the best drill targets that are extrinsic of the 8 kilometers. Because in our view, the odds that this occurrence is alone. Well, mother nature is very fickle. We know that the odds are very long in exploration. But I've been in this movie before. And I found that in the case of precious metals, and in the case of hydrocarbons, where we made our biggest killing at Electrum, Wildcatting is something that can take a 10x opportunity to 100x. And fortunately, we have a partner who doesn't see exploration success as being a challenge. But John Paulson and his team completely have aligned with us on understanding that good news through the drill bit is a multiple expander. And if this turns out to be what we hope it is and it's a hope, this is really the next Carlin. And the partners are aligned in being able to identify that. So when you think of the relatively low cost of exploration versus the high reward, I think you can understand that the partners in Donlin are very keenly aware that we may just be scratching the surface in this story. It remains one of the greatest exploration stories in the world, and that will unfold for the market. Soundarya Iyer: Yes. I mean I totally agree with that. My question was on that front that exploration work could gain more value in a bull market. And just one more. On the state permitting, can you walk us through what's left there on the -- as a full state permitting checklist? What is in hand? What remains outstanding? And how do we expect the receipt of those permits going forward? Greg Lang: Sure. I'll take that one. The only outstanding state permit is for the tailings dam and other water retention structures. Our federal permits which are all in hand, authorized us to do this work. However, in Alaska, these structures are administered by the state, and they require final engineering drawings before they grant approval. We've submitted the design packages to the state. We had already completed the geotechnical work, and we expect approval of these permits about the time we're wrapping up the bankable feasibility study. So they're not on the critical path, but the work to get these permits is well in hand. All of our other remaining state permits are in good standing as is our federal permits. Melanie Hennessey: Thank you. I do have a few questions from the webcast that I wanted to read out. The first is from Eric. Will the BFS include a closure and recognition estimate, including long-term water treatment and post-closure monitoring assumptions? Greg Lang: I'll start with that one. Yes, it does. Part of the feasibility study and actually the permitting requires you to have approved closure plans that have to be invested by the state and our native partners. The lease plans, reclamation and closure and water treatment, they are all part of the commitments in our existing permits. Once the mine is in operation, it will cash fund these permits through a trust. So it's -- the procedure is well defined and the approvals are all in place for the subsequent reclamation and restoration of the Donlin site post mining. Melanie Hennessey: Great. Thank you, Greg. The next question comes from Jean. Given the recent share price volatility and now with the feasibility team in place, which upcoming milestone in this study do you believe will be most important in helping the market recognize the project's underlying progress and value? Greg Lang: Well, there's -- I mean, the important piece of this, obviously, is to finish the feasibility study. But along the way, we're advancing many different avenues. I think particular interest is we will be evaluating third-party participation in our gas pipeline and other components in the infrastructure that we could logically bring in a third party to handle. So that will be one of the catalysts coming up as we advance the feasibility study. Then the other milestones along the way as different components of the study are completed, and we will update the marketplace as this work unfolds. But the real key item is finishing the study, and we anticipate it will certainly demonstrate robust economics in this price environment. Melanie Hennessey: Great. Thank you. I have a further question that come through the line from Matt. Dr. Kaplan, at the last quarter's update, you mentioned that your decisions toward NOVAGOLD and Donlin were family influence. I have been following NOVAGOLD for over 15 years and now have many family members investing in the story. I just wanted to say that I appreciate your's and NOVAGOLD's integrity over the years. A big thank you. Could you comment on the recent movement in gold and how that relates to NOVAGOLD? Thomas Kaplan: Well, that's very kind. While I'm going to ask our team, could you please call up the chart that references the long-term bull market in the Dow, and just let me know when it's up there. Melanie Hennessey: Yes, the slide is up. Thomas Kaplan: But before that, let me get to the best part of the questioner's remarks. First of all, I find it very gratifying, we all do that you're able to make this comment about our integrity and your family's investment in NOVAGOLD. Needless to say, as Electrum is the largest shareholder of the company. And as the largest shareholder of Electrum is my family. I take it very much to heart that I have a responsibility to my family, but all the other shareholders and in your case, your own family, to do the best possible thing that we can. And I would say that the thing that Greg and I are most proud of since having come into the story together in 2011, we are celebrating 15 years of joyful monogamy. And one of the things that we are most proud of is that any promises that we made, we kept. To the extent that we disappointed, I think 100% of our shareholders understood it was for reasons beyond our control. And we had all the tailwinds that I think and John Paulson thinks will take us to $100 per share. But we had one headwind. And when you think that a year ago, our stock was at $2 and change, and reached 14, and I have no doubt that we will vastly surpass that and multiply past $14. You understand that we took it to heart as much as any shareholder that we were being held back. And once that was relieved approximately a year ago, we knew that we would be on our way to $10 to $15 to $30, and we think well beyond that for all of the reasons that have become so clear to everyone that whether people realize it or not, and I'm not saying we're going back to a gold standard, because we'll never see that kind of discipline ever again in human economics. But we are seeing the remonetization of gold. We are seeing that central banks have shown through their purchases that gold is the asset that they hold because it doesn't represent someone else's liability. When central banks hold gold, when central banks buy gold, they're making a statement. To the extent that some central banks need to lay off some gold as Turkey is said to have, that proves, proves to all of the rest of them that gold is the asset that you want to own because gold traditionally in a crisis gets hit because if it's in a bull market, it may be one of the only things in which people have a profit. So the ability to not just buy but the ability to sell something, if you need to take some chips off the table because I don't know, you have missiles that are flying into your territory and need to be taken out with Patriots. That's a good thing, not to be concerned about. And this is one of the things that I enjoy most in the time that I've been bullish on gold and publicly so since gold was at $500 in 2007. And when I said my first equilibrium for gold would be between $3,000 and $5,000, people thought I was nuts. Similarly, when I said that silver will go to triple digits, people thought I was nuts, but that's my stock in trade. I don't know how to build a mine. Greg Lang knows how to build the mine. Richard Williams knows how to build the mine. They know how to do it on budget and on schedule. I can't figure out how to make chrome work over Safari. But I don't need to. You surround yourself with the very best people. My job is to protect my family's wealth. And by extension, all of the families that depend on me, including our management team and including our shareholders. So with that, let me go back to a chart that I spoke to on our last conference call because I wanted to give people a heads up as to what might happen. It wasn't required, but it might happen. In fact, what I would call the 1987 correction started 3 days later. Now I'm not going to say that I was predicting it. I was going to say that it should be expected. And for that reason, whereas people who predict a downdraft are seen as Cassandra's, I wasn't actually being a Cassandra in this case. And I have been a Cassandra in different cases, like on the Middle East. But in this instance, I was presenting people with my belief that we could have in 1987. 1987 is not so much remembered for how you felt when you thought the world was caving in, in October of '87. It was -- it is and should be remembered as the blip that created the best buying opportunity of the bull market in stocks. The best because we've already seen the stock market go to 2,750. And when it pulled back to 1,650, you have to fade these numbers a bit, I'm sorry. That was actually the cream of the opportunity to be able to build the position if you didn't have one or to add on weakness in a bull market that has all the structural factors going forward. And if anything, we can see that the world is a very different place. I hope that it's going to turn out to be a much safer place. But without getting into politics, the reality is that we're in unchartered waters economically and the debt burden will never be repaid. So just for all these reasons, if you didn't own gold on the way up, taking advantage of a pullback was what I was trying to express, while some people were a little bit upset that I said that there could be such a pullback, the reality is we're looking at it. So look at this chart again because this is the exact same chart as I issued. And I'll just repeat the sentence that I repeated 3 months ago. As a curiosity, I want you to go back and look back at the mid-1980s. The blip, which barely is noticeable is the crash of '87 that a lot of us thought was going to be the harbinger of The Four Horsemen of the Apocalypse. You can't even see it as the Dow march from 1,000 to 45,000 and up to 50-some-odd thousand plus leap in value over the decades. A few days later, '87 began. And then it was compounded by the need for people to be able to have some liquidity due to the war with Iran. So once again then let me reiterate, in the words of Ray Dalio, one of our greatest contemporary applied historians, Gold is now the second largest reserve currency behind the U.S. dollar. To understand why you need to look at the history of fiat currencies like the dollar and hard currencies like gold. The way I see it, we're currently facing a classic currency devaluation similar to what we saw in the 70s or 80s. In both of those cases, fiat currencies around the world all went down together and all went down in relationship to hard currencies like gold. If events today follow a similar pattern that makes hard currencies an attractive asset to hold. For all of you who've known me or listened to me over the years when I was asked which currencies to own, I said, if you have to own a paper currency on the dollar. But the real currency is gold. And now I don't really know what paper currencies are going to thrive the most. But I will repeat something which I've said now over the last couple of years, regardless of your view on currencies against gold, the dollar is actually collapsing. So every once in a while, you'll have a pullback, but the long-term trend on gold, to my mind, is going to be very similar and indeed price-wise, it actually looks at, but that's coincidence. Very similar to what we saw in the Dow Jones. And so for those, if you haven't taken advantage of the pullback, my strong recommendation is that you do. And I can only say that what my family does, we are long-term holders in our flagship gold asset Donlin and will absolutely remain so because to our mind, if we sell it, we can't go into something at least as good, and we really think impossible to go into anything better. So thank you for being a long-term shareholder. Thank you for your support. I can tell you it means a lot to us. And the last conference call for those who managed to stay through it. One of the callers actually said that he and his wife had an argument over NOVAGOLD during the tough times, but that the revival of NOVAGOLD actually saved his marriage. And we regarded that as probably not only the funniest, but the most heartwarming piece of news we've had all year. So with that, I thank you and all of the shareholders who have kept the faith. All I can do is promise you that I, the entire management team is devoted to being able to unlock the fullest value of what we consider to be the greatest gold development story in the world and what will be the largest single gold mine in the best jurisdiction on the planet. Thank you. Operator: I'd now like to hand the call back over to Greg Lang for concluding remarks. Greg Lang: Well, I just want to thank everybody for taking the time to get an update on NOVAGOLD, and our Chairman's thoughts on gold prices and markets. So everybody thank you. We'll be in touch. Operator: This brings to a close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Philippe Palazzi: Good evening, everyone. I'm pleased to hold this presentation today together with our CFO, Angelique Cristofari. Just keep in mind that the figures we are presenting today are financial data that have not been yet approved by the Board of Directors and as well, they are not audited. Angelique will provide further details later on regarding the financial framework behind all these figures. I will start with a short introduction on where we stand in our transformation journey, followed by our key financial indicators for the full year '25. Then I will provide you with a brief reminder of our Renouveau strategic plan ambition, and I followed by an overview of key '25 business achievement per brand. Then Angelique will walk you through our financial performance for '25, and I will close the presentation by providing you with some perspective and insight on the French retail market. We'll take your questions at the end of the presentation. Let's start with a quick update on the turnaround plan status. Casino turnaround is a long-term 3-phase mission, restore, recover and grow. After an intense period of transformation, we're entering in the phase of recovering. Our strategic plan, Renouveau 2030 defined in Q4 '24 had been updated and expanded by 2 years last November with the objective to generate value over the period '26, 2030. We have also launched in November '25, the adaptation, the strengthening of our balance sheet structure. Angelique will provide you with more details during this presentation. Let me first start by introducing our '25 financial data estimate. First and foremost, '25 marks a new momentum in a strong increase in profitability for the group. '25 financial data estimates are fully in line with our value creation plan and confirm that the turnaround is well underway. Regarding our sales performance and for the first time since the financial restructuring, we are posting a positive like-for-like sales growth. Net sales reached EUR 8.3 billion with a like-for-like growth of plus 0.5% versus PY. Regarding our profitability, adjusted EBITDA before lease payment is growing by 14% versus last year and reached EUR 655 million. This result reflects the efficiency of our cost optimization, our store fleet rationalization measures and last but not least, the improvement of our retail gross margin. The adjusted EBITDA after lease payments reached EUR 198 million, representing a growth of EUR 86 million. Finally, our free cash flow reached minus EUR 120 million, an improvement of EUR 519 million versus PY. Let me give you a brief reminder of our Renouveau strategic plan ambition before to enter into the key business '25 achievement per brand. If I have to summarize our long-term strategy in one sentence, I would say, differentiate brands as possible and centralize resources as necessary. We are a group of 7 well-known brands that are all unique and complementary, which is Casino, Cdiscount, Franprix, Monoprix, Naturalia, Spar and the last one, Vival. We are now fully engaged in delivering Renouveau 2030 ambitions to offer our customers the best brands in convenience retailing. We have just updated and expanded our Renouveau strategic plan by 2 years and our vision, mission and direction remain unchanged. Our 2030 strategic plan is based on 5 key strategic levers supporting unchanging core vision for the group, strength of our brands, our culture of service, our strength as a group, the energy of our people and our societal and environmental values. These levers are all connected, interconnected and declined per brand to specific actionable measure. The entire company is focusing on execution on a day-to-day basis. Before providing you with the key business '25 achievement per brand, let me give you a brief summary of our Group '25 focus. Here are 6 core execution focus of 2025. First, brands and store concept investment, focusing on actions on creating, testing and launching pilots and rolling out store concept as well as refining brand personality. Investing in our franchisee development with now circa 85% of our store portfolio is franchised, streamlining our store portfolio to eliminate loss-making store with profitability as a key driver versus market share at any cost, managing COGS improvement, rationalizing and massifying private label volumes, increasing national brands assortment overlapping across brands, implementing Aura Retail and Everest alliances and continuing cost reduction, notably through the rollout of several group shared services such as IT, accounting, payroll, legal, name it. Last but not least, cash management with a definition and a follow-up of a detailed CapEx program and optimization of our remodeling costs. I will now guide you through an overview of the key business '25 achievement per brand. Let me start first by Monoprix. For you recall, Monoprix business unit represents 624 stores by the end of 2025, of which 283 are owned stores and 341 are franchised. Let me present to you in one slide the main Monoprix achievement in 2025. Monoprix sales reached EUR 4 billion in 2025, representing a like-for-like growth of plus 0.6% and an adjusted EBITDA growth by 10.9% versus PY. The results reflect the good performance of Monoprix, especially in fresh products, nonfood categories such as fashion and home decoration. What are the main Monoprix achievement in '25? First, several initiatives have been launched in the key quick meal solution market. Monoprix defined, tested and launched the new concept La Cantine in 12 stores by the end of '25, posting encouraging double-digit growth. During Q2, Monoprix introduced a new quick meal solution assortment with circa 250 SKUs rolled out in all of our stores. Second, regarding the food category, Monoprix was focusing on developing fresh category with the rollout of 25 new fresh counter and 14 stores with a new fruit and veg concept. The team continued to strengthen Monoprix singularity and personality brand, thanks to the introduction of over 800 innovation to the assortment this year. As far as the nonfood is concerned, Monoprix sustained growth in the beauty and fashion category by defining, testing and launching a new beauty concept rollout already in 14 stores and by developing a new collection supported by our 11 partnership with designers in '25 in home and fashion category. Fourth, we have also worked to continue our digitalization to position Monoprix as an omnichannel brand. To name a few, we extended our partnership with Amazon to 22 additional cities. We developed quick commerce solution with Uber Eats and Deliveroo covering today 92% of our store network in France. We finally developed our new e-commerce site, [monoprixshopping.fr], dedicated to fashion and decoration categories. In parallel, we kept on working core retail fundamentals, improving product availability and reducing shrinkage, increasing the number of conveyor belt checkouts plus 10 points versus last year, giving more shelf space to highly profitable nonfood category. We took the opportunity by closing 28 magazine and newspaper departments in our store. Regarding the Monoprix and Monop' store network management, 26 new stores opened over the period, while 20 underperforming ones were closed. 30 owned stores were switched to franchise. And last but not least, we started store remodeling with 7 stores in 2025. Let's now continue with Franprix. For you recall, Franprix business unit represent 999 stores by the end of 2025, of which 296 are owned stores and 703 are franchised. Let me present to you in one slide main Franprix achievement in '25. '25 obviously was for Franprix, a year of unlocking potential. Franprix sales reached EUR 1.5 billion in '25, almost flattish with -- sorry, adjusted EBITDA growth by circa 20% versus PY. The execution of the Renouveau strategic plan includes several important achievements. First, the rollout of our performing oxygen concept in 89 stores in '25, summing up to 107 stores at year-end. As far as our quick meal solution is concerned, we have proceeded with important space reallocation for snacking, development of a new stacking assortment and menu such as breakfast at EUR 1.9 or pizza menu at EUR 5.5, positioning Franprix as the cheapest among all our own competition in the market and launching a set of exclusivity such as Krispy Kreme. We also launched several customer-focused commercial initiatives. The new loyalty program, bibi! with circa 50,000 additional subscribers in '25. We launched as well the PF initiative that includes essential articles at highly competitive price. The rollout of daily in-store services such as Nannybag, Franpcles, et cetera. And finally, the rollout of Leader Price as a core private label of Franprix and Tous les jours as a brand as an entry price range. We also developed specific B2B promotional offers under the concept of buy more, pay less to help our franchisee in boosting their sales and profit. And finally, in terms of store network management, we maintain a disciplined approach with 20 new store opening, 85 store exit and 6 own store converted to franchise. Now let's continue with Casino, Spar and Vival brands. For you recall, Casino, Spar and Vival business unit in France represent 4,528 selling points by the end of 2025, of which 236 are owned stores and 4,292 are franchised, which is 95% of the stores are franchised. Let me show you in one slide, like for the previous brands, '25 achievement. Casino, Spar, Vival sales reached EUR 1.28 billion in '25, representing a positive like-for-like growth of plus 0.6% with an adjusted EBITDA decreased by circa minus 37% versus PY, mainly driven by HM/SM disposal dis-synergy that we carry them since '24. The execution of the Renouveau strategic plan includes several important achievements. We launched in '25 2 new store concepts. We defined, tested and launched the new concept of Spar called Origins in 5 stores by the end of 2025, posting encouraging double-digit growth. We defined a new Casino brand identity in Q4 2025. And the first store -- the first 2 store, I must say, will be inaugurated not later than tomorrow in Saint-Etienne. And in case you are close by, please, you will be welcome to visit us. In the key quick meal solution market, we continue to roll out of our Coeur de Ble concept with 53 corners deployed in '25, summing up since '24 to 62 stores up to date. We complete our snacking assortment by introducing 70 new SKUs in '25. We also launched several customer-focused commercial initiatives. We continue to roll out our Coup de pouce loyalty program launched in '24 with circa 128 new subscribers in 2025. In parallel, the team continues to strengthen Casino, Spar, Vival singularity and personality, thanks to the introduction of new assortment tailored to the trade areas as well as corner of Naturalia, for example, in 20 stores. As for Franprix, we introduced B2B promotional offer, buy more, pay less type of, and we launched new IA functionality of Casino Pro. Casino Pro is a tool for franchisees in ordering too but help them to better manage their store performance. In terms of store network management, we opened 151 new selling points, 1,052 stores were exited and additionally, 78 owned stores were converted to franchise. Now let me switch to Naturalia. For you recall, Naturalia business unit represent 213 stores, of which 152 are owned stores and 61 are franchised, means 29% on franchise. Let me show you in one slide what have happened in '25 for Naturalia. It was a year of growth acceleration for Naturalia. Sales reached EUR 300 million, representing a positive like-for-like growth of plus 8.6% and an adjusted EBITDA increase by circa 57% versus PY. Main achievement for Naturalia was the rollout of our performing La Ferma concept in 25 stores in '25. End of December to date, 36 stores are already rolled out. Naturalia had launched a new organic quick meal solution concept in 35 stores and a new beauty concept in 47. Teams have also worked to continue Naturalia digitalization by adding 7 new stores with our partner, Uber Eats and launched several commercial initiatives. In terms of store network management, 6 underperforming stores were closed and 1 store was opened in 2025. Let's finalize an overview per brand of '25 by Cdiscount. '25 was for Cdiscount the year of customer acquisition. Cdiscount GMV reached EUR 2.75 billion in 2025, representing a growth of plus 3.5% versus PY, EUR 1 billion of net sales and an adjusted EBITDA of EUR 67 million. Starting with our solid B2C performance, we saw sustained 3P momentum with a GMV increase by 7.7% in '25, reaching plus 8.1% in Q4. Our marketplace business grew representing now 67.3% of our total GMV, a 2% point increase over '24. We continue to expand our customer base, acquiring 2 million new customers in 2025. Our major investment plan has been fully deployed, providing support for both sales uplift, brand equity and obviously, customer acquisition. Moving on to our B2B activities. We've seen significant progress in enhancing the experience of our sellers, resulting in a notable or noticeable 20% reduction in support tickets. Furthermore, our Retail Media business has experienced strong growth with net sales up 13% compared to last year. Finally, we developed in-house conversational chatbot deployed with more than 900,000 customers, leveraging generative AI to enhance search and improve conversion. Let me now share with you a few group initiatives, starting with our store portfolio streamlining and how we strengthen our relationship with our franchisee. We continue streamlining our store portfolio to eliminate loss-making store and coordinate selective expansion with profitability, as I said, as a key driver versus market share at any cost. From Jan to end of December, 1,178 stores left our network portfolio. During the same period of time, we also opened 207 stores, and we switched 112 stores to franchise. In parallel, we continue to strengthen our franchisee relationship by organizing, for example, annual franchisee event, sharing monthly newsletter, implementing B2B Net Promoter Score and involving our current franchisees in the franchisee selection process for new store openings. Finally, we support franchisee store performance by providing them with user-friendly store performance report versus their local competition, for example, or versus the average network performance. As far as cost reduction is concerned, we have put a lot of effort in efficiency improvement, cost reduction and CapEx monitoring. In the first half of '25, we successfully launched 7 group shared service centers covering key functions like IT, accounting, payroll and [others]. We kept on increasing the assortment overlap for national brands across all our business units. We are continuously managing our CapEx with detailed calendarization and reduction of our concept remodeling cost per square meter. Finally, we strengthened our process to recover overdues receivable, ensuring better financial discipline. And last but not least, 2 purchasing alliances are now operational, supporting our retail gross margin improvement. The Aura Retail purchasing alliance with Intermarche and Auchan in place since March 2025 for large 20/80 supplier, the European Everest purchasing alliance since August '25 for international purchases. By the end of '25, 37 supplier were rolled-out. Let me now hand over to Angelique. Angelique Cristofari: Thank you very much, Philippe, and good evening to you all. Let me first provide the context and financial framework behind these key financial data estimates for 2025. This publication is intended to provide the market with financial information relating to 2025, subject to the formal approval of the financial statements for the year. As such, this information does not stem from a full set of financial statements since it has neither been approved by the Board of Directors nor audited by the statutory auditors. However, the process related to the preparation of the consolidated financial statement has been completed. This financial data have been prepared on a similar basis as that used for preparation of the consolidated financial statements in accordance with the IFRS reference framework and are based on the information known by the group as at the date of this presentation. These data have been reviewed by the Board of Directors at its meeting held today. The approval of the financial statements on the basis of the going concern assumption remains subject to a favorable outcome of ongoing negotiations among the stakeholders involved in the group financial restructuring. Here is a summary of our full year financial data estimates. As you can see from the table, the trend is reserve positive with a net sales like-for-like growth over the full year period at plus 0.5%, driven by solid initial reserves results of the rollout of new concepts in the food business and the sustained momentum of the nonfood activity. So a significant improvement in profitability with a 14% growth in adjusted EBITDA driven by, first, the implementation of action plans such as reducing shrinkage and improving receivables collection. Second, the benefit of purchasing massification under alliances. Third, the measures to streamline the network, as Philippe mentioned, and fourth, our cost discipline. Our consolidated net loss group share would come out at minus EUR 402 million, mainly due to the net financial expenses in continuing operations. Free cash flow before financial expenses remains negative at EUR 120 million, representing a strong improvement versus last year, mainly derived from the growth in operating cash flow and the change in working capital. Net debt stood at EUR 1.5 billion, up EUR 290 million compared to December '24, still impacted by cash outflows from discontinued operations. The group liquidity position was EUR 1 billion at the end of December '25. It includes operational financings for which the group has obtained from its creditors, an extension of the maturity to May 28 of 2026. The group aims to reach an agreement with its creditors and FRH, its main shareholder within this period and at the latest by the end of June. Let's now go into the market environment. According to Circana data for 2025 and more specifically the FMCG category, value sales across all channels were up plus 1.9% in '25 with inflation up plus 0.6%. The positive news last year is that volumes rebound in 2025 with plus 0.9% growth versus '24 after 4 years of decline in France alongside a slight premiumization trend. Combined with moderate inflation, these factors are driving revenue growth. In this context, the convenience store segment continued to outperform other store formats in '25 in both value, plus 6.3% and volumes, plus 4.9%. This supports our strategic positioning in line with changing consumer trends. As for Monoprix, its performance followed the general trend among supermarkets category. However, in Q4, market trends were marked by a significant decline in festive products in all segments over the key 4-week period ending January 4. It was minus 4.4% in value and minus 3.4% in volume. A similar trend was also observed in our operational performance for December '25. First of all, a quick overview of our group sales figures. Full year 2025 net sales totaled EUR 8.3 billion, up 0.5% like-for-like. This performance must be split into, first, a return to growth for our convenience brands, up plus 0.7% like-for-like with 0.6% at Monoprix and Casino, Spar, Vival, while Naturalia increased by plus 8.3%, but Franprix slightly declined. Second, a minus 0.7% decline for Cdiscount on net sales, sorry, which, however, reflects an improvement over the year with a strong acceleration in Q4 with plus 3.7%. On the GMV side, as Philippe mentioned, Cdiscount was up plus 3.5%, also supported by an acceleration in Q4 with plus 6%. Let's now focus on Monoprix. Monoprix net sales amounted to EUR 4 billion in '25, up plus 0.6% like-for-like, of which minus 0.5% in Q4. Nonfood sales representing about 30% of net sales were up plus 2.1% and once again supported the trend driven by Fashion & Home, which is outperforming the market. Food sales representing about 70% of net sales were stable, reflecting a contrasted performance with positive momentum in fresh products, plus 1.3%, offset by unfavorable market trends in festive products in December, as mentioned before. The brand recorded a plus 0.4% increase in footfall in '25. And in terms of adjusted EBITDA, Monoprix totaled EUR 424 million in '25, up EUR 42 million year-on-year. This change is driven by the reduction in shrinkage, the margin gains resulting from the alliance with Aura Retail, the cost savings, which partially offset the rise in store staff costs. Franprix net sales came to EUR 1.5 billion in '25, slightly decreasing by minus 0.4% like-for-like, of which minus 1.4% in Q4. The good performance of stores converted to the oxygen concept was offset by negative impacts from price cuts rolled out in September '24 and the nonrenewal of a promotional operation in Q1 '25. However, footfall rose by plus 3.8% in 2025, of which plus 2.5% in Q4 as a result of commercial offer developments. Loyalty program acceleration, as Philippe mentioned, the [prix francs] campaign with prices cut and frozen on 30 private label products, the development of services such as Francples for key duplication service or the Nannybag luggage security service. Adjusted EBITDA for Franprix totaled EUR 136 million in 2025, up EUR 22 million year-on-year, driven by strong cost management and lower impairment of receivables as a result of actions to streamline the store network. Casino Brands net sales amounted to EUR 1.3 billion in '25, up 0.6% like-for-like, of which 0.3% in Q4. 2025 net sales performance was positively impacted by strong momentum for seasonal stores as well as the efficiency of the supply chain with an improvement of service rate at 94.9%, plus 2.5 points versus 2024. Adjusted EBITDA amounted to EUR 29 million in '25, down EUR 17 million year-on-year. Excluding the impact of EUR 21 million in dis-synergies on operating costs and EUR 12 million in logistics dis-synergies, adjusted EBITDA would have increased by EUR 16 million, supported by the important streamlining of the store network and cost savings. As for Naturalia, sorry, net sales came to EUR 310 million in '25, up plus 8.3% like-for-like, of which plus 8.4% in Q4. The brand definitely benefited from a good momentum in the organic market and the success of its La ferme concept plus the effectiveness of measures taken in terms of product offering and assortments. E-commerce sales also performed well in '25 for Naturalia with double-digit growth of website, plus 19.1%, while the partnership with Uber Eats on quick commerce continues to be rolled out, covering 72 stores at the end of '25. Naturalia continues to benefit from a strong growth in footfall, up plus 8.2% in '25 and a solid loyalty customer base since 74% of its revenue is generated by loyalty cardholders. Adjusted EBITDA amounted to EUR 22 million in '25, up EUR 8 million year-on-year, driven by volume, FX and cost discipline. As for Cdiscount, the brand has enjoyed positive momentum in '25, thanks to its relaunch strategy initiated 18 months ago. Global GMV has returned to growth in '25, supported by marketplace GMV with plus 8% growth, while the direct sales GMV decreased by minus 1%, but keeps recovering with a return to growth in Q4, plus 3%. Cdiscount net sales came to EUR 1 billion in '25, down 0.7%, of which plus 3.7% in Q4, confirming the sequential improvement underway since 2024. Adjusted EBITDA came to EUR 67 million in '25, down EUR 4 million year-on-year due to higher marketing costs as part of this reinvestment plan, which was partially offset by strong commercial momentum, operational efficiency and cost savings. By contrast, adjusted EBITDA after lease payment increased by EUR 5 million, primarily supported by a significant decrease in lease payments resulting from the rationalization of warehouse capacities. By walking through the P&L statement, we would arrive at a consolidated net loss of EUR 402 million, including a net loss from continuing operations of minus EUR 571 million and the net profit from discontinued operations of plus EUR 168 million. The net loss from continuing operations was mainly impacted by EUR 64 million trading profit resulting from an adjusted EBITDA of EUR 655 million, but EUR 591 million of depreciation and amortization. Second, a reduction in other operating expenses, which amounted to minus EUR 258 million in 2025, including EUR 87 million related to assets disposals, mainly real estate assets, minus EUR 275 million asset impairment losses, including EUR 218 million in goodwill impairment and minus EUR 41 million from risks and litigations. A negative impact of EUR 369 million from net financial expenses, including a net cost of debt of EUR 192 million, interest expenses on lease liabilities for EUR 145 million and the financial cost of CB4X for Cdiscount of EUR 25 million. As regards the discontinued operations, the net profit of EUR 168 million was mainly due within the HM/SM segment to favorable settlements of liabilities related to reorganization costs, termination of operational contracts and store closures. It thus reflects costs that are ultimately lower than initially estimated. In 2025, we then reported a free cash flow deficit of EUR 120 million, an improvement of EUR 519 million versus 2024. This change reflects the growth in adjusted EBITDA after lease payment for EUR 86 million, a positive impact of EUR 403 million due to change in working capital. As you know, 2024 was marked by the financial restructuring with a return to normalized payment terms leading to a higher level of disbursement in '24. On 2025, we saw the implementation of the suppliers shared service center with a new organization requiring a complete overhaul of processes. Changes in working cap was also impacted by faster inventory turnover due to seasonal effects end of '25. Generally speaking, the basis of comparison had been adversely affected last year as well by the payment of EUR 153 million social security and tax liabilities placed under moratorium in '23, of which EUR 142 million coming from working capital and EUR 11 million from taxes. Excluding this effect, the free cash flow before financial expenses last year would have been negative for minus EUR 486 million, and the free cash flow would then have increased by EUR 360 million positive year-on-year. Now starting from the minus EUR 120 million free cash flow of the previous slide, our net debt position has been mainly impacted by the net financial expenses, of which EUR 118 million interest paid for the reinstated term loan. EUR 19 million cash flows from discontinued operations and asset disposal, including a negative impact of EUR 152 million in cash related to discontinued activities, but a positive impact of EUR 170 million from real estate disposals. As a result, our net debt has increased by EUR 290 million to EUR 1.5 billion end of 2025. On this slide, we can see our debt maturity profile. As you know, most of our debt accepted our main RCF matures in March next year. And for operational financing, we have secured last week an extension of the maturity from our banks until the end of May 2026. In the meantime, ongoing discussions with creditors are continuing with a view to reaching a comprehensive agreement that would, in particular, extend the maturity of the operational financing to a longer term and also revise downward the cost of debt. You can also see on the right the cost of our main debt instruments. In light of this maturity and cost of debt, last November, the group has launched a work to adapt and strengthen its financial structure, as most of you know. Now let's give you some insight on our liquidity position at the end of December last year, which standed at EUR 1 billion, including EUR 11 million of undrawn overdrafts. All the other credit lines were drawn as of December 2025, as you can see here, the main RCF for EUR 711 million, EUR 149 million of overdraft facilities, EUR 95 million of the Monoprix exploitation's RCFs and EUR 60 million of the French state-guaranteed loan, plus EUR 36 million of Monoprix Holding's bilateral lines of credit and EUR 20 million of another bank available line. Just as a reminder, under the loan documentation, available cash is defined as cash and cash equivalents, excluding the float and any trapped cash. Now moving on to our financial covenants. The financial covenants under those financing agreements include EUR 100 million minimum liquidity on the last day of each month. Hence, EUR 1 billion end of December was satisfying. And the same covenants also applies to each month of the subsequent quarter. Here, important for you to know that our liquidity position estimate for the end of Q1, which is tomorrow, is EUR 0.8 billion, of which EUR 0.2 billion is attributable to factoring, reverse factoring and similar programs. The total net leverage ratio at the end of each quarter must also comply with specific thresholds. As at December '25, this ratio was 4.66 based on EUR 194 million covenant adjusted EBITDA and EUR 900 million covenant net debt. It is below the threshold of 7.17, we were to comply with, and it doesn't take into account, sorry, any pro forma restatement as granted by the documentation. I would add that the ceiling of this ratio is set at 7.41% for March '26, and our EBITDA forecast for Q1 is to ensure compliance with this March test. Let's now focus on the project to adapt and strengthen the financial structure of the group. In order to support the execution of the strategic plan and in light of the maturity of our various indebtedness, we have initiated work to adapt and strengthen our financial structure since last November '25. The key terms of the proposals made by either the controlling shareholder or the creditors were made public in February and March and are detailed in the presentation available on the group website. It's important to highlight that such -- should such a transaction to adapt and strengthen the financial structure be completed, it would result in a significant dilution for existing shareholders. The company has last week secured an extension of the standstill agreement from the RCF, TLBs and operating financing creditors until May 28, 2026, while the standstill granted by the Quatrim creditors is in the process of being extended from end of April to end of May. Banks have also agreed to extend the maturity of the operational financing to the end of May 2026. As of today, unfortunately, no agreement has been reached between Casino, FRH and the creditors regarding the adaptation and strengthening of the Casino Group financial structure and discussions are continuing. So that concludes my presentation. Thank you for your attention, and I give the floor back to Philippe for his closing remarks. Philippe Palazzi: Yes. Thank you, Angelique. I will go to a conclusion. That means I would like to provide you with an overview of our market perspective and upcoming challenges that Casino Group will face in the coming months. First of all, I'm convinced that we are at the right place and at the right moment. Convenience retail market, as you have seen in the Angelique presentation, shows a positive trend aligned with change in the consumer habits, especially in the growing segment of quick meal solutions. There are still white spot for expansion in our targeted zone in France. Organic specialized distribution and e-commerce penetration are still growing, offering important opportunities for the group. Main French retailer operate -- move towards growing convenience retail sector on which there is significant investment, especially in Paris. [Recovery] will increase drastically in the upcoming months, most likely leading to a territory and price war. Moreover, traditional retailer position is exposed to risk from the aggressive expansion of nonfood discounters and ultrafast fashion e-commerce platform such as Temu or Shein. Finally, from a macroeconomic perspective, we'll also face consumption decline mainly to political instability in France, low consumer confidence, recent conflict in Middle East and the oil price increase. It's now the moment to conclude. I would say that we are in a dynamic convenience market at the right place, with the right brands at the right moment, but in a market increasingly competitive where players are fighting for price leadership. '25 financial data estimates are fully in line with our Renouveau 2030 business plan and confirm the relevance of our positioning and the successful execution of our strategic plan. We'll focus during the coming months on execution and constantly adapting our model to market evolution as well as to market revolution. I would like to thank you for your attention, and we will now answer your questions. Thank you. Angelique Cristofari: Okay. Then the first question is, when will the group pay the rest of the Quatrim bond given the high interest burden? So you may have noticed that EUR 21 million were repaid last Friday to the Quatrim secured bondholders. Hence, the nominal amount of the Quatrim bond is now EUR 120 million versus what it was end of December. The gross asset value of our real estate asset presently stands above EUR 200 million at the end of last year. And we are ahead of schedule, which means that thanks to this disposal program, we have reduced the coupon at 7.5% since April 2025 instead of an initial coupon of 8.5%. This bond matures on January 27, and it benefits from a 1-year extension option exercisable by the company, which will be -- we will see in the future how this is extended. We also have a question from ODDO. What to expect on margins from Casino and Cdiscount, which were somehow below expectations going forward? On margin, Casino and Cdiscount are not below our expectations. In the next year, we expect that Casino free cash flow should be 0 in 2030, as was shared through the Renouveau 2030 plan, and it should be for Cdiscount a EUR 67 million free cash flow. Philippe Palazzi: Yes. I think the question -- I will take that one. The question is it seems that somehow CapEx is below target slightly, but above all is it enough to growth in the context of increasing competition in proximity. I mean cash flow reached EUR 252 million in '25, slightly below our plan of EUR 263 million. It was just phasing effect we had at this time. As you recall in the presentation that I mentioned that we are very careful in the cost per square meters and as well as to make sure that we implement the right CapEx at the right store and at the right place. This year, we have accelerated at Monoprix as well all the investment, the CapEx investment we are doing in turnaround stores. You know that every store by the end of the plan of Monoprix will be touched till 2030, every single store will be touched on that one. If you take '25, 2030 is more than EUR 1.7 billion that will be invested into our network. And yes, to answer your question, is highly sufficient to fight against competition and even leading the pack. Angelique Cristofari: Yes. We have a question on net debt. So can you elaborate on the position as of December '25 and real estate disposals? How much of the cash from those disposals? Is this level of net debt a kind of run rate? Or shall we make some retreatment to have an idea of the real net debt, excluding divestments? So the consolidated net debt stood at EUR 1.5 billion end of December, increasing by EUR 290 million, as explained during the call. This variation was mainly impacted by real estate disposal for EUR 170 million, but financial expenses for minus EUR 382 million. Cash flows from discontinued operation for EUR 152 million and free cash flow before financial expenses of minus EUR 120 million. So net debt end of December '25 was yet impacted by the real estate disposals and discontinued activities, notably as indicated. Ongoing discussions to change the group financial structure will impact what is the level of group indebtedness and cost of debt going forward. So it's a bit early to answer what is the run rate for the net debt. Philippe Palazzi: And apparently, there is no more questions. But we would like to thank you for the time today and for your question. And we're going to see most of you quite pretty soon. And next financial update will be end of the quarter as well, first quarter. Thank you.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Quadrise Interim Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'm sure the company will be most grateful for your participation. I'd now like to hand over to the team from Quadrise. Peter, good afternoon. Peter Borup: Thank you very much, and thank you very much for joining us for the interim reporting for Quadrise. As always, we start with a disclaimer. I will leave that to you and jump straight into the presentation. So the strategic challenges of Quadrise are clear and well known. So our focus is entirely on getting the MSC Cargill trial up and running. We have also since we last time met been having a meeting with OCP face-to-face that suggests we might be running a second trial with them leading into a commercial offtake agreement. But perhaps even more importantly, we have been upping and accelerating our efforts to build support from refineries. So we have feedstock supply available, or at least plausible for when we need to scale up after these trials. I have mentioned at previous occasions, latest at the AGM that we are looking at whether we can identify other shipping clients who would be willing to do commercial trials perhaps in other segments. And this is an ongoing effort where we've been speaking with a good number of people that we believe are willing to be upfront users or first movers rather than the traditional shipping approach where you are first adapters rather. And I think we know pretty much who this is. So we've had meaningful discussions. We are talking to the right departments and all these companies, but it's something that takes a little bit of time, but it's an effort that is ongoing. We're also aware that while our focus is entirely on the trial and on the scaling up the refinery efforts, we really need to look at the future as well. I think we have a great platform on the bioMSAR platform, but it's also one where much of the bio feedstock will vary. There's simply not enough feedstock in any one product to meet the IMO requirements should they ever be adopted. So as you will know, we have a stable product with the glycerine. We have been trying out the cash no oils, and we are trying out other feedstocks that are perhaps a little bit further away, but it's really important that we can speed up our, say, product or research to market time. And one of the ways of doing that is being -- modernizing our data infrastructure. It's actually quite good, but leading into building digital twins. We're already part of an EU project in that respect, but it's something that will help us fine-tune before we do the actual machine test, fine-tune exactly how do we make the feedstock, and prepare it for that test. And we can do that then in cyber instead of doing that on a machine. So hopefully speed up the whole process. We've been trying to sharpen our focus. Of course, we've conducted a lot of projects over the years. We're painfully aware that some of these are projects that are research-minded, so there can be longer periods of hibernation where nothing really happens and then they take off again. And that's just part of running a portfolio of different projects. But we also have more specific projects that you've heard about before and we're going to talk about today. And we just have to be very mindful that they continue to make commercial value to keep them alive. So that's an ongoing process. We have a clear focus on shipping clients. We have to make a choice. But it also means that in terms of power plants and industrial clients, they have to be really promising for us to invest time in it. Some of these other projects are far, far away geographically at least, but we are trying to focus on them by also using external clients to speed up the process to market. We'll come back to that on the individual projects. We are, of course, affected, and we are watching what is happening on the regulatory front. Fuel EU is moving along according to plan. We are very mindful that a number of countries are looking at the fuel EU rules and regulations to seek inspiration, and they are likely to be adopted there if IMO doesn't go ahead. Timing is uncertain. Localization is also a little bit uncertain. And clearly, as a former shipowner myself, there's nothing that shipowners fear more than having a number of different regulatory regimes, having the level playing field and having one set of rules has enormous value. What we're hearing from the IMO is that the talks are ongoing. The Americans have offered their view on how it to proceed, not very positive last Friday. Others have also offered their views. We're mindful that Liberia and Panama both suggested solutions that are close perhaps to the Greek position, which is lower fines, a broader base, more LNG involvement in the range of fuels that can be used. The feeling right now, certainly from my side, my personal view is that this is likely to take longer than just a 1-year suspension that the IMO decided last year in October in London. From the market point of view, we actually feel that the -- what happens at IMO might not impact Quadrise's technology that much. The main thing is that there are fuel EU rules, they're driving change. What we are mindful of is that there are a lot of other things on the agenda, also shipowners and most businesses the pace of technological change, not just in AI, but in many other technologies where exponential changes in these technologies is really changing the business landscape and no business can afford to ignore it or not be well briefed on it. Same thing we have on a broad term geopolitical transition that we have not seen at all at this level before in terms of a [indiscernible] role of international law, change in alliances, certainly uncertainty about many of the traditional alliances that we've been working with in the past, but also trading blocks changing quite rapidly. And that means that any company operating in this environment needs to look at their operational expenses before they look at anything else. So my clear impression from the last 6 months where we've been seeing a lot of shipowners and a lot of related businesses is that there's a strong focus on the green transition, but everybody understands that they need to make sure that their businesses are strong, so they are going to be around for the green transition. So the focus will be on cost to a very large extent. And that also matters for, of course, for the choice of technology that we can offer. We are still selling both MSAR and bioMSAR, but there's no doubt that the ability to deliver MSAR at below the cost of conventional fuels is a major for. And that's even before talking about the current conflict in the Middle East. What we are seeing is that many of the players we are dealing with are no longer competing on price or freight rates or even the availability of ships. It's about availability of bunker fuels, which is not a given, and that is impacting the value chain. Clearly, where sometimes we've been finding that we are dealing with much bigger players than ourselves, and that holds its own challenges because they have many, many concerns to take into account. In a case like this, dealing with primarily large players have some benefit because they will be first in line to get the bunker fuels. And I'm not saying it's easy for them either, but it's something that gives us some consolidation as we are trying to get trials in place with MSC and Cargill in the first place. We are -- if we look at the projects, first and foremost for us is the trials that have been planned for such a long time with MSC and Cargill -- we've had quite frequent meetings and discussions with both of them over the last 3 months. I think they're positive. They're down to a few items now. What also happens when things take time and, people are checking carefully the agreements they entering into is that certain things come up again. Most recently, we've been looking into whether VAT issues in the EU for the Antwerp trial would affect or would come into play with a tripartite agreement. It seems not to be the case. So that's been sorted out. We're now discussing or looking at the terms and conditions, which are standard for a big buyer of fuels. And my feeling is that we are getting very close now. We've had meetings again, face-to-face. We are experiencing that MSC is committed to the 2 trials that have been agreed, so one for MSAR and one for bioMSAR. But we're also experiencing that they are very helpful when we are talking to refineries, and others and pushing and endorsing not only the trial, but building a scale up in terms of feedstock supply afterwards. So I think that's quite positive. Some of the issues, some of the things that have to happen now, we have filed for a branch in Belgium, enabling us to start the production in Antwerp, and that might be a little bit early as we haven't signed yet, but we just want to make sure that doesn't hold it up. There'll be some certifications that have to be renewed, but it's -- the whole process has been simplified. But again, we want to do that already now, so we don't have to wait for that. So I think while I can't tell you that it's all been signed and dusted, we're ready to go. My feeling is that we're getting quite close. And our focus has shifted -- not shifted, but has now also been on how do we make sure that we can scale up after an expected successful trial. So no longer than 3, 4 weeks ago, Jason and I and Linda as well were in Singapore exactly to look for potential supplies from refineries, but also from buyer suppliers to make sure we're ready for that and had very positive meetings. Cannot really reveal who we've been talking to. But hopefully, we can talk more about that later in the year. With that, I will hand over to you, Jason, on OCP. Jason Miles: Thanks, Peter. Yes. So in terms of OCP, again, Peter and myself earlier this year, went out to Casablanca and met with the main people there. Quite surprising meeting because they were extremely positive in terms of the cost leadership program, which MSAR fits in with. So the current status is that the updated trial agreement is well underway. So basically, we're now sort of detailing exactly which site we're going to be at. The likelihood is it's not going to be the same kiln as we had before, which is slightly constrained with this OEM issue, which we documented before. But the key thing is, I guess, the time behind the amendment to the agreement, we make sure that there's an operational board, obviously involving Peter and the head of OCP there to make sure that it's got management buy-in and make sure we try and avoid the delays that we've seen so far. The trial itself, the actual duration depends a little bit on the scale of the kiln that we're operating on. So if it's a smaller kiln, it will be 30 days. If it's a bigger kiln, it's likely to be less. So really, the plan is to basically carry out that trial. And that's a longer-term trial is needed. We did -- the previous trial was done over a period of a week or so. OCP want at least a longer-term trial of a couple of weeks minimum to actually get the full operating data that they say is needed before they commit to commercial supply. So that's what we're doing. And in the meantime, our equipment remains on site and any costs that are being incurred, we're getting reimbursed for by OCP still, and that process has been working very well. In terms of the next project in the U.S. with Valkor for basically heavy sweet oil, which is essentially a low sulfur bitumen -- ultra-low sulfur bitumen product. We received obviously the first payment. We revised terms that people remember of the agreement last year. We basically received the first installment this year -- sorry, last year as well. We basically invoiced the second installment, which is due at the end of this month. So we're expecting payment of that 300,000. And then there's another 650,000 due at the end of the year. The samples that have been long overdue as well, they've been -- essentially the Valkor have been going through a change -- slight changes in their exact processing. So they've been holding back the samples until they know exactly which technology route they're going for, but that's now been finalized. So they're doing pilot runs at the moment to generate the samples that we expect to get fairly soon, so we can do the testing in the second quarter of the year. Their pilot plant that is due to go in, be operational in Q3 has been delayed slightly because of the site that they selected was not fit for purpose. So they had to move site to a new location. So that delayed some of the civil works that was planned to be up and running by now. But that's moving ahead. So they expect to be the installation to happen during Q3, and the plant to be up and running in Q4. In the meantime, we're preparing -- we prepared our unit. It's nearly complete now for shipment, and that will be done during the second quarter of the year to the U.S. with expected deployment then in what's obviously just part of the installation program in Q3. So really, the plan is then to carry out a paid for trial for -- to produce actual trial volumes of fuel for local consumers and it also initiates a marketing program that we've had in plan for some time with Valkor as well now that is actually live. But yes, Valkor they're fully funded. Obviously, they've got a position now in TomCo as well in the U.K. In terms of Panama, again, as you remember, we carried out a trial in July, which went very well. Essentially, we've got a letter of intent from Sparkle, basically stipulating what their demand will be. We know that there's other demand from other -- both plants, both within Panama and Central America region, specifically around Honduras. The fuel permitting process, we've got basically MSAR and bioMSAR have been basically approved as alternative fuels. So these are fuels that can be utilized when -- as they're trying to phase out potentially fuel or diesel. So that's been approved. The process for an import permit has also been detailed now. But obviously, we now need a live case where we can actually bring in the fuel with a partner. So we're discussing that with regional refineries and other logistics companies in the region with regards to commercial supply to Panama. And in the meantime, we've had some new arrivals to the team, including Matt Hyde from -- who's coming from BP, who's really helping with the sort of getting a deeper understanding of refinery economics there as well in that region. In terms of the bioMSAR program, which is ongoing, we've been doing a lot of testing with additional biofuel feedstocks, including doing things in the lab, but also doing testing at third-party facilities in Germany, where these engine facilities are used by quite a lot of parties. So it's a good endorsement for the fuel. We're also kicked off -- we also kicked off a collaboration with the University of Bath not just in terms of fuel research, but Peter mentioned before, some of the AI digitization as well. That's something that Bath can utilize in the future. And obviously, it's potentially a good talent pool for us going forward in terms of their engineering and the technical people as well. And in the meantime, as Peter mentioned before, there's a world beyond glycerin for the biofuel, which really comes from biomass-derived material, which is abundant, but obviously, there's different technologies to extract it. So we're working with the main technology providers there, but all of which has its own features and challenges, but we're working through to actually get some of their products to market faster than they would normally expect through some of their other technology platforms, which is why they're working with us. And then as part of the development program as well, we have an EU-funded project, which we're part of us amongst sort of 18 other companies ranging from universities through to people in the marine space as well and actually owners of vessels as well. So that's been going very well, and it's actually -- it's been quite active this year in putting together this digital twin, which again, Peter mentioned at the beginning, which is looking at 4 different types of existing vessels and 4 different types of new build vessels to see what's the optimum technology platform to decarbonize shipping, and it's looking at a range of different technologies of which MSAR is one of those on the biofuel space. So it's a good platform for us to market our technology. And then sustainable ships is something that we launched again with them today -- sorry, this year rather, with Linda and Alfie especially have been very active in getting that up and running, doing an online seminar. And that's brought through some quite good introductions already as part of that program. But it's a good way of comparing how MSAR competes with other -- MSAR and bioMSAR competes with other fuels. The next slide really just gives you a pipeline of the different fuel types that we're using and explains really what the bioMSAR is a mixing technology. It's a platform technology, which enables us to bring in a range of different biofuels into the finished product on the right, which needs to go through the appropriate engine testing, but ultimately can then be rolled out to the shipping fleet and really answer some of the questions around the abundance of biofuels. That's what we're really looking to nail and provide quite a unique difference in what we're offering because we can blend oil and water together. Some of these products like the sugars that we mentioned, some of the pyrolysis sugars and other means of other sort of components on here actually be water soluble as opposed to being easily blendable with oil. So we have the ability to blend both. And I'll hand over to David. David Scott: Thanks, Jason. So our results for the period are largely in line with the same period last year. Our loss has gone up a little. We've got some additional project and development costs in there this year. The main thing that is of interest based on the questions is our cash balance. So at the end of the period, at the end of December, we had $4 million in the bank. Now in addition to that, as Jason alluded to earlier, we're expecting another sum through from Valkor overall to take us through up to the USD 1 million that we're getting on the license fee, and that's expected in over the course of this calendar year. Now where that's going to take us to, we're going to have to see where we get to with our -- hitting our milestones and our projects for the period. So it's too early as yet to say how far that's going to take us to. We're based on our cash spend rate, which is historically about $3 million per year. We've brought in some new additions to the team. So that cash spend has gone up, but maybe only 10%, 15%. So that GBP 4 million is still way more than 1 year's worth of cash spend plus the Valkor money. So we're in a pretty healthy position cash-wise. The loss for the period -- loss per share for the period is in line with the prior period. And our tax losses of GBP 68 million will be there when we come to generate profits. And that's everything for me for the moment. Thanks. Peter Borup: Thank you. So there have been a few updates to the team. You will have noticed our RNS on Lauri stepping down from the Board and Michael Covington joining us. Michael brings in many years' experience in investment banking and private equity leadership also in energy. And just as importantly, he brings in a lot of energy, and drive and a willingness to contribute and participate on the board and in the daily work. So we're looking forward to that. We have also brought in Matthew Hyde, who has more than 30 years in refinery economics, most recently from BP. And that's a reflection of our decision to accelerate how well do we actually understand refinery economics because it's not something we can just do after a successful trial. Once we are having a production trial, we need to make sure we can scale up afterwards. so we can supply the material and the fuels to our clients. Right now, we're down to about probably a gross list of 25 refineries that has a good match to the kind of residues we are looking for. And then Matthew will need to analyze that further to find out which are the ones that will benefit the most from using the MSAR technology and the bioMTAR. So that's ongoing work, but also really important. And I feel we already -- we have already learned a lot compared to when he started. In summing up, -- we -- I feel we are making small steps forward in almost everything we are focusing on. And I'm really looking forward to being able to announce hopefully, the MSC agreement being done and then being able to move on to the next steps. And I'm also very mindful that it looms large to have the agreement signed now or the agreements signed, the next steps are going to call on something else from [Indiscernible] and we have to get into project management phase. We need to mobilize. We need to set up. We need to make sure that the crew on the ship or ships in question are ready for the trials, so we get the most out of them. And then we need to make sure that we scale up properly, that we have agreements in place with refineries -- and while we're starting in Anterp, it's quite clear that some of the next places we have to go, of course, shipping up like Singapore, it might actually be the Persian Gulf again at some point, but also the Mediterranean and the Americas. So that's what we are focusing on and trying to run a tight ship, of course, also on the resource side, still investing in our future, investing in the data platform and accessible data lakes. So that's where we're at. We have had a number of questions come in, I think 45. I'm going to hand over to David to take us through as moderator of the questions that have come in and the questions that you can still post on the platform. So with that, David. David Scott: So thanks to everyone who's submitted questions in on the INC platform. We're going to deal with the pre-submitted questions first, and we've grouped them into segments. So we're going to be going through each segment. After that, we will come in with the live questions that are coming in as we speak. And any questions that we don't want to address today will be dealt with on the INC platform in due course, likely early next week. So I'm going to start now with some of the strategy questions for Peter. And the first question is, what efforts are Quadrise applying to the market of new built dual fuel ships fitted with scrubbers? And how big is this opportunity? Peter Borup: Our focus right now is on talking to owners who have a willingness to move first. So owners who control their own ships. So one thing is owning it, but another one is actually controlling the daily operations. And of course, we're looking for ships that has the highest possible consumption per day of fuel because that's where we can really test them and where we really want to sell. So that is our priority. Secondarily, we are probably looking more for vessels with electronic fuel injection main engines because that works better with our technology. And that's even before looking at scrubbers or no scrubbers. But -- so I think we have a fairly good take of the segmentation there, both from the experience I have and Tony Foster and Linda Sorensen has in the shipping industry, but obviously, also because we have fairly good access to data from various databases on where the ships are with high consumption, and the fuel injection or electronic fuel injection, but also with scrubbers. So we can break that down, and we -- that's how we approach the marketing, if you will. Unknown Executive: Probably worth adding that the dual-fuel ships tend to prioritize LNG, right? There's a reason normally that people have built a dual-fuel ship that's to take advantage of LNG. So it wouldn't be our obvious first choice necessarily. But having said that, there are a number of dual-fuel vessels that are using fuel oil still if they can't get LNG. So -- but it's not the first choice, I would say. David Scott: Okay. So the next few questions are with regards to bringing in additional shipping companies. Do you expect to sign up an additional shipping company once the trilateral agreement is signed between MSC, Cargill and Quadrise? Can you update on how the search has progressed for additional shipping companies? And can you put a time scale on that? Peter Borup: So I -- we are hoping to add another trial. We are talking to tramp owners. We are talking to other types of owners. The time scale is a little bit hard to predict because right now, with all of them, I actually feel we have good access. So in some, we've started with the bunker departments. And then we referred to the technical departments. In others, we've been in with the technical departments first and then talk to the bunker traders or their ESG departments. We had a number of very good meetings in Singapore when we were there, too. So we are sort of spreading it out. We have been talking to family-owned companies, and to listed companies. But again, what we're looking for are people who have proven that they're willing to look at green transition fuels, who have invested in that because it comes often at a cost for them. If we can find owners who have vessels in place for Antwerp, that's another benefit. Predicting when something will be signed is way too early. All I can say is we're having fruitful and meaningful discussions. And some of the ones we've talked to will probably want to wait simply because they don't have ships in place or because the segments that they're operating in are under some pressure at the moment. So I don't want to put a time line on. All I can say is that I feel we are talking to all the right people, and I'm hopeful that we'll get another trial. David Scott: And are you seeing the interest being primarily BioMSAR or MSAR or both? Peter Borup: I would say both, right, at this stage. For some of the bigger players, I'm pretty convinced that the real interest will be for MSAR, but that's yet to be proven, right? But I just know what kind of cost pressure most of these owners are going to be on right now, and the uncertainty that they're operating in. And this is something that shipowners have done for centuries, right, dealing with uncertainty and volatility. So they know how to do that. But it always starts with making sure you have your cost under control. And MSAR is a great product for exactly that. David Scott: Okay. Up to Antwerp, what is the next plan to install MSAR or bioMSAR production? Can you confirm if this will be terminal blending or at refinery or both? Peter Borup: Yes, that's a great question. That obviously depends on our clients. But if you're looking at a very large line of network, or if you're looking at the temporary one, the obvious next place would be Singapore. That's where -- that's the biggest bunkering port in the world. It's a board that has done a lot to improve the transparency of their fuel markets, generally speaking. So they've had issues in the past with cappuccino bunker and all sorts of other substandard fuels, and they've dealt with it using transparency and different mechanisms. We had a fantastic number of meetings, both with governments and fuel providers in Singapore when we were there. I think a lot of what's going on is really, really exciting. But for a sheer size as a bunkering port, that's an obvious place for us to be. For the next places, we've looked at also refineries and suppliers in a number of different places, including in the Persian Gulf, but with what's going on right now, that's not -- doesn't seem to be a viable third place to set up, but we are mindful of the advantages once it becomes accessible again. But East and West Med, the Americas are obvious places. The trial that Jason spoke about with Sparkle is not just about a power plant, but it's also a strategic location for supplying fuel to shipping, right, at the natural bottleneck. So we are looking at these places, trying to identify what are the suppliers available on location that we could collaborate with. David Scott: You said in your interview this week about MSAR offers price competitiveness. So that's where our focus has to be. Is the intention to roll out MSAR commercially once the proof-of-concept data analysis is done and the proof of concept is signed off and successful by MSC? Peter Borup: We will roll it out as soon as we have a client willing to commit to it. Right now, a lot of the clients are willing to do this, their path to adoption will be much easier as a successful trial. So that's why the trial is so important. If somebody is willing to use it now, we have some experience with using the technology in the past in power plants. Now we have to prove it for shipping, but theoretically, there should be very few real issues. There's something about the mobility, et cetera. But if somebody was willing to take -- sign a takeoff agreement now, we would be willing to go ahead with that. But the trial is important for a lot of the owners we are talking to. So we do that first, and then we hope to be able to sign agreements or maybe trial supply agreements with shipowners as the trial shows some results. David Scott: And lastly, on this section, just one on sustainable ships. How is the Quadrise Fuels price model working as a sales tool? Peter Borup: I think it gets people interested. It also works as a sort of a uniform way of calculating because one of the things that we don't always talk about when we talk about biofuels or alternative fuels is that there are so many assumptions that goes in. So at what load do you run the engine, at what speed, what is the weather conditions like, at what end of the range? I mean, many of the -- certainly, many of the articles being written tends to overemphasize the high end of the range of any given product. So I think the sustainable ships platform offers a standardization of that, so we can compare better the different fuels. So I think it has helped us in getting people in the door, but it's also something we use on a daily basis when we are presenting to shipowners, or to people who are interested in the product in general to show what it would work like for a different ship type or a given conditions, or at a given time, right? Because let's not forget that fuel EU changes over time. So requirements will change in 30 and 32, I believe. And the same thing with the proposed IMO framework. So it's helpful for that reason alone. David Scott: Yes. So I'm going to go on to the technology section now, and these are primarily directed at you, Jason. So the first one is just on refinery setup. Is it true that new and updated refineries are having crackers fitted to extract more value from the input crude and that this will reduce the amount of residue available? Does this, therefore, mean that bunker and storage companies producing MSAR or bioMSAR are the path to success for Quadrise rather than refinery bio MSAR production? Jason Miles: Yes. I think in terms of existing refineries, I think those refineries actually installing, I guess, upgrading equipment in the minority. There's not many companies actually investing in downstream assets anymore. So -- but new -- certainly the case for new refineries. If you're building a new refinery, that tends to be a full conversion refinery and you don't produce any fuel oil at all. I think if you look at -- and people are doing this on the basis of a long-term plan that might be 5 or 10 years out, right, with the expectation that fuel oil or especially high sulfur fuel oil is in a decline. But in reality, it seems to be quite a popular product and it's still on the rise in terms of how it's being utilized. And there's still a very large market for heavy fuel oil. Based on our assessment, Peter mentioned before, we've got -- we've done an assessment of all the refineries available and there's at least 25 on our short list, which are really good candidates. And indeed, some of those actually have put cracking capacity in, but they still have a resid stream, which they have to blend the fuel oil, right? So not everybody is going not just because you put a cracker in doesn't mean that you have no fuel oil at all. Some still produce quite sizable amounts of fuel oil. So that's really where we see the refinery is key. I'd say that's the source of the lowest cost feedstock. But having said that, in the middle of that, refineries don't have a lot of tanks and not always involved in the bunker business. And that's where the storage companies and the bunker traders, et cetera, are also important to us as well. So I wouldn't rule them out as partners in the future because they are key to unlocking the logistics of getting it from the refinery to the end user of the shipowner. David Scott: What is the plan for supplying residual streams of bioMSAR at MAC2 to replace the HFO component and further reduce bioMSAR cost base? Also, do you plan to deliver biogenics to refineries to produce bioMSAR at the refineries, and minimize the cost base? Jason Miles: Yes. I think in terms of the, I guess, the residual streams, we're certainly looking at using the more viscous forms of fuel oil or a fuel or derivative. So the heavier the resid, obviously, the lower the cost. But it doesn't mean we can start using refinery resids at that particular facility because of the viscosity of it is just too high and the temperature that you need to handle it in makes it quite complicated from a logistics point of view. But we're certainly looking at the most viscous forms of fuel oil you can buy out there as one of the components. Yes. And in terms of other biogenic components, we're certainly looking potentially to supply those to refineries in the future where we can put a system in the refinery. Certainly, that would be an opportunity to supply them with a biofuel in the future to make the bioMSAR product as it becomes of interest. But the primary driver probably in the refinery is most likely to be the MSAR products initially. But every refinery likes to know that there's a biogenic pathway going forward as well, and we've got a range of different options and a pretty low-cost solution as well compared to some of the other things we're looking at. David Scott: Thanks. My next question is just on MSAR and bioMSAR production. Can MSAR be produced at refineries and then shipped to a bunkering location for further processing in the bioMSAR. So the question is, can we make bioMSAR out of MSAR? Jason Miles: The reality is it's a bit more problematic because MSAR has 30% water and bioMSAR has 10% water. So there's a limitation to how much bioMSAR we can turn into -- sorry, MSAR, we can turn into bioMSAR. So in reality, it's much better to produce the individual fuels. That's not to say it couldn't be blended in the future, but there are some physical limitations in terms of what you can do because ideally, what you'd want to do is replace the water with a biogenic component in the water phase. David Scott: Makes sense. Post BioMSAR, when could we expect other Biogenics to enter the bioMSAR offering at the commercial level? Jason Miles: I mean that's something we're testing at the moment. So there are -- Peter mentioned before, some available products, which are commercially sold today, but have the limitations in the case of methyl ester residues and cash in nutshell liquids and some of the other products out there that we could -- we're looking to introduce at an early stage. That requires some engine testing that we're still doing to confirm that. And obviously, then we need to present those engine test results to Wartsila and others and get a candidate vessel to actually utilize the fuel as well. So it's work in progress, but we're making very good progress in that regard in terms of offering another pathway for these products. David Scott: Okay. Just one here now on ISCC certification. Is ISCC certification a prerequisite to getting the trial agreement signed? Or does the fuel actively have to need to be produced, and the on-site setup audited in order to secure the ISCC certification? Jason Miles: Yes. So the ICC certification process, we're working on together with Cargill. We made some very good progress in that regard. And the new regulations that covers the EU, especially has simplified the process. So in terms of the application process, we're in good shape. The final part of that jigsaw is to actually get the -- an audit done once the plant is up and running -- basically once the plant is installed at MAC2 and being commissioned, that audit can take place, and that's the final rubber stamping. And to answer the first question that you had, I mean, the IC certification process is not holding up anything in that regard in terms of signing the agreements. That's purely the commercial and legal discussion being finalized between MSC and Cargill. David Scott: Yes. Okay. Thanks. There's a couple here on the financials. So I'll just deal with those ones. What is the other income of $12,000 in the interim accounts? So that $12,000 is grant income. So we received grant income for the SEASTARS project. Overall, it's about $50,000. So we've actually got that cash. And what we do is we release that in the P&L as the work against that program is completed. So as of December, we've released $12,000 against the P&L. And then a couple of questions just on where we're at with cash. I did cover that on the presentation, but just to reiterate, -- we've got 4 million at the year-end, which is still more than 1 year's worth of fixed costs despite the increases to the team and the headcount. On top of that, we're expecting USD 950,000 worth of some in from Valkor throughout the course of this year. So we need to work out where we're going to be over the next 6 months by reaching our milestones as to how long that's going to take us to. Then there's one in here as well. Shareholders have been advised that the last fund raise was sufficient to take the company through to commercialization. Given the cash holding and spend rate plus delays to revenue-generating contracts, does that guidance of sufficient cash to commercialization still hold true? And how appropriate was that guidance? So when that guidance was given, that was during -- after the last fundraise and during the last IMC, which is about 6 months ago. And that's where our projections were at that time. Obviously, things have been delayed a bit. So it's not a clear cut, but it's still too early to say. We need to see which milestones we hit over the next 6 months. The next section is on MSC, and I'm going to direct this to you, Peter. Can you provide -- can you provide detail on the delay associated with signing the MSC trial agreement and why trilateral agreement is now mentioned in the interim results RNS? Also specifically, what do you mean when you state in the RNS post-trial commercial considerations? What considerations constitute MSC putting in to paper? Peter Borup: Yes. So we have been talking about bilateral agreements, four lateral agreements and at some point, even bilateral agreements. And some of this is driven by attempts to make this work, right? So there was a concern about being subject to EU VAT in Antwerp. And that led us to look at if we could inject a bargain company in the agreement as well and hence, avoid it. It turns out not to be necessary. So we're back to a tripartite. It's not a fundamental change of the agreement at all. It's now we're back to the original tripartite, but still with a discussion over some of the terms and conditions that Cargill is going through as we speak. So that, I think, was the first question. On the second question, it was about the MSAR, was it? Of course, commercial considerations. Yes, that's really refers to the scale-up in the commercial contract, right? So my expectation is that, that will be for MSAR. My expectation is also that we need to have refineries ready, and we're hoping for MSC to use some of the leverage in helping us get in. But we're not leaving it at that. We are doing our homework. As I mentioned, we've hired Matt to help us do that homework, but we're also using 2 different consultancies who have different kinds of access and different perspective on this, and we can call on them when we need to get a little bit closer to any one of these refineries to make sure we can clinch such a supply. David Scott: Yes. Okay. Peter recently stated that the remaining parts of the draft agreements are now predictable, and we can expect signature soon. Was Peter referring to both tripartite and bilaterals, or just the tri-part idea? And have MSC and Cargill shared their view with the team that they will also expect the remaining parts to be predictable and signed off soon? Peter Borup: The outstanding contracts, a couple of bilateral ones and there's a tripartite as it looks right now, are all related. So it's the same issues that needs to be sorted out in order for us to finalize these. David Scott: So you would expect them all to be signed together? Peter Borup: I would expect it to be one signing, yes. I'm certainly hoping it will be, but I see no reasons why it shouldn't be. My conclusion that these are small is based on 30 years of doing shipping contracts and the issues that are remaining, I believe, is of a pragmatic nature rather than a principal nature. But with large companies, you want to make sure and you will involve your legal departments. So -- and that's where we're at, right? So what we can do now, I'm not going to give you a time frame because that's born to be something I regret. But what I can say is that we try to keep the pace up on this and try to make it a little bit simpler to get it expedited and push your own legal departments rather than us just waiting for it or answering us. So I think these are smaller -- I think these are -- of course, they're not small issues, but they are pragmatic issues, and we should be able to sort them out. But I'm also mindful that if you're running a fleet of 750 ships and you certainly can't get oil out of the Persian Gulf, that's probably going to be your prime area of focus right now, right? So we are competing with that. That's for sure, right? But that's one of the few things I can see should hold it up further. David Scott: Okay. Is the plan for MSAR rollout post MSAR proof-of-concept completion? Can you provide some detail on the plan once the MSAR proof of concept is confirmed as complete? Peter Borup: Well, it is that we need to be able to provide the manufacturing units in the locations where it's required. And it's going to be a gradual rollout. We're not going to open up all over the world all at once, but we will prioritize the big bunkering hubs, spoke a little bit to it earlier. So Singapore is an obvious choice. It's a very, very significant bunkering port. Maybe build out in Northern Europe, certainly in the Mediterranean at some point in the PG because on the Persian Gulf. Right now, that's off the table, obviously, and then the Americas. But that will also depend on the clients and what their preferences are, and they are also likely to perhaps change a little bit as the world changes around us. So we're flexible on that. As you know, we have collaborators who can help us scale up also on the production of these manufacturing units. Fundamentally, it comes down also to the partners we have both on the refining side and also in some places on the bio feedstock side. David Scott: Can you confirm if MSC has informed Quadrise that they'd be willing to use MSAR commercially under the interim law? And if so, how many vessels would that involve assumed agreements were reached? Peter Borup: We have not gotten into the detail like that, no. David Scott: Okay. Do MSC still regard MSAR as the main Quadrise fuel choice in the immediate future with bioMSAR use dependent on economic considerations going forward? Peter Borup: Yes, I think that's a very good question. It's probably one that MSC should answer, right? So my expectation is that there will be a strong focus on whichever one offers better saving over conventional fuel, and that would be MSAR. So I would expect that to be the case. David Scott: Okay. What is the status of MSAR supply to MSC, which we have been told is running independently of MAC2 facility with preferential supply in the Mediterranean? Peter Borup: We are assessing all the locations where we can provide this. But ultimately, it's up to -- it's also up to MSC and collaboration with us and other suppliers to determine where we can deliver the fuels. David Scott: Can you clarify the status of the interim loan oil for MSAR, and whether MSC have explicitly confirmed they would proceed to commercial use without a full loan oil following a successful proof of concept? If so, how have insurance implications been addressed to ensure this does not become a barrier to uptake? Peter Borup: Maybe, Jason, you could take the loan oil part. Jason Miles: I'll take the question if you want. I mean in terms of the interim loan oil was issued to Maersk from -- by Wartsila. So that's the status of the original interim loan, obviously, of which MSC is very much aware, right? So from their perspective, something is in place that covers that. And in terms of the, I guess, the trial itself, obviously, the test vessel is insured in terms of the product liability risk of using MSAR or bioMSAR that's fully insured as part of the development process. As part of doing the trial, obviously, you generate a lot of data and initial -- sorry, further approvals then in terms of the products that we're supplying, all of which helps to alleviate some of the initial risk that you get from insurers and others in terms of obstacles to actually move ahead. So our -- we're in very good contact with our broker and the underwriter on Lloyd's who covers this risk at the moment for us. And obviously, as data is approved upon as the tests progress, then that we should reduce the premiums in terms of using the fuel on various vessels. And we don't see that as a constraint going forward because it's being done with other fuels as well. David Scott: Yes. Okay. Have MSC indicated a desire to get our fuels used in their engines? Jason Miles: They have in the past. And obviously, Peter has been involved with discussions with M&A quite recently in Denmark in terms of what the approval process will look like. So that's something that we are progressing. So yes, I think -- but yes, for sure, M&A or Evolent is now called now are an important OEM that we need to bring up to speed as we get the data from the testing that we progress. moving to Morocco. David Scott: So we're going to move on to the OCP questions now. Can you remind us why the Morocco trial is actually needed given that there was already a successful trial in November 2023. Also, is the fuel to be used the same fuel that was shipped in December 2022? Jason Miles: Yes. So the additional test is needed because the first test that we did was designed essentially a proof-of-concept test by OCP. So that worked very well at Kariba. We basically tested both MSAR and bioMSAR. -- going in that over a short period of time. So the requirement from OCP was that that's gone well, very happy, but we need to have a longer-term test of up to 30 days depending on the kiln to get the data. So that's what we're planning for next is to complete that subsequent trial, anything between sort of 15 to 30 days is the plan at the moment. And we'll be utilizing -- we won't have to make fuel and bring it to Morocco. So all the fuels from the previous test, sorry, was utilized successfully without any problem. So it's not like we've got fuel sitting around there for that period of time, although that will probably still be stable if I'm honest. But yes, so we've been making new fuel in Morocco and using that for the test going forward. David Scott: Okay. For OCP, are you looking to set up Mediterranean fuel supplies previously? Or would the fuel now be made in Antwerp and shipped to Morocco? Jason Miles: Yes, probably have answered that one in terms of we'll be making it in Morocco as opposed to making it outside of the country at the moment. David Scott: I think this has probably gotten our post trial considerations. Jason Miles: Yes, yes, I guess this is with the OCP trial. But yes, in terms of post trial, definitely, that would be -- we'd be looking for most likely a refinery in the Mediterranean region in Africa. David Scott: Okay. And then one for you, Peter, on OCP. Haven't recently met OCP, what is your take on the general attitude to an interest using MSAR? Peter Borup: Also, I mean, we went to Casablanca for the meeting. I was quite positively surprised by their interest in using it. Also an approach that I think makes a lot of sense in involving the different business units to make sure they are motivated and they're measured on it. It's a reasonably small trial, obviously. But we have the equipment on location, if you will. And I think it makes a lot of sense for us to stick around and conduct the trial, and just make sure that the project management around it is something that we can all learn from and that it leads into a commercial takeoff agreement afterwards. David Scott: Okay. A couple of questions now on Valkor for you, Jason. Can you detail the plan on producing MSAR or bioMSAR at the Balcor facility? And how this gets to bunkering locations if MSC are prepared to trial the fuel? Jason Miles: Yes. So I guess the initial plan of Valkor is to produce an MSAR product because that's the simplest thing to do. We're using their heavy sweet oil, which is a very low sulfur asphalt type material to make a low-cost alternative to low sulfur fuel oil diesel potentially. So that's the initial plan is to produce an MSAR product. Obviously, the key thing about that is that as part of their production process, if they're able to demonstrate that the carbon intensity of the product is lower than low sulfur fuel or diesel as well, that's quite important because that gives you carbon credits we can utilize. But the initial market is to really focus on the sort of industrial and power type applications, first of all. The volumes aren't there yet or we don't expect the volumes to be there initially anyway to supply the marine sector other than maybe for the occasional trial volume. But in the past, we've discussed this with MSC at a high level. And in principle, they're obviously interested in testing it if it meets the specifications that we need to for marine fuels, especially around sort of levels of aluminum, silica, et cetera, which oil sands is important to reduce. But yes, so if it is supplied to the marine sector, we've looked into that. There are -- there's rail supply that's very reasonably low cost to get it from Utah, either to the West Coast or down to the U.S. Gulf Coast as well, which is the main markets for bunker fuel. But that's some way off at the moment. So initially, we want to stimulate a local demand, get up and running with that. And then obviously, as they expand, then we can start looking at the marine sector. David Scott: Okay. My next question is just on the status of the samples that we're expecting from Valkor, sort of why have they been delayed? And what's the current expectation? Jason Miles: Yes. I mean we've had some, I guess, some interim samples in the past, right, which have not necessarily been representative of their commercial products. So we were quite specific with them. We didn't want to waste time -- we're testing that if it wasn't essentially a good representation of what they'll be supplying. And in the meantime, they've also been changing some of the technology in terms of what they're installing, both in the oil sands plant and obviously, the downhole drilling program as well to overcome some of the issues they had initially. So that's now been settled. The pilot plant, as I mentioned in the presentation, is now up and running and producing a sample, hopefully, several [panamas] of samples that they're sending across to us. Imminently for testing, and then we obviously think can analyze that and provide a market spec for it as well that we can go out and start selling to end users. So that's all ongoing, but it has been delayed for sure, but not really down to us. David Scott: Okay. So that takes us on to spot. There's a couple of questions here. The first one is just on the Panama power market. Are you aware of the Panama 0 126 power tender where thermoelectric plants running on bunker or diesel that with long-term government contracts must convert to cleaner fuels within 36 months. Is this a target for BioMSAR, BioMSAR Zero with any of our Panama clients? Jason Miles: I mean the answer is yes. We're very much aware of that particular tender. Sparkle made us aware of it. And that's one of the reasons why it was important to get the approval of the Panamanian authorities for both MSAR and bioMSAR to be considered as alternative fuels basically to fuel oil and diesel, which they are. I think initially, the pathway will be still to go the MSAR route, first of all, to reduce the cost of generation there and be competitive, obviously, to LNG, which is the other source other than obviously renewable sources. But ultimately, bioMSAR is certainly seen as a viable means going forward as well compared to LNG and LPG, which are the main alternatives to them. David Scott: Okay. I don't think -- this is probably the last question because I don't think we've got time for many more after this. We were advised that the Panama fuel permits were expected to be received by the end of 2025. What has held them up? Are you working with the government on getting our fuels cleared to be used as cleaner fuels as per the Panama Zero 126 tender? Is this part of the permitting plan now? Jason Miles: Yes. I probably semi answered this in the last answer. But yes, I mean, in terms of the actual approval of the alternative fuels, certainly MSAR and bioMSAR are now considered by the authorities as such. In terms of getting the import permits, we actually need to have now the supply logistics nailed down in terms of which refinery, which terminal we're going to bring in, which partner potentially in Panama might we wish to use. And then we can apply either ourselves or through that particular partner for the import permit, which we've been given the procedure that we need to follow, all of which seems to be fairly straightforward, and meeting the guidelines that we're well used to in Europe and other places. So we're using internationally established guidelines to then get the fuel approved and imported. So we don't see any real holdups now in terms of other than bring the fuel in and make sure there's a commercial contract in place between buyer and seller. David Scott: Okay. Operator: That's great, David. Thank you very much indeed for moderating through the Q&A. Ladies and gentlemen, thank you for your engagement this afternoon. I know investor feedback is particularly important to you. And Peter, I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, I wonder if I may just ask you for a couple of closing comments. Peter Borup: Yes. Thank you so much for listening in. Thank you for your support. Thank you for the many very good questions. I know there are a couple of questions that have come in on the platform live during our presentation. We will address them, as David mentioned earlier, on the platform latest by next week. So once again, thank you very much for listening in. Operator: That's great. Thank you very much indeed. Ladies and gentlemen, we will now redirect you for feedback. On behalf of the management team of Quadrise, we'd like to thank you for attending today's
Operator: Ladies and gentlemen, thank you for standing by. I am [ Gaily ], your Chorus Call operator. Welcome, and thank you for joining the Bally's Intralot conference call and live webcast to present and discuss the Bally's Intralot trading update. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Robeson Reeves, CEO of Bally's Intralot. Mr. Reeves, you may now proceed. Robeson Reeves: Good morning, everyone, and thank you for joining. As a standard reminder, this call may contain forward-looking statements. Please refer to our 17th March full year results announcement for the full disclaimer detailing FY 2025 [Technical Difficulty]. Operator: Mr. Reeves, if I apologize, this is the operator. Can you hear me. Mr. Reeves, I apologize. This is the operator. Can you hear me? Robeson Reeves: Yes. Operator: I'm sorry. Your line is very bad. I cannot hear -- we cannot you very well. Robeson Reeves: Okay. I'll try again. Apologies. Operator: No problem. Robeson Reeves: Good morning, everyone, and thank you for joining. As a standard reminder, this call may contain forward-looking statements. Please refer to our 17th March full year results announcement for the full disclaimer and detailed FY 2025 financials. Today, I want to do 3 things. First, briefly recap the key numbers we published on the 17th of March '26, so we're all working from the same base. Second, reaffirm our 2026 adjusted EBITDA guidance, and I want to be clear that reaffirmation is exactly what it is. And third, give you the Q1 2026 trading data, which I'm providing because it directly supports the confidence behind that reaffirmation. Let me get straight into it. On the 17th of March, we published our full year 2025 results. I'm treating that filing as read and want to reconfirm the headline numbers disclosed previously remain unchanged. A few points worth reiterating. The 39.7% adjusted EBITDA margin reflects the structural quality of this business. A U.K. operator running at that margin has a different risk profile to any operator running at 20% to 25%. That matters particularly now as we enter the period of U.K. gaming duty change. EUR 172.7 million of levered free cash flow gives us clear capacity to service debt, return capital and pursue M&A simultaneously if the right opportunity arises. The EUR 50 million of capital returns represents less than 30% of annual free cash flow. And we continue with our plan on deleveraging the balance sheet towards our 2.5x target. That is the base. Now let me tell you where we stand on '26. Our 2026 adjusted EBITDA guidance of approximately EUR 422 million is reaffirmed. From today, the 1st of April, U.K. remote gaming duty moves from 21% to 40% of gross gaming revenue. We have been preparing for this since Q4 last year. So we have a mitigation bridge. If I go to the start point, that's approximately EUR 431 million. That's our 2025 pro forma adjusted EBITDA. So we get this gross tax impact of EUR 95 million, the direct cost of the duty increase on our U.K. gross gaming revenue. With our first mitigation, that's our generosity reductions and marketing optimization, we add EUR 25 million. That's already in motion, phased in Q1 and in the run rate now. Our second mitigation are the cost savings, headcount and operating expenditure adding EUR 10 million. That's been actioned in Q1. Mitigation 3, that's the transaction synergies, adding EUR 15 million, which tracks to be in line with the commitment we made at the time of acquisition. The final mitigation is just our organic growth across all markets, including our Lottery division with 0 U.K. gaming duty exposure, adding EUR 34 million. The net result of that is approximately EUR 422 million. That's a 2% impact on the 2025 pro forma. That is what I told you this cost would be, and that's where we remain. On leverage, we're at 3.46x. We are entering this tax change with approximately EUR 173 million of levered free cash flow. The mitigations are operational levers within our control. And as the Q1 data I'm about to give you will confirm, we are entering this change with stronger underlying trading momentum than at any recent point in our history. On margin, our B2C adjusted EBITDA margin was approximately 40% in Q4 2025. Most comparable operators are running below 25%. When Gaming Duty nearly doubles on gross gaming revenue, not profit, a 20% to 25% margin compresses to near 0. A 40% margin does not. That asymmetry is why our guidance is reaffirmed with confidence. Now on to trading. The reason I'm giving you Q1 data today is straightforward. Q1 trading is strong, and I want you to have that as context when evaluating our guidance reaffirmation. This is not a separate story. It is the evidence base. Please note that these numbers are unaudited and could change slightly as we close our Q1 accounts. So now I want to touch on sequential quarter-to-quarter performance. So Q4 to Q1. Q4 is always the biggest quarter, our biggest quarter. It's always that every time. October, November, December has the autumn sporting calendar, the Christmas build, peak promotional intensity across the entire market. So in Q4 '25, U.K. net gaming revenue was GBP 148.8 million. Q1 '26 was approximately GBP 147.9 million. That's essentially flat quarter-on-quarter against Q4, right? Q4 is always the biggest. So flat is exceptional performance. So that is the first thing to hold. Q1 2026, when we look at that for the quarter in full, U.K. B2C NGR for the quarter, as I said, GBP 147.9 million, up approximately 10.5% year-on-year. Every single month of Q1 delivered year-on-year growth. B2B performed in line with our expectations across the quarter. The B2B division is a core part of the business, and it's stable with a strong contracted revenue base, which provides additional resilience to the group during this tax transition period. Touching on some other customer metrics in Q1. Active players were flat quarter-on-quarter, so against a really strong Q4 base. This reflects sustained momentum in both acquisition and retention as well as efficient welcome offers. First-time depositors were up 10.8% quarter-on-quarter and 59.4% year-over-year. The customer pipeline is expanding into the tax change, not contracting. B2B is stable. It's operating within our expected parameters, and there's no material surprises. Noncore international markets are also stable. There are modest FX translation headwinds in certain markets and some market-specific dynamics we flagged at the FY '25 results. That picture has not materially changed. The group margin is carried by UK iGaming and our Lottery division. Both of those are performing. Noncore stability means they are not a drag. That's the message. This is the trading base on which we reaffirm our EUR 422 million of adjusted EBITDA guidance for 2026. Now on to capital allocation. So I'll start with buybacks. Approximately EUR 20 million has been executed since the EGM authorization. I believe our shares represent outstanding value. I intend to continue utilizing related TRS products of international banks that do not immediately impact our cash on balance sheet and give flexibility to execute buybacks when we determine that timing is right. On to dividends. The Board is recommending approximately EUR 30 million to the Annual General Meeting, leaving EUR 173 million of levered free cash flow, EUR 50 million returned, well within our capacity while deleveraging. On leverage, net leverage at year-end was 3.46x pro forma. The medium target remains at 2.5x, and we have a clear line of sight. On M&A, the tax environment is creating very motivated sellers, and we have the platform, the margin headroom and the management team to act on the right opportunities. So we are active. My closing remarks, I'll just give you a nice summary. FY 2025 published on the 17th of March, pro forma revenue of EUR 1.0858 billion, adjusted EBITDA EUR 430.8 million, margin of 39.7%, leverage 3.46x and free cash flow, EUR 172.7 million. 2026 adjusted EBITDA guidance of approximately EUR 422 million is reaffirmed and our mitigation program is in execution with all 4 levers active. Q1 U.K. B2C NGR of approximately GBP 147.9 million, flat on the seasonal peak of Q4, up approximately 10.5% year-on-year. Active players flat Q-on-Q, but up 8.7% year-on-year. First-time depositors up 10.8% quarter-on-quarter and 59.4% up year-on-year. The customer pipeline is expanding into the tax change. B2B is performing in line with expectations and noncore international markets are stable. EUR 20 million of buybacks have been executed and a EUR 30 million dividend recommended. Deleveraging is on track to 2.5x. I said this before that the strong don't only survive, but they do get stronger, and I believe that we are getting stronger. We'll now take your questions. Operator: [Operator Instructions] The first question is from the line of Chinchilla Ricardo with Deutsche Bank. Luis Chinchilla: I wanted to start on the M&A front. As you mentioned that there is opportunities and that the press has recently mentioned that you are active. While respecting the company's confidentiality regarding specific targets, I would appreciate an assessment of the company's M&A appetite. This assessment could encompass suitable target profiles. Are you looking at B2C operators, technology stacks and a specific company within a market? And also, can you please also provide us with an evaluation of the maximum leverage that the company can sustain or that you will be willing to elevate just to move fast in an environment and consume something strategic for the business? Chrysostomos Sfatos: Robeson, shall I take this one? Robeson Reeves: Go for it, Chrys. Go for it. Chrysostomos Sfatos: Yes. Thank you for your question. We have said many times that we are on the lookout for any opportunity that will contribute towards either organic or inorganic growth. We're clearly on a growth path from this point on. So inorganic growth would cover -- our appetite for M&A is there. But on condition that we will be able to fulfill our financial policy goals as stated, which includes, first and foremost, our path to delever and the distribution to shareholders. So both goals, I think, on distributions, we've already covered enough on this call and through our announcement. On the path to delever, it remains our goal. We have disclosed what is the pro forma free cash flow generation. And with that, as you probably know, we have an amortization schedule with regard to our bank loans in our capital structure. And so we intend to make significant repayments and reduce the gross debt in the next 2, 3 years. So we are committed to deleverage. We will do whatever M&A is necessary by adding EBITDA by considering anything that's meaningful in terms of very, very substantial synergies that we feel comfortable we can deliver or cost reductions on the target. And at the moment, this is our message to the market. Luis Chinchilla: Got it. If I may do a follow-up. The company recently opened that casino in Newcastle and you had mentioned in the past that they wanted to expand into sports betting. Can you provide your thoughts on additional casino footprint in the U.K. And if you rather acquire a sports business or build it yourself from the ground up? Robeson Reeves: I'll take this one. For us, the retail casino in Newcastle is much more of an R&D piece. It's very, very small part of the actual footprint. There's no intention to expand into retail within Bally's Intralot. The retail presence we'll have will remain in the lotteries. With respect to Sports Betting product, we currently have an agreement with Kambi, who provides really a back-end sports betting solution. We're very happy with them. If we were to look at any opportunities out there, as we said, the U.K. market has become more attractive more because of the trauma, which has been created by this tax change. We would only consider things if we could see substantial cost-cutting opportunities as well as synergies. I would not underestimate how strong our margin profile is versus peers in this space. As long as we can bring things into our platform, and I mean our platform, how we manage things, how we operate things that gives us this margin improvement over others, then it can become very attractive. But we'll be very diligent and ensure that we protect our capital structure in whatever we do. Luis Chinchilla: If I could squeeze one last one. In the past, the company mentioned articulated growth opportunities contingent upon the integration of the [ Merck ] technology stacks. I was hoping if you could give us an update on these potential opportunities that at the time you mentioned that you would disclose once the merger was completed and you get permission. So any update would be very helpful? Robeson Reeves: So as we discussed previously, Ricardo, our intention is to launch into 2 B2C markets per year, utilizing the Intralot footprint and their relationships. These things are progressing. We will disclose those closer to the time. If we end up looking at other opportunities inorganically, that may change that plan if it accelerates expansion, but we're still on track for 2 new B2C markets being launched this year. Operator: The next question is from the line of Narula Raman with Principal Asset Management. Raman Narula: Just a couple from me, please. The first, just curious if you can disclose what percentage of your full year '25 U.K. revenue was Sports Betting and maybe the same for Q1 as well? And just if you could give a sense of how that's been growing, that would be appreciated. Robeson Reeves: Cool. Katherine, do you want to take this? Katherine Gomaniouk: Sure, Robeson. Thank you. Sports Betting still constitutes a fairly small percentage of our revenue, but we have seen healthy growth in that space as is demonstrated by the growth in our FTD numbers, which were in part driven by some sports events that happened in Q1. So we continue using sports as a funnel to acquire gaming customers, and that strategy seems to have been working as would have been demonstrated in our Q1 numbers. Chrysostomos Sfatos: And just to layer on top of that -- so thank you, Katherine. Just to layer on top of that, when we look at Sports Betting and iGaming, what you would have seen from many of our peers' recent releases around Q1 performance that there was a decline in Sports Betting and there was an increase in iGaming. Now if you've got the balance right between your product sets, so people might win on sports and they reinvest into iGaming and so on, then you would -- the net position would always be better, whereas actually, a lot of the peers are showing down by 5% or so in Sports Betting and up in iGaming by 5%. So they're not even really seeing any growth. What we've been very careful to do with our Sports Betting offering is ensure that it fits with all of the regulations which sit in the U.K. market, such as stake limits on slot machines. So you need to balance exactly the scale of bets that you would take alongside people's ability to reinvest. Sports betting just, call it, [ GBP 1 million ] or so per month is what we're seeing in the U.K. So small, but that's where a huge opportunity lies. Raman Narula: Understood. That's very helpful. And I guess as a segue into the next question, obviously, this year, huge sports calendar along with the World Cup. Just curious, maybe in a similarly stacked sports year like '24 with the Euros, I mean, what kind of effect did you see on your sort of core iGaming business during those months, those summer months when you had those big football tournaments ongoing? Robeson Reeves: We didn't see any -- if you're asking, is there any negative impact by having -- you have to understand, you've got the euros, you got the World Cup. How many of those matches are competitive and how many fixtures do they have in terms of volume. They are good acquisition drivers, but they're not necessarily big revenue drivers, right? You're going to have fixtures between Curacao and other matches, which are heavily one-sided. When it comes to soccer, you prefer fixtures, which are a bit more balanced or you have sufficient volume. The World Cup actually is, call it, a low period or the Euros is a low period in fixture volumes for actual revenues, but it does bring new customers to the market. So for us, this would aid the funnel for acquisition, and it's almost like a perfect storm in lots of ways because there's not enough matches for people to be betting on to constantly be active. If you think about normal Saturday, there's lots of fixtures for revenue to flow there. But actually, this will get the right prestige and coverage to acquire and then there's no matches, then people can play iGaming products and so on. Raman Narula: Makes sense. And then lastly, I just wanted to touch on dividend policy. Obviously, in the preliminary results, you stated that it's the intention to recommend a pre-dividend sort of along with the publication of H1 results. If you could just give us a sense of like the potential quantum? Is that going to be a percentage of the pro forma adjusted EBITDA? Or is that still a percentage of adjusted net income? Just if you could give -- remind us of your dividend policy, that would be really helpful. Robeson Reeves: Chrys, do you want to take it? Chrysostomos Sfatos: Sure. At this point, we cannot give you an estimate about the pre-dividend. I think the combination of buybacks and the dividend that we will distribute the EUR 30 million, which is what we already have available for previously undistributed profits in the past, which we could not distribute at the time due to losses that we're now covering. That's the only specific thing that we would like to share at the moment. We don't want to preempt what the results are going to be. We will evaluate the entire situation, our cash flows at the time, and we will make the decision once the results are available. Raman Narula: Understood. And could you just clarify the medium-term target of 2.5x. Do you expect to sort of be there around mid of '27? Or what are you targeting? Chrysostomos Sfatos: That will be in line with our amortization schedules. Yes. By the time we get basically to 2029 when we have the retail bond maturing, the EUR 130 million retail bond, the unsecured portion of our debt maturing in February 2029, we intend to repay that. And we intend to repay through amortizations, as I said, and eventually on maturity at the end of 2029, the Greek bank loan. Well, these 2 tranches together is EUR 330 million of gross debt, which we intend to reduce in the coming period. Of course, it will all depend on the cash generation, on our CapEx requirements and all of this. So in this period, we think that it's achievable if we manage to deliver our growth targets. What we said is that basically the imposition of a new tax regime in the U.K. will have, as a result, the delay of our plan by 1 year because we will be able to capture market share from a market which we believe is going to change fundamentally in the next year. Operator: The next question is from the line of [indiscernible] with Credit Suisse. Unknown Analyst: As part of the bond offering last year, the company included the helpful KPIs. You mentioned the impressive growth, 8.7% increase year-over-year in the first quarter. Is that going to be included in the annual report that -- in upcoming presentations? Chrysostomos Sfatos: I think you're referring to the U.K. market or to the combined growth. Unknown Analyst: Yes. Maybe the active online players, revenue per active players, that type of disclosure was helpful and it was including the bond offering, and you mentioned it again today. I guess it was more of a request to include it as part of your presentations. Robeson Reeves: Yes. I think going forward, we'll share the most relevant KPIs, which can indicate the future pathway as best as we can guide. But that's why we showed new player volumes. New player volumes will build on your base and actually drive future revenues. So we're trying to be as -- we believe that transparency is always a good thing. So we'll be as transparent as is sensible without giving away too much competitor information, let's say. So we -- yes, we'll try and be as transparent as possible in every quarter going forward. Unknown Analyst: And what is driving the impressive growth in the first quarter? Robeson Reeves: Well, with respect to the revenues, as we said, we've made some slight adjustments to our products, so some of the configurations with regards to ensuring that players basically lose at a very sustainable rate. So our objective has actually been to manage player spend almost down slightly on a visit frequency, which means that people retain better longer term. But we've seen really good numbers coming from, call it, marketing performance from acquisition spend. As I've said to all of you, the day following the tax announcement in the U.K., we saw improved performance from the same marketing spend amounts because there was reduced competition. For me, that's a pretty amazing sign that the statement of tax coming caused a reaction. So from this day, we'll see what performance looks like given now this is the first time that people with suppressed margins will have to start footing a bill with the increased gaming taxes. I'm very hopeful that if I think about my history in this sector, when I started working here, there was no tax on revenues, no gaming duty on revenues. Then it went to 15% tax of net gaming revenue, then flipped across on to gross gaming revenue, then became 21% and this is the next tax change. In every single period of this, it's led to consolidation. And actually, through this cycle, our EBITDA margin has grown because we're very, very good at, call it, flying through a storm and operators who don't see there's a storm there, even if it might be a clear blue sky, they just don't see opportunities because you can continuously improve and continuously improve your margins and improve your growth. So I'm quite excited about this next period. This is opportunity. Operator: The next question is from the line of Gondhale Pravin with Barclays. Pravin Gondhale: Firstly, on U.K. sort of growth outlook for 2025 and 2026, what's your assessment on that given the tax changes? And then within that, are you seeing any changes in channelization of online gaming? I realize it's just day 1 of the new taxes, but what's your outlook for that as well? Robeson Reeves: Yes. Okay. So you're talking about the overall U.K. market, right? Just for clarity. Pravin Gondhale: Yes, please. Yes, yes. Robeson Reeves: Yes. So the U.K. market, as I was indicating when I spoke about some of the peers who haven't been able to see reinvestment of winnings from sports betting go back into casino, there will be a degree of channelization coming from that. So people -- because the reason why people can't reinvest is due to limits on what they're able to spend. This can do multiple things. People could move to the black market slightly. But bear in mind, the U.K. Gambling Commission are investing substantially in trying to police this. I don't see the market growing by that much, if growing at all this year because of these changes to stake limits. Having said that, I believe it's a significant period of consolidation. So I'd expect all the big operators to gain share in this. There are many operators out there who are willing to hand over databases for royalty fees and so on. They're willing to exit. And that will just mean that we can soak up that revenue. So I don't see the market really growing. It will be minimal, a couple of, like, call it, low single digit if growth, right? But there will be consolidation into the big guys. Operator: [Operator Instructions] The next question is from the line of Katsios Nestoras with Optima Bank. Nestor Katsios: Just a question from my side. Can you please repeat your free cash flow guidance because I missed that part. Chrysostomos Sfatos: We have not given the guidance for 2026. We have published the pro forma free cash flow for the combined entity at EUR 171 million -- EUR 172.7 million for last year. So that was on the background of an EBITDA of EUR 230.8 million -- EUR 430.8 million, sorry. So based on the guidance on EBITDA -- and it will depend a little bit on our CapEx requirements this year. Last year, the CapEx we published was around EUR 60 million. This year, it will be a bit higher because of certain renewals in the United States. And we are still waiting to hear from our bid for the Victoria Monitoring License in Australia. So we can't reveal the sensitivities on our CapEx. So it will depend on that alone. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Robeson Reeves: Thank you. Thanks, everyone, for joining us today. I'm sorry that we're interrupting your Easter break. I hope you all get a bit of time off. But we wanted to give you the most up-to-date summary of Q1, and I look forward to speaking to you again soon. Feel free to reach out to the company if you've got any further questions. So thank you for joining us. Goodbye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
Operator: Good morning, ladies and gentlemen, and welcome to the goeasy Q4 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, March 26 -- on Wednesday, April 1, 2026. I would now like to turn the conference over to James Obright, Senior Vice President. Please go ahead. James Obright: Thank you, operator, and good morning, everyone. I'm James Obright, Senior Vice President of Investor Relations and Capital Markets. Thank you for joining us to discuss goeasy Limited's results for the fourth quarter and full year ended December 31, 2025. Our Q4 news release, which was issued yesterday is available on SEDAR+ and the goeasy website. On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our fourth quarter performance and recent developments and an outlook for the business; Felix Wu, our Chief Financial Officer, will provide an overview of our Q4 and full year 2025 financial results as well as our liquidity position. Also joining us on the call today is Jason Appel, goeasy's Chief Risk Officer. After the prepared remarks, we will open the lines for questions from our research analysts. [Operator Instructions] The operator will poll for questions and will provide instructions at the appropriate time. Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company website and supplemented by a quarterly earnings presentation, which will be referred to by our speakers today. For those dialing in by phone, the presentation can be found in the Investors section of the company website. As noted on Slide 2, forward-looking statements will be made on this call, which may involve assumptions that have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that goeasy uses non-IFRS financial measures and metrics to arrive at adjusted results. Management evaluates performance on both a reported and an adjusted basis and considers both useful for assessing underlying business performance. These are more fully described in the appendix. With that, I will turn the call over to Patrick Ens. Patrick Ens: Thank you, James, and thank you, everyone, for listening today. I want to begin by acknowledging the impact on our shareholders, our lenders, our employees and our other stakeholders from the charge-offs at LendCare and the impact from the mitigating actions we have taken since disclosing those charge-offs to you on March 10. Since 2021, our strategy has been to grow the secured loan book through merchant channels at LendCare with certain expectations of returns and credit performance. Based on what we are observing now, those expectations are not being met. We are taking decisive action to pull back where we see the weakest performance and reoptimizing our strategy to focus on where we have the greatest confidence, our direct-to-consumer, unsecured and home equity personal loans. My top priority as CEO is to ensure we manage credit well and return to delivering the strong performance we expect of ourselves. Although we are significantly pulling back on our originations at LendCare, we see potential in these product verticals to be unlocked down the road by applying the best practices established in the strong easyfinancial business to our merchant-originated loans. Since this is my first call as CEO, let me provide a brief introduction. I've spent my entire professional career in credit, including serving as a Senior Credit Officer at a financial institution and working in the subprime lending sector for nearly 20 years. I came to goeasy in 2024 to lead easyfinancial, our direct-to-consumer lending business. It's a business I'm very proud of, one with strong fundamentals and it represents the majority of our loan book today. The challenges we're currently navigating pertain to LendCare, our indirect, merchant-originated point-of-sale financing business. On our call today, we're going to discuss the matters we disclosed on March 10 in more detail and have addressed in our current financial reporting, not only to help you better understand them, but critically, to highlight what we've already been doing to address them through our six-point action plan. We've taken decisive steps in recent weeks, initiated structural changes to our business and defined a road map to get goeasy back on track. We have work to do, but we have a clear plan, we're executing with urgency and we're committed to building back stronger than ever. Now let me walk you through where we are and where we are headed. Let's start with an update on the key financial developments of the quarter. As we'll get into in more detail later in this presentation, we saw higher levels of losses in LendCare, including an incremental charge-off of loans receivable and a related charge-off of loan interest and fees. We recognized a goodwill impairment charge, also related to LendCare, and saw an increase in our allowance for credit losses. Beyond identifying and promptly disclosing these matters, we've set out a six-point action plan and have already taken swift and decisive steps. While one part of our business is facing some significant challenges, the fundamental market opportunity remains strong and intact. We perform best where we have built direct relationships with our customers. That's where our credit performance has been strongest. easyfinancial, the direct business I led as President before becoming CEO, continues to perform as expected. That's why our strategy is focused on growing easyfinancial while we stabilize and rightsize LendCare by leveraging the best practices around credit discipline and collections in support of a unified operating model. Turning to a summary of our Q4 financial performance. You can see the impact of the challenges at LendCare across key metrics. Profitability in the quarter was significantly impacted by the $72 million net change in allowance for credit losses, the incremental $178 million of charge-offs and the $160 million goodwill impairment charge. However, as a reflection of continued strong customer demand for credit, Q4 originations drove continued growth in our consumer loan portfolio which ended the year at $5.5 billion, up almost 20% year-over-year. The origination levels in the quarter are a reminder of the opportunity we have to provide a valued service to an underserved customer base. This opportunity will remain available to us as we work through this period and beyond. But we are determined to approach this opportunity right. Let's look at exactly what we are doing to address the factors that impacted this quarter's results. As announced on March 10, we have a six-point action plan. Let me walk you through what we've already delivered over the last 3 weeks. First, we're focusing growth on easyfinancial channels. We've reoptimized our unsecured personal loan credit criteria and continue to underwrite loans where we have expertise and a strong track record. Second, we've reduced LendCare originations. We've significantly tightened credit standards and reduced exposure in auto lending, powersports and other merchant channels. We are maintaining a smaller presence in segments and merchants where we see better performance and opportunities for future optimization. We are fundamentally reassessing our approach in this area. Third, we're integrating functions across our business units as we adopt one unified operating model. We've already unified our easyfinancial and LendCare loan processing teams under shared leadership, eliminating duplication and ensuring consistent standards. Fourth, we're delivering operational and cost efficiencies. We implemented a workforce reduction in March, impacting approximately 9% of our employees that is expected to yield $30 million in annualized run rate savings that will flow through our P&L in coming quarters. The impact of these reductions was deepest in our LendCare business unit, consistent with the reduction in activity at LendCare, while we work on strengthening the business model. Going forward, we will be investing as appropriate to strengthen and develop our operations in areas where additional resources are necessary to deliver strong results. Fifth, as previously disclosed, we've brought in new leadership at LendCare with the appointment of Farhan Ali Khan as Head. And sixth, we've taken the first steps to strengthen our balance sheet and liquidity. Dividends and share buybacks are suspended to retain cash, and we've successfully negotiated covenant amendments with our secured lenders. This is a plan already in motion, and we will continue to pursue ongoing initiatives around adjusting our business mix, integrating LendCare, looking for further opportunities to drive efficiencies and enhancing our funding position and liquidity. Our six-point action plan does two things: it stabilizes the business in the near term and it sets out some of the core elements of the strategy to establish a stronger foundation for future profitable growth. So let me outline our road map for the next 3 years. This isn't just about fixing what's not working, it's about building a stronger, more resilient company that can deliver sustainable, profitable growth. In 2026, our focus is on decisive action and stabilization through our six-point action plan. This includes rebuilding our access to attractively priced capital, and we are pressing ahead with that work. As this year unfolds and into next, we will be investing in our platform for scalable disciplined growth. We will be strengthening our enterprise risk management with enhanced risk models, credit discipline and collections resources for our indirect merchant channel. We will prudently invest in technology to automate manual processes and drive efficiency and scalability. We will leverage our unique multichannel model to pursue growth opportunities and develop dynamic and personal digital customer experiences. Into 2028 and beyond, we're expecting to deliver disciplined high performance. Our strategy, which you'll be hearing more about in coming quarters as we refine our plans, is designed to deliver a return to sustainable profitability through balanced portfolio expansion, a scalable operating model and normalized credit metrics. goeasy will be oriented to sustainable and profitable growth throughout the credit cycle. By transferring best practices from areas where we are already performing well to the entire business, we will approach the future with a significantly strengthened enterprise. So I've told you about where we are taking goeasy, but wanted to spend some time on the company as it stands today. On Slide 9, we offer some new insights around our portfolio composition to underscore where we continue to see strong performance. We have two reporting segments: easyfinancial, our consumer lending arm that provides installment loans; and easyhome, Canada's largest lease-to-own company. Under the consumer lending umbrella are two operating segments. The easyfinancial operating segment is our direct-to-consumer lending business. This is the long-time core of goeasy and the business I was leading as President prior to taking the CEO role. We offer unsecured personal loans and home equity loans directly to customers through our nearly 300 locations across Canada and our digital channels. With easyfinancial, we have deep credit expertise, proven underwriting models and strong customer relationships that have yielded a track record of success through credit cycles. We acquired the second consumer lending operating segment, LendCare, in 2021. LendCare is our point-of-sale financing business. It operates through thousands of merchant partnerships, auto dealerships, powersports dealers and retail partners. It's an indirect channel, which means we're one step removed from the customer relationship. LendCare represents about 43% of our portfolio. Our direct channels, the healthy core of easyfinancial unsecured personal loans, secured home equity loans and easyhome lending comprised 57% of our portfolio. And on Slide 9, we look specifically at the performance of the components of our consumer lending reporting segment. We're providing the weighted average interest rate of these three business lines to highlight the relative returns before ancillaries and interest charge-offs. The decline in unsecured loans from Q4 2024 to Q1 2025 reflects the impact of the new maximum allowable rate of interest cap at 35%. Its impact has been moderating over time. Now here's what's critical. We saw stable credit performance in Q4 in both our easyfinancial secured and unsecured products. The elevated credit losses we experienced were not in our direct channels. The higher charge-offs in Q4, including the incremental $178 million were attributed to the LendCare loan portfolio. Our direct business continues to perform as expected, and that's where we're focusing our growth going forward while we invest in integrating and reoptimizing the LendCare business under Farhan's leadership. As I wrap up my initial remarks, I want to talk a little bit more about our easyfinancial direct business. Our platform addresses a large target market, 9.5 million Canadians with non-prime credit scores who collectively represent almost $238 billion in non-mortgage credit balances. That group is underserved by the mainstream financial institutions. With no dominant player, the market opportunity is attractive for participants that can execute with discipline. As the prior slide demonstrated, this part of our business is healthy and strong. Our customers know our top-ranked brand. We've earned a great Trustpilot rating, an overall measurement of reviewer satisfaction. And our customers have access to close to 300 locations nationwide and a whole suite of digital channels to engage with us and build relationships. As we have seen, the returns are attractive and the credit performance is consistent. In my time leading easyfinancial, I have been impressed with the team members I work with, the business processes, credit discipline and overall performance. By pursuing a unified operating model going forward, we will bring that culture of success to the whole goeasy organization. Our ability to execute this rebuild is grounded in our success with easyfinancial and our unique value proposition in the Canadian market. There is more work ahead but Felix and I and the rest of the executive leadership team here are determined to see it through. Before I turn things over to Felix to go into more detail on our financial performance, I wanted to take a moment to formally introduce him in his new role. This is Felix's first call since being appointed as our permanent Chief Financial Officer last month. Felix brings more than 20 years of senior leadership experience in finance, operations, risk and compliance at financial services companies. He served as CFO 3 times before, most recently at KOHO and previously at President's Choice Financial and Capital One Canada. At a time when we're focused on strengthening our foundation, rebuilding our balance sheet and enhancing our risk management practices, Felix is exactly the leader we need in this seat. I have full confidence in his ability to strategically lead our financial function going forward. Now I will turn it over to Felix for a discussion of our performance for the year and for the quarter. Felix, over to you. Felix Wu: Thank you, Patrick, and good morning. Before I recap the key financial developments in our business in 2025, I wanted to highlight three important points in our financials. The first is a difference in the presentation of certain financial information that takes effect with our Q4 2025 financial reporting. In the preparation of these results, we identified a presentation change around consumer loan interest receivable write-offs, which were previously shown as an offset to interest income, lowering the net revenue line. To align with IFRS 9, interest receivable write-offs are now being shown as a bad debt expense. This was purely a reclassification. It had no impact on net income, earnings per share, cash flow or our balance sheet. For consistency with prior presentation of certain non-IFRS measures and ratios such as total yield and annualized net charge-offs, we maintained our prior approach to the calculations. The second important point is the restatement of prior period information that corrects an error in the accounting treatment of certain customer payments. This had an impact on the gross loans receivable, interest and fees receivable, the allowance for credit losses as well as our delinquency and loan staging disclosures. I will describe this more fully in the coming slides. This was also an error in the over-accrual of -- there was also an error in the over-accrual of interest income on Stage 3 loans. As required by IFRS 9, interest income is recognized on the net carrying amount of the loan, whereas we were recognizing interest income on the gross loan amount for Stage 3 loans. The company has corrected this error in our previously provided financial reports. More details of our restatements can be found in Note 2 of our financial statements and in the sections of our MD&A headed Restatement of Prior Period Financial Information and Restatement Impact on Interim Financial Information. Finally, during our year-end assessment, we identified a LendCare-specific control deficiency related to the application of IFRS 9 in our financial statements. While this LendCare deficiency did not prevent us from accurately restating our financial statements and properly accounting for credit losses, we have determined that our internal control over financial reporting at LendCare requires enhancement. We are implementing additional controls and oversight mechanisms to strengthen our financial reporting processes going forward. Turning to the summary of our full year results. For the year, our top line was strong. We grew our consumer loan portfolio by nearly 20% and saw double-digit year-over-year growth in revenue as a result. However, our net income and return on equity were negatively impacted by the measures taken in the fourth quarter related to LendCare, namely a significant charge-off of late-stage receivables based on an assessment of collectibility, a meaningful increase in the allowance for credit losses on the expectation of higher charge-offs and the impairment of goodwill associated with our LendCare business. I will expand on these further in the coming slides. We had a positive year in originations and asset growth. Originations grew by nearly 10% for the year, driven by strong customer demand and volume of applications for credit. Gross consumer loans receivable grew by nearly 20% to $5.5 billion, with 45.6% of that number secured, down from the prior quarter due to the LendCare charge-offs and continued strong easyfinancial growth. Originations growth drove revenue growth of more than 10% for the full year. The chart on the right side shows total yield on our consumer loan portfolio, which declined to 26.6% and in the fourth quarter from 32.6% in the prior year. Yields faced downward pressure on three fronts. The most significant impact came from higher interest and fee receivable charge-offs relating to the LendCare portfolio. The ongoing impact of the new maximum allowable rate of interest on the company's unsecured lending product introduced at the beginning of 2025 was the second largest impact. And lastly, a higher proportion of larger dollar value loans, which have reduced pricing on certain ancillary products also weighed down yield. Let's get into expenses and cost management for the business. The company defines efficiency ratio as adjusted other operating expenses divided by total revenue, less bad debt on interest income. As we've seen in recent quarters, adjusted operating margin can move around for reasons beyond how we're managing costs, such as provisioning or credit performance. We also recognize that the efficiency ratio aligns more closely with how other lenders think about operating efficiency, which enhances comparability as revenue normalizes. Over the course of 2025, we continue to evaluate and implement measures designed to improve effectiveness and operational efficiency across all areas with a particular focus on credit underwriting and collection practices, which resulted in a Q4 efficiency ratio of 25% or 24.9% for the full fiscal year. As was noted by Patrick, the fourth point in our action plan is a focus on operational and cost efficiencies, which we expect will yield approximately $30 million in run rate savings. Our future focus is on enhancing our whole firm practices by building off of the rigor of the easyfinancial operating model. On both a reported and on an adjusted basis, which excludes the goodwill impairment, Q4 operating income was a significant negative, reflecting large items recorded in the quarter, pertaining entirely to our LendCare segment. The next three slides focus on our credit and underwriting performance in the quarter. Charge-offs are an important indicator of the health of our operations. Excluding the incremental $178 million, the net charge-off rate was 11% due to weakness in the LendCare portfolio that emerged in Q4 2025. In addition, in Q4 2025, we incorporated more recent data in the assessment of the collectibility of unsecured and secured loans that are greater than 90 and 180 days past due, respectively. There are now two scenarios where an unsecured loan can age beyond 90 days and a secured loan can age beyond 180 days, namely, the collateral has been seized, but we're still waiting on proceeds from sale, or we've entered into an agreement with the borrower to modify the loan, but the process has not yet been completed. With our current view of collectibility informed by additional data, we expect to see higher loss rates in our LendCare business. I want to reference the new disclosure Patrick covered on Slide 9, which showed net charge-offs in greater detail than we had previously shared. For Q4 2025, net charge-offs in LendCare were 40.6% as compared with 12.1% in easyfinancial unsecured and 1% in easyfinancial's home equity secured business. Regarding our delinquency disclosures, you will see some of the impact of the restatements I mentioned here. After the year ended December 31, 2025, we identified an error related to the financial reporting of certain customer payments initiated close to period end dates in Q4 2024 and the first 3 quarters of 2025. These payments were credited to our bank account by our banking partner, but had not yet settled with customers as of the relevant period end. We had reported them as customer payments. Although the cash was accessible to us at period end, under our banking agreement, we remain liable for payment reversals and retained credit risk until settlement. Ultimately, there was a meaningful number of payment returns. We reinstated the related loan, interest and fee receivables and recognized additional allowance for credit losses on the increased balances along with related tax impacts. We also corrected the disclosures for loan aging, staging classification. You will also note that this quarter, we amended the aging buckets to align with how we are now monitoring delinquent loans and managing the collection strategy. These updated loan aging data are shown in this delinquency table. The percentage in the 91 to 180-day bucket rose slightly quarter-over-quarter into Q4. This is a source of potential future charge-offs. Following the application of the updated assessment of collectibility I covered on the prior slide, only 0.5% of the loan portfolio was more than 180 days past due at the end of 2025 compared with 2.9% at the end of 2024. Turning to our allowance for credit losses. The net change was $72 million in the quarter and $168 million in the full year. Increases in allowance are driven by portfolio growth and by changes in expected credit losses. Our rate of allowance for expected credit losses, which we refer to as provision rate in prior quarters, increased to 9.6% in Q4 from 8.4% in Q3, and reflects our expectation for higher credit losses in our LendCare portfolio. I want to point out something about our business that may not be fully understood. So this chart should help to clarify. Our lending business generates strong cash flows. The significant principal repayments we receive together with interest paid by our borrowers, generates about $0.5 billion in cash flow per quarter or roughly $2 billion per year before originations. In the past, we directed much of that cash flow to meet customer demand for new loans and to support the growth in our gross receivables. To be clear, we are still making new loans, but we have a lot of flexibility to carefully manage the biggest use of cash in our business, originations, as we work to manage our liquidity in the near term and continue to strengthen our balance sheet. That flexibility also extends to our ability to control both the size and the mix of credit we underwrite and its associated risk and profitability. I want to wrap up my remarks with an update on our balance sheet. We announced on March 24, we entered into definitive agreements with the lenders under our revolving credit facility, securitization facility and loan purchase and sale agreements. These agreements provided that our revolving credit facility and securitization warehouse 1 would remain available to provide future funding as well as waiving compliance with certain covenants with respect to Q4 2025 and giving effect to other amendments. As a result of executing the definitive agreements, we are in compliance with all of the financial and other covenants under the facilities. We've provided detailed disclosures on these amendments in the appendix to this presentation and in our MD&A. Under current assumptions, new equity was not required in order to comply with the revised covenants. From a liquidity perspective, as I noted on the prior slide, we benefit from considerable cash flow coming in and our ability to control the volume of loans we originate. We'll be repaying our May notes maturity out of existing cash resources and have no other near-term maturities to manage. We'll continue to benefit from the low and mostly fixed hedge interest costs we have with an average coupon of 6.6% at the end of 2025. As Patrick outlined in our six-point action plan, by focusing our growth on easyfinancial channels, where we have a strong track record of originating highly profitable loans while reducing underperforming LendCare originations, we have outlined a strategy to deliver on covenant compliance and strengthening our balance sheet. Lastly, by suspending our dividend and share repurchases indefinitely, we're showing prudent retention of cash flow while we navigate this period. With that, I will turn the call back to Patrick for our outlook and concluding comments. Patrick Ens: Thank you, Felix. Let me talk about what you should expect from us in the near term and how we're thinking about our path back to strong performance. In terms of our outlook for the business, when we report Q1 next month, we expect ending loans receivable to be between $5.3 billion to $5.4 billion relative to $5.5 billion at year-end 2025. Yield on consumer loans is expected to land between 27% and 28%, and net charge-offs between 17.5% and 18.5%. We know that many of you had hoped we would share 3-year financial forecast today, as has been goeasy's historic practice in prior fourth quarters. While we're not providing that detailed financial guidance today, we did want to share some outlook for the year ahead, 2026. We expect gross loans receivable to decline before resuming growth in the second half. Yield on consumer loans is expected to improve over the course of the year as interest charge-offs decline. And finally, we expect net charge-offs to average in the mid-teens for the year, with improvements expected as the year progresses. Our focus for 2026 is execution, delivering on our six-point plan, prudent management of liquidity and strengthening credit performance. We aim to come back to you with well-thought-out commercial targets later this year, while we continue to deliver against the path forward we have outlined today. As we wrap up, I want to reinforce why goeasy remains an attractive opportunity even as we navigate these near-term challenges. First, we are serving the relatively fragmented $238 billion non-prime consumer credit market in Canada. There is significant room for a disciplined, experienced player to gain share, and we already have a leadership position. Second, we have a proven track record of meeting customer needs. easyfinancial is a well-known brand in the direct channel with more than 20 years of history of serving that market. Our top-tier ratings of customer awareness and trust, our expansive merchant channel and our 400-plus locations means a presence that is hard to replicate. Third, our core direct-to-consumer business is healthy and profitable, and we are building on that foundation going forward. And critically, we generate significant free cash flow before net principal written, $2.1 billion last year, that we can use to rebuild liquidity and balance sheet strength. This combination, a large market proven model, healthy core business and strong cash generation gives us confidence in our ability to execute on our six-point plan and emerge stronger. This is the foundation we're building on as we navigate this transition and position ourselves for success in writing the next chapter in goeasy's story. Thank you for your time today and for your ongoing support of our company. With the conclusion of our prepared remarks, I will turn the call back to our operator for questions from our research analysts. [Operator Instructions] Operator? Operator: [Operator Instructions] Your first question comes from Gary Ho with Desjardins Capital Markets. Gary Ho: I want to start off with the loan book and the cash generated. So you did mention a decline in loan book to $5.3 billion to $5.4 billion in Q1 and a recovery in the back half. So directionally, it sounds like Q2 could be the trough. Maybe just give us a sense of the size of the loan book as we progress throughout the year. And more importantly, under those assumptions, Felix, Patrick, I think you highlighted $2 billion of cash flow generated last year. But looking out, can you elaborate under those assumptions with additional loans, like what's your net cash flow look like first half and second half? And I think you also mentioned you don't need equity at this point. Maybe just talk us through what scenarios you perhaps might need some equity help, if at all? Patrick Ens: Thank you, Gary. Thank you for the question. Just to make sure that I was tracking there. I heard a request for a bit more color commentary on how our growth is expected to play out over the course of the year and how that pertains to our plans for funding that growth. So maybe just to pull it up a level, what we outlined in our action plan here is that we feel really strongly about the performance of our easyfinancial direct-to-consumer business. So that's where we're focusing our growth and attention while we're pulling back on the LendCare merchant-originated loans so that we can recalibrate and rebuild our formula on that side of the house. So we've shared for the full year that we expect our year-end gross loans receivable to be relatively flat by the end of the year. And so yes, declining in the first half of the year and then returning to some growth in the second half of the year to hit our year-end target of being roughly flat. We also shared that we've successfully partnered with our secured lenders to reestablish our covenants and funding facilities there. And so that plan really all works together to achieve and fund those stated growth goals and successfully done that without any requirements for equity. Gary Ho: Okay. And then -- sorry, I know it's limited to one question, but like under those scenarios, you probably ran under -- other assumptions, like what are maybe some of the KPIs we should look at from the outside? Is it your debt to tangible equity going to a certain range before there might be an equity raise, or no? Patrick Ens: Yes. Thank you, Gary. I think if you look as well in the appendix materials, you can see that we do have higher debt to tangible equity than we would have had in the past. What's important to note is that that's part of the plan that's been worked upon and agreed with our banking partners that doesn't require any additional equity. So we're going to start a little bit higher and then continue to bring that down as the year progresses. Operator: Your next question comes from Jeff Fenwick with ATB Cormark. Jeffrey Fenwick: Can you hear me okay? Patrick Ens: We can. Thank you, Jeff. Jeffrey Fenwick: Okay. Great. I just wanted just to get some clarification about the ability to access the funding under your amended credit agreements here. It looks like, obviously, there's an audit that needs to be completed on some aspects of the loan book through the end of Q1, some restrictions around advances and things like that. Like what -- just trying to understand realistically how accessible that base of funding is? Are you really going to -- it sounds like at least not until midyear, but just being able to draw on either the securitization facility or the revolver, how should we think about that? I mean, it looks like you're going to have to navigate largely with your own cash flows for the time being. And then it's just not quite clear to me that those dollars are there, but are they really desirable to be able to draw on? Are they available for you to draw on without a lot of incremental challenge there? Patrick Ens: Got it. Thank you, Jeff. I'm going to let Felix take that one. Felix Wu: Yes. Great question, Jeff. We have a lot of clarity in terms of the ability to draw on those amended facilities, both the securitization warehouse and the revolver. And so very clearly, on the revolver, we have access to it as of July 1. And so it's [ date ] driven from that perspective. On the securitization warehouse facility, there are two things that we need to accomplish, and we have a good line of sight to being able to deliver on that over the next few months -- the next 2, 3 months. The first one is the completion of an audit, and that continues to go well. And the second one is the changing of a backup servicer from that respect. And so we have no sort of -- there's no complications or obstacles in terms of executing on that. And so we foresee having unfettered access to both of those facilities at the end of Q2, beginning of Q3 from that perspective. Lastly, as we highlighted, we generate -- one of the big strengths of this portfolio is we generate a lot of cash. And so there is absolutely no issue in terms of liquidity. We can manage our originations to manage any short-term liquidity or liquidity needs that we do have. We do have a very small bond maturity on May 1 that we stated that we're going to pay down with our existing cash flows. And then our next big maturity from a high-yield bond perspective is not until December of 2028. And we can, again, as we highlighted, moderate our origination to manage any liquidity needs. Jeffrey Fenwick: Okay. And I guess just a nuance there is that external -- or sorry, third-party servicer you mentioned, it's a little unusual. I guess goeasy had been -- you had been servicing the loan book yourselves directly. So is this just to provide extra reassurance to the lending partners that they're more directly engaged in the process of the collections and remittance? Felix Wu: No, Jeff, let me be clear on this. This is a backup. And so we continue to service all of the loans on that side. But in the event sort of that there is an issue that they have the right to switch to a backup service provider from that side. So we are servicing our loans. Operator: Your next question comes from Stephen Boland with Raymond James. Stephen Boland: One question. I'll get to the main question, I guess. Patrick, I think there's some concerns about the culture, this big write-off comes at a point of where the media was reporting predatory practices, aggressive lending. So I guess, Patrick, I'm going to put you a little bit on the spot here. What is to blame here? Like -- or who is to blame? Is there a problem with the culture in the company? Some people have pointed to the 3-year guidance that it maybe has driven employees to be more aggressive than necessary. So how do you feel about the culture of this company? And does it need an adjustment or a change? Patrick Ens: Stephen, thank you for the question. Let me just maybe start by saying that obviously, the leadership team here is certainly spending some time reflecting on how we got to this point. These aren't results that we want to attain. So we've been reflecting quite a bit on that. And just looking back on the strategy of the organization, there was a strong kind of belief that leaning into growth through our merchant-originated secured business was going to generate a certain set of performance and credit results that would be net beneficial to the organization. And we're now learning that those expectations aren't being met based on the most recent data that we have. So it is an excellent learning opportunity for the organization and certainly one that we're institutionalizing. And it also just provides us an opportunity to recalibrate our strategy. So really, what we were sharing through our action plan as well is that focusing our growth on where we've seen the best performance and where we have the strongest track record is the formula for success at this company, and that's why we're leaning so far into easyfinancial and pulling back on LendCare. But we also think there's a lot of good things that we're doing in that easyfinancial business that could be applied to our merchant-originated business as well, and that's what's behind that point in our action plan around delivering a unified operating model because fundamentally, we have this really successful business, and we had one business where the performance expectations are not being met. So we want to take the great ingredients of that successful business and bring it to the whole organization. Operator: Your next question comes from John Aiken with Jefferies. John Aiken: Patrick, I wanted to explore the -- what I'm calling the runoff of the LendCare portfolio. Can you give us a little more details in terms of what you plan on underwriting going forward? Is it by product, merchant, geography? And then from the originations in the LendCare in the fourth quarter, how much of those originations represent things that are not going to be going moving forward? And then Felix, one sub-question for you. When you reassess the collectability within LendCare, was -- did any of those write-offs pertain to autos? Or was that all the pleasure craft vehicles? Patrick Ens: Thank you for the questions. Just to make sure I can track the two there. There's just one around where do we see opportunity in the LendCare business? What sort of business might we be underwriting going forward? And then the second one was just around the details of that kind of LendCare write-down. I might ask Jason Appel to answer the second one here. I can start with the first. So we have a broad range of products and merchant types in the LendCare business today. The two biggest verticals being automotive and powersports. We have seen some performance challenges in both of those verticals. We are taking the opportunity to fully reassess exactly that question. So we're going to deeply understand where we see stronger performance, maybe less strong performance, whether that be by customer segments or merchant types or kind of product verticals. And part of the reason we're not sharing the longer-term financial forecast today is just so that we can spend the time to do the rigor to answer exactly that question and come back to you with a more robust response. So I understand that might be a little bit unsatisfying, and just appreciate your patience on that. Maybe I can ask Jason here to lean in on your second question. Jason Appel: Just on the reassessment of collectibility, that would have extended to a very broad brush that we took across the entire organization, but specifically in the quarter, in Q4, it pertained principally to the auto and powersports businesses of LendCare. So hopefully, that answers your second question. John Aiken: And if I can just revert with a follow-on. Given the fact that you're still reassessing the LendCare business, can we assume that in -- going forward in the second quarter, there may not be any originations in LendCare as you're going [indiscernible] and that's one of the factors in terms of the decline in the portfolio? Patrick Ens: Yes. Maybe just coming back to the prepared remarks off the top. We have maintained a small presence in certain pockets of the merchant-originated channels there, particularly where we see better performance and where we have long-standing strong merchant relationships that we think there is long-term opportunity here. I would say that there's still more to be evaluated there and there could be more opportunity in other merchants as well. But we still have a presence that we're maintaining in Q2. Operator: Your next question comes from Jaeme Gloyn with National Bank. Jaeme Gloyn: Yes. I guess maybe a bit of a two-parter. First part would be how much of a deep dive into the loan portfolio did you complete to come to the charge-off guidance for 2026? Did that include the unsecured easyfinancial portfolio? And then related to that, if I think about the allowance rate at 9.6% compared to that mid-teens guidance. What's the risk? Like the risk I'm concerned about is that allowance rate continues to rise through 2026. Why would it not rise? Patrick Ens: Thank you, Jaeme. Jason, can you take that one? Jason Appel: Yes. Jaeme, just to answer the first part of your question, we did a pretty thorough deep dive across the entire portfolio so that would be both the LendCare channel as well as the easyfinancial channel. And I think as I mentioned in past quarters, we tend to break out the performance of the loan books in two ways. We look at both the back book, which is all the loans that are effectively out as well as the anticipated performance of the front book, which is the originations we are going to use moving forward. And both of those were modeled quite extensively using various scenario analysis to arrive at how we expected the charge-offs to run through. And as both Patrick and Felix mentioned on the call, we do expect those charge-offs to progressively move or ease as the quarters move along with an average coming in and around the mid-teens, which suggests that we should be -- we should be below that level by the end of the year. And as far as the allowance is concerned, I would say that it's just important to remember that, that allowance contains multiple moving parts. Obviously, it looks at the underlying performance of the portfolio and also takes into consideration mostly future-oriented performance. So you're right, we have indicated that charge-offs will remain elevated in our LendCare business, and that's partly why we saw an increase in the allowance in the quarter. But also keep in mind that as we write off certain portions of the LendCare book, that amount is netted against the allowance, which results in an allowance release. So you have to look at this as a series of puts and takes. I wouldn't go so far as to say that one would expect the allowance to rise. I'd say the other factor you have to keep in mind is there are also forward-looking indicators that weigh into the allowance that we have no direct control over. So all three of those component inputs can push the allowance up or down, and you'd be right in that the allowance has been moving up over the last number of quarters. But with the action plan, as we have outlined and as the charge-offs starting to move down quarter-over-quarter, we would naturally expect that allowance to start to reflect that trend over time as we move forward. Operator: Your next question comes from Bart Dziarski with RBC Capital Markets. Bart Dziarski: Great. I wanted to have you guys maybe confirm for us the unit economics embedded within your 2026 outlook numbers? And I'm thinking yield, losses, OpEx, cost of capital, et cetera. And I'm just trying to confirm whether you expect to be profitable based on that outlook and those embedded unit economics? Patrick Ens: Thank you, Bart. I appreciate the question. And yes, as you've noted, the economics of the loans we're originating are very important to our strategy. And so in providing the guidance that we did provide, which -- acknowledging it's relatively limited and directional on a couple of key elements, we expect the year to see net charge-offs starting higher than the average for the year and ending progressively lower throughout the year. That obviously impacts our yield. So our yield as well starts lower and then will rise over the course of the year. As you noted, we're pursuing fairly aggressively cost efficiency opportunities. And so we took a very meaningful step in the organization with the reduction in force that was implemented in March and certainly not one -- or not an action we take lightly. So there's a variety of moving pieces there that are all intended to strengthen and improve the profitability of the company as we move forward. We haven't directly provided -- or we haven't provided more precise guidance than that. We intend on doing that later on in the year. Once we've seen some of the actions that we've already got underway start to filter their way through the P&L, and we'll have more clarity and specificity for you. Operator: Your next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe we could talk about the securitization facility 1. It matures on October 30 of this year. What's your confidence that you can renew that important lending facility? And when would you actually look to engage in discussions with that? Would you look to do it before October 30? Patrick Ens: Why don't I have Felix take that one. Felix Wu: Thanks, Patrick, and thanks for the question. We have a lot of confidence in renewing that facility. That's based on the fact that, unfortunately, we had some tough news to share with our banking partners 2, 3 weeks ago, but we were able to quickly come to amendments after 2 weeks of effort. And so I think that, that just speaks to their support of the action plan that we have in place as well as the deepness of the relationship, and we acknowledge that support that we -- and collaboration that we received from our banking partners. And so for that quick resolution, I think, is a testament to our confidence in being able to renew the facility on that. And so -- and to your point, we would be looking to do that well before the October time frame in terms of discussions. There's obviously a couple of things that we outlined in terms of being able to access that facility over the next 2, 3 months, which is switching the backup service provider as well as completing this audit. And so we're taking it step by step. But if you look at the sort of what we've been able to accomplish in a couple of weeks in terms of this amendment, we are very confident on that side. Graham Ryding: Okay. That's helpful. And just with the higher spreads on the amended facilities, what's your sort of expectation for that blended cost of debt going forward relative to what we saw in Q4? Felix Wu: Look, I think that, that will be part of the overall discussion with our bank partners at the time. It's obviously -- one component is pricing, but it's also the borrowing base that is allowed and the collateralization levels and the different triggers. And so I think if we look at it at a portfolio level, it was up by 100 basis points. But when you take a look at sort of that overall funding mix compared to our total debt, this is 10% to 15% of our overall funding costs and so very manageable in terms of -- from a cost of funds impact. Operator: [Operator Instructions] Your next question comes from Jaeme Gloyn with National Bank. Jaeme Gloyn: Yes. So maybe two separate follow-ups. First, I think I understand this. The -- there's no expectation of repaying or paying down the warehouse facility or the revolver facility. Those balances outstanding today will remain outstanding for the next couple of quarters. Just want to make sure I'm clear on that. And then the second is just on the charge-off guidance. If the unsecured portfolio is running at 12% charge-off right now, and the auto, powersports portfolio, if you ex out the sort of onetime $178 million, it's running at about 12%, like why is it jumping to 18% in Q1? But what else do you see coming down the pipe? Why is it not -- like what did you miss in Q4, what did you not factor in, in Q4 that you need to take into account in Q1 and Q2, I guess? Patrick Ens: Thanks, Jaeme. We got two distinct questions there. So maybe Felix, you can start with the first question, and then maybe I'll pass it back to Jason to talk about the credit risk expectations there. Felix Wu: Yes. In terms of the first one, that is correct, Jaeme, there's no expectation to pay it down. In fact, because of this amendment and the support from the banks, we are able to access additional funding from that side so you would expect over time for that funding amount to increase from that perspective. And then I'll pass it over to Jason in terms of your second question. Jason Appel: Yes, Jaeme, if you look at the charge-off performance in Q4, you'd be right, the unsecured business of easyfinancial is throwing off about a 12% net charge-off rate. And then the LendCare business, in totality, I think we indicated, threw off a 40% net charge-off rate. And of that, roughly about 30% out of that 40% number is accounted for by the onetime charge-off of $177.9 million that we took in the quarter. So you'd be right in saying that the delta would be around 11% on that business. And if we look at how we're guiding the remainder of the year, it's taking into a combination of a couple of factors. One is obviously the reduction in the size of the LendCare portfolio that's taking place principally as a result of two things, the reduction in originations that's been mentioned as well as the continued high expectation of charge-off numbers. Felix commented on that when he walked you through -- or walked everyone through the delinquency numbers sitting as at Q4, where we still have a pretty appreciable size of loans in the late-stage buckets that we intend or expect a significant portion of that, which will charge off. So I would say that, that 11% number is informed by a combination of both the numerator and denominator. And as far as whether or not we've missed anything in the quarter, as I said before, we've modeled out both the back book historical performance as well as the level of originations we anticipate going forward. And that gives us a fairly high degree of confidence that, that overall charge-off number will reduce through time, recognizing that, again, movements in the denominator might change that percentage a little bit. But the important point to note is those charge-off numbers are moving down. They are moving down consistently. And until such time as we've got that judicious review and comfort as to how the overall LendCare portfolio will perform, we'll continue to be mindful of how much we originate moving forward. Jaeme Gloyn: Okay. So I guess it's just a seasoning and timing factor for some of these loans that are currently delinquent and what you expect will become delinquent? Jason Appel: Correct. Operator: There are no further questions at this time. I will now turn the call over to Patrick Ens for closing remarks. Patrick Ens: Thank you, operator. In closing, we are committed to taking decisive action through a focused six-point plan to deliver strong financial performance, anchored in the strength of our direct-to-consumer business. Thank you again for joining us. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Thank you for joining today's conference call to discuss Tilray Brands' financial results for the Third Quarter of Fiscal Year 2026 ended February 28, 2026. [Operator Instructions] I'll now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin. Berrin Noorata: Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and OSC. Please note that during today's call, we will be referring to various non-GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP. In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from these described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary followed by Carl Merton, Chief Financial Officer, who will review our financial results for the third quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon. Irwin Simon: Thank you, Berrin, and good morning, everyone. It's been an exciting year at Tilray Brands. We delivered a record quarter with continued international expansion across our platforms. I also want to briefly highlight our BrewDog acquisition. When you have good news, you go to the tallest building and scream it and don't wait. This transaction positions Tilray at approximately $1.2 billion global revenue company on an annualized basis and meaningfully strengthens our long-term growth profile. I've done over 100 acquisitions in my life, and I've never received more calls, congratulations and a brand with more awareness on a global basis, which helps Tilray to be at the forefront around the world. Since 2019, we have transformed the company from a Canadian cannabis business with approximately $50 million in revenue to a global lifestyle consumer products company approaching over $1 billion in revenue on an annualized basis, providing the strength and effectiveness of our strategy and our execution going forward. We are building a diversified global platform grounded in a long-term vision of bringing people together through meaningful connection. With a strong team and clear priorities, we remain confident in our path forward. Today, Tilray leads its global platform as the #1 cannabis company in Canada by revenue, the fourth largest craft brewer in the U.S., a global leader in medical cannabis and a wellness leader in North America. And now with BrewDog, the #1 craft brewer in the U.K. Transforming this business has not been easy. We operate in highly regulated environments globally. Face cannabis regulatory reform in the U.S. and navigate constraints across international markets. At the same time, we've strengthened our global brand portfolio, scale and optimize our cultivation capabilities and our brewing capabilities, built a $0.5 billion beverage platform within a long-established category and established a meaningful wellness strategy. This level of progress reflects both the pace of our execution and the strength of our strategic foundation and the teams that we have in place. Yes, there have been challenges along the way, particularly with integration, and there will continue to be challenges. This takes time. But today, we see the pieces coming together in the way that few businesses can replicate, and we're building something truly differentiated. And our Q3 results reflect this in the third quarter and consecutively from Q2 to Q3, we delivered record results with net revenue reaching $207 million, reflecting 11% organic growth year-over-year and gross profit increasing to $55 million, up 6% from the prior year despite ongoing industry and macroeconomic headwinds, we also maintained a strong financial position ended the quarter with $265 million in cash, restricted cash and marketable securities and approximately $3.5 million in net cash, providing the flexibility to invest in growth while maintaining financial discipline. Our Q3 results reinforce the momentum we outlined last quarter, improving fundamentals, sharper execution and increasing leverage from our diversified global platform. Turning first to our cannabis business. We delivered strong results this quarter across our global platform, with continuous momentum in both Canada and our international markets. As the regulatory environment evolves, particularly in the U.S., we're well positioned with scale infrastructure and experience to expand this business globally, we've built this platform deliberately, and we're ready to execute as opportunities develop. Q3 was the largest quarter ever for international cannabis growth. We generated $24.1 million in net sales with 73% year-over-year growth and 20% sequential growth. This was driven by exceptional sales volume growth. Medical cannabis flower volume was up 100% year-over-year and medical cannabis oil volume was up 90% year-over-year. Tilray holds top position by a significant margin in the medical cannabis oil category across leading international medical markets while we leverage our expertise and reputation in the doctor-led distribution channels. Germany, our largest international market grew 43% year-over-year, an important achievement for our international team as they continue to navigate evolving regulatory framework and significant price compression across global markets. Notably, we overcame $7 million in price pressure that flows directly to the bottom line. Turning to our medical distribution business in Europe. I'm extremely proud to say that CC Pharma was recognized as one of the top 100 innovators, leaders and trusted partners in the European pharmaceutical market. Congratulations to the team on a great accomplishments for continuously driving our business forward. Our Tilray Pharma business grew 35% year-over-year to $83 million, making it our highest ever third quarter for sales and profitability. The increase in distribution revenue in the period was driven by portfolio optimization, mix, positive market trends and increased medical device sales. Our recently announced partnership with Alliance Healthcare further strengthens our leadership in Germany, expanding our reach to more than 16,000 pharmacies, up from 13,000 previously. In addition, we entered into a partnership with Smartway, a leading U.K.-based pharmaceutical distribution company to expand the availability of our pharmaceutical products across the United Kingdom. Together, these partnerships speak to the strength of Tilray Pharma as a valuable strategic asset within our global medical cannabis platform. Looking ahead, our distribution business is laser-focused and driving future operational efficiencies, be automation, centralized sourcing, harmonized packaging and label that sets us up with vertical integration for our cannabis business. Turning to Canada. Our Canadian cannabis business continues to deliver strong results. We reinforced our position as Canada's leading cannabis company by revenue on a trailing 12-month basis, and our adult-use medical grew 8% year-over-year to almost $40 million of net revenue. This performance speaks to the strength of our portfolio and the resilience of our commercial execution and the team that we have in place today. From a market share perspective, Tilray maintained the #1 market share position in cannabis dried flower, pre-rolls, beverages, oils and chocolate edibles. Importantly, this leadership reflects the strength of our tiered brand strategy in dried flower, Tilray is the only licensed producer with 3 brands in the top 10. In pre-rolls, we hold 2 of the top 3 brands. And in beverages, we delivered the top 2 brands in the market during quarter 3. This approach diversifies our reliance across brands and facilities while allowing us to serve the seed consumer segments with clearly differentiated offerings. From a brand portfolio perspective, Broken Coast delivered its strongest quarter in the past 2 fiscal years, growing 16% year-over-year. We also continue to innovate with our core categories launching Good Supply, Where's My Bike and Blueberry Donuts cannabis strains during the quarter. both of which finished the quarter among the top 10 dried flower SKUs in British Columbia, and we plan to scale them nationally and introduce additional genetics in Q4 and into fiscal 2027. Finally, we also introduced a new brand, Portal, featuring vapes, infused pre-rolls late in the quarter. While still early, we're beginning the national rollout. We expect to launch a Portal to build upon our momentum and drive meaningful growth in these key categories going forward. And we're also making clear progress in high-growth price-sensitive categories such as vapes. Quarter 3 marked our strongest vape quarter in the past 2 fiscal years, reestablishing Tilray as a top 10 player in the category. Importantly, this performance reflects our disciplined approach to revenue generation. We intentionally scaled back our vapes volume until we achieve the right cost structure and return the category to profitability. After 7 years of federal cannabis legalization in Canada, we are modernizing the store. We built a strong foundation on Canadian cannabis, and we're now advancing to the next phase transforming our cultivation platform through AI-driven growing systems, next-generation genetics and improved yields across our operations. We're executing a comprehensive end-to-end upgrade of our cultivation capabilities. And while this transition is still underway, we're already seeing progress as we move towards more consistent, higher quality and more efficient production. This evolution is designed to enhance margins, strengthen product quality and position us ahead of the curve as the industry continues to mature. In the U.S., we continue to monitor the rescheduling of medical cannabis and are actively engaged with legislators and regulators. We're also evaluating our participation in the center for Medicare and Medicaid Innovation pilot programs. Tilray is well positioned to contribute to the pilot program with its proven track record of operating at a scale in a highly regulated medical cannabis globally. Moving to our beverage business. This quarter and shortly after the quarter end, we successfully executed against our key strategic priority to expand our global beverage platform through a strategic licensing partnership with Carlsberg and the targeted acquisition of BrewDog, strengthening our portfolio, improving utilization and advancing our global growth strategy. We are honored and proud to begin our partnership with Carlsberg, one of the world's leading brewers starting in January of 2027. Through this partnership, we'll produce, market and distribute a portfolio of leading Carlsberg brands across the U.S., leveraging our brewing network, commercial capabilities and our national distribution footprint. We expect this to drive immediate scale accretive to revenues, supported by increased volumes, expand shelf presence and a more favorable product base. Following the Carlsberg announcement and post quarter close, we acquired craft beer icon, BrewDog, creating approximately $500 million global craft beverage platform on a pro forma basis. We acquired BrewDog's global IP, strategic brewing and brewpub assets across the U.K. Ireland, Australia and the U.S., creating immediate scale, strengthening our infrastructure and broadening our international reach. This positions us to extend our reach into previously untapped markets such as the Middle East, Asia Pacific and take our U.S. brands globally while strengthening their portfolio with a highly recognized craft brand. We acquired this platform for approximately EUR 40 million, which reflects a fraction of its replacement cost. This strategic acquisition has significantly accelerated the implementation of our global strategy by several years. Now turning to the results of our beverage business. We're making disciplined progress on the integration of our beverage acquisitions, while staying focused on the work still ahead to generate growth and profitability. As expected, beverage net revenue of $43 million in Q3 was impacted by margin-focused actions as well as industry-wide softness. These margin-focused initiatives are delivered and necessary to reset the business for profitable long-term growth. What's important is that the underlying fundamentals are improving. Through Project 420, we rationalized the portfolio, removing nonstrategic SKUs to improve velocity, margin and execution. We continue to focus on cost discipline, delivered over $6.2 million in annualized savings during the quarter, completing our target synergy program of $33 million enabling us to achieve approximately 32% gross margins despite significant input costs and headwinds. Without these decisive actions taken, margin would have been more significantly impacted. Operationally, we're building a more focused, higher performing portfolio, we're prioritizing fewer, bigger, better innovations aligned with consumer demand. Products like Pub Light are expanding distribution and our ready-to-drink cocktails on the West Coast are delivering margin accretive growth. We're also starting to see sequential improvement across our core brands, including Sweetwater, Shock Top, Blue Point, Revolver and Montauk. Looking ahead, we expect continued momentum on improving fundamentals and a stronger path to growth. Within the spirits category, in Q3, we focused on enhancing our commercial plan. Wholesale completions were 160 basis points above the national spirits trends, demonstrating strong consumer demand and awareness. Our ongoing efforts remain focused on expanding product distribution to additional states and beyond. Regarding our U.S. hemp-derived THC beverage business, we continue to offer Fizzy Jane's, Happy Flower, hemp-derived THC beverages in 5-milligram and 10-milligram formats through nationwide retail partnerships, including major wine, liquor and grocery outlets across the country. While federal and regulatory changes may affect HDD9 products after November 2026, we continue to stay engaged with legislators and regulators who are closely monitoring the development in Washington. Turning to wellness. Net revenue increased by 16% to $16.4 million in the quarter, driven by our focus on value-added innovation across superseed, better-for-you breakfast and snacking and continued momentum in the high-vol energy grade. We'll continue to focus on distribution expansion broader assortment and promotional improvements while continuing to strengthen the profitability profile of wellness business. With that, I will now turn that over to Carl. Carl? Carl Merton: Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. This quarter, we achieved record third quarter revenue and strong year-over-year improvements in gross profit and adjusted EBITDA and we are reaffirming our adjusted EBITDA guidance for fiscal 2026. Net revenue was a third quarter record of $206.7 million, an 11% increase year-over-year. Revenue growth was across multiple businesses. Cannabis net revenue increased 19% year-over-year to $64.8 million during the quarter, driven by strong growth in gross international cannabis revenue of 73% and 8% in net Canadian adult-use and medical cannabis. The exceptional revenue performance of our international cannabis business solidifies our point from the last conference call that Q4 2025 and Q2 and Q3 of this year's performance are more indicative of what investor expectations should be going forward. Growth in international cannabis accelerated based on an enhanced supply chain, increased patient adoption in certain markets and our targeted expansion into emerging markets. This quarter, we continue to strategically reallocate supply from the Canadian wholesale market to higher-margin international markets and we'll maintain this approach as those markets continue to scale. Year-to-date, we allocated approximately 6 metric tonnes of product from Canada to international markets, which continues to supplement our ever-increasing cultivation in [indiscernible]. Distribution net revenue increased 35% to $83 million based on a focus on higher velocity and margin SKUs and positive impacts from foreign exchange rates. We expect distribution to continue to be a strong contributor as it complements and scales alongside our international business. Beverage net revenue for the quarter was $42.6 million compared to $55.9 million in the prior year. However, the results do not fully reflect the operational progress we have made in the segment. During the quarter, we successfully completed Project 420, closing and delivering $33 million in annualized cost savings, which improved the underlying cost structure of the business. Those cost savings are not always visible in our margin results as they've been largely offset by almost $2.9 million of higher aluminum costs year-to-date and lower overhead utilization rates. Getting our cost structure right in beverage has been and will continue to be a key focus area for us. Looking ahead, Carlsberg represents a compelling opportunity for us through a partnership with one of the largest global brewers. The relationship enables us to improve overhead utilization without deploying capital to acquire a brand while creating meaningful operational leverage. It also provides multiple avenues to strengthen the platform including increased scale with key global raw material suppliers and the ability to collaborate and learn from one another on innovation and best practices to support long-term growth. BrewDog represents an equally compelling opportunity to strengthen our beverage business in the future, but for different reasons as it is more about an international opportunity. The BrewDog transaction was unique because it represented a chance for the business to start with a clean piece of paper and hand select the best and most important elements of a strong business that was placed in administration for reasons other than its core business. After this transaction, Tilray strengthens BrewDog, BrewDog strengthens Tilray. Lastly, wellness net revenue in the quarter was $16.4 million, growing 16% year-over-year based on our focus on high-value innovations the continued strength of high-vol and growth in the ingredient sales channel. In terms of contribution, cannabis accounted for 31% of revenue, beverage revenue was 21%, distribution was 40% and wellness was 8%. Moving on to profitability. We achieved a record third quarter gross profit of $55 million, a 6% year-over-year increase. Gross margin was 27% compared to 28% last year. By segment, cannabis gross margin was 40% for the quarter compared to 41% year-over-year and remained largely flat, primarily due to price compression in international markets, which reduced international cannabis revenue by approximately $7 million despite higher gram equivalent sold. Distribution gross margin increased to 12% this quarter compared to 9% year-over-year due to favorable changes in product mix and increases in average selling price during the quarter. Beverage gross margin was 32% this quarter compared to 36% in the prior year quarter. This change was a function of lower overhead absorption rates and higher input costs, including the previously discussed aluminum costs. Wellness gross margin increased to 33% during the quarter from 32% year-over-year as strategic price increases largely offset an unfavorable change in sales mix. Net loss was $25.2 million, a $768.3 million improvement compared to a $793.5 million loss year-over-year or a net loss per share of $0.24 compared to a net loss per share of $8.69. The improvement in both net loss and net loss per share is primarily driven by the onetime noncash impairment we reported in the prior year quarter. Adjusted net income and adjusted net income per share, which both exclude the noncash impacts of amortization, stock-based compensation, impairments and nonrecurring charges, improved $5.3 million year-over-year to $2.4 million and $0.02 per share, compared to an adjusted net loss of $2.9 million and adjusted net loss per share of $0.03. Our adjusted cash operating income for the quarter was $4.1 million compared to a loss of $3.1 million last year. Adjusted EBITDA for the quarter increased 19% to $10.7 million compared to $9 million last year, reflecting continued execution against our strategic plan, particularly from our international cannabis business. Cash flow used in operations was $21.9 million compared to $5.8 million last year. The increase in cash used in operations was largely related to inventory ahead of our seasonally stronger fourth quarter and accounts receivable for our growing international cannabis business. Excluding the impacts of working capital, cash generated from operations was $3.4 million compared to cash used in operations of $9.3 million in the prior year. We ended the quarter with cash, restricted cash and marketable securities of $264.8 million and a net cash position of $3.5 million, which improved $40.2 million from a net debt position year-over-year. As we have recently demonstrated our strong liquidity position has enabled us to act decisively in a dynamic environment and provides continuing flexibility to pursue strategic opportunities. We remain focused on managing and strengthening our balance sheet throughout the remainder of the year and beyond. Lastly, we are reaffirming our fiscal 2026 adjusted EBITDA guidance of $62 million to $72 million. Operator, we can now open the call for Q&A. Operator: [Operator Instructions] And the first question is from the line of Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: Can you guys hear me now? Irwin Simon: Yes. Carl Merton: Yes. Kaumil Gajrawala: Great. I wanted to first maybe ask about the supporting the international business in the context of Canada looks like it's also stabilizing. So you have a lot of growth and great margins in one. But on the other hand, you've got stabilization in your bigger markets. So how are you managing the balance between those two? Irwin Simon: What was the line? I didn't hear. You broke up the last piece, the cannibalization? Kaumil Gajrawala: Not cannibalization, but just managing the balance between supporting your international business and what looks like stabilization in Canada? Irwin Simon: And you're talking cannabis right now for us, right? Kaumil Gajrawala: Yes, cannabis. I'm sorry, this is about cannabis. Irwin Simon: Yes. Yes. Okay. So listen, I think the big thing is, number one, we are bringing on our Masson grow facility in Gatineau, which is increases our -- we're going from 137 metric tonnes of grow to almost 200 metric tonnes of grow. And also, we're bringing on outdoor grow in Cayuga. So number one, when we now have plenty of growth, and this has been a tougher year on yields in that, and that's sort of what you heard me say as we're overhauling things and modernizing things on better yields in the Canadian market. On the other hand, the good news is our Cantanhede facility in Portugal and our Germany facility is probably producing some of the best yields and some of the best flower that we ever had. So the number -- the most important thing is we have plenty of supply to supply the European market. The other thing is we're seeing price compression, which I talked about, with the growth that we're having with yields, we'll be able to support that. And I think the most important thing in Europe is this here, consistent supply. We've not had consistent supply. Number one. Number two, one of the things in Europe, you have to wait for permits, and that has slowed down to getting our sales out there. We've seen a real big improvement in the Portuguese government. I want to thank them. They modernize this now, where sometimes it'll take a month, you can see 3 days now. So being able to get product to our customers is something very important. And then with that, we have perfected our grow and our yields, that will help our margins continuously, and deal with price compression. And I think the important thing is from Tilray standpoint, with our Tilray products with our innovation, with our brands, the big opportunity for us is if we got consistent product, we're going to get the volumes and how do we deal with price compression? If price compression consistently happens, we have supply, and I think we have more supply than anybody there. So it's something that we're aware of. We dealt with it in Canada. We've had $250 million of price compression over 5 years in Canada, and we dealt with that. So not that I want to see that in Europe, but it's something we can deal with either now having supply, now having good yields, now having good grow over there to do it both in Canada and Europe. And there's no one else out there that has the supply that we have, both from the Canadian market today and the European market. Kaumil Gajrawala: Got it. And on Project 420, now that I guess, it's coming sort of towards the end or at completion, is there a new project? Or is it sort of more ongoing business as usual as we look forward from a productivity standpoint? Irwin Simon: This is a good question. I mean there is absolutely project ongoing. We never just say, okay, we made a $33 million, $35 million of cost savings, stop. Now with BrewDog in the mix and bringing that together, both internationally and domestically in regards to buying hops, cans, labels, et cetera. And it's definitely something as we combine now. And just remember, we've gone from a $200-plus million beer business, almost $0.5 billion now in size. So from scale, that's going to help us. And as we look at rationalization continuously on our plants, we look at rationalization on distributors. We just said, how do we bring all the organizations together, there'll definitely be additional cost savings available to us. Operator: Our next question is from the line of Robert Moskow with TD Securities. Xin Ma: This is Victor Ma on for Robert Moskow. So I just want to ask about international first. International grew 73%, Germany grew 43%. What drove this delta? Was it shipment timing or permit delays that -- from the previous quarter that were fixed this quarter? And in terms of kind of looking at growth going forward, is that 43% growth rate for Germany? Is that kind of a good run rate to use and looking at growth for the segment? Irwin Simon: So number one, there was some products that did not get shipped in the second quarter because of permits, but there's products that did not get shipped in the third quarter because of the permit. So it equals out. In regards to what was the growth? The growth was based on us having supply and demand. And I'm not sure, again, we have a big fourth quarter, what is the true run rate there. And the big thing is what I said before, what the market is realizing, what patients and what doctors are realizing is that we will have supply. We will have good flower, we will have lots of innovation, we'll have some good oils. And again, we will be price competitive. So what is the right growth number? I'm not ready to give that yet. But again, there's big opportunities for us in the international markets, not only in Germany and Poland, the U.K. and other markets, it's additionally other markets that we're looking at to open up and what will happen in Spain, what will happen in France. And so we're really excited. The other thing that we have there with our CC Pharma, Tilray Pharma and some of the stuff that we're doing in the U.K. and being vertically integrated as we sell through our distributor and sell directly through our distributor into the drug stores, helps us that where we're a grower, where we've got a brand. And then we have -- the third part of it is where we have from a vertical integration, the distribution going to the drugstores. So that helps us tremendously, too. Xin Ma: Got it. And then my second question is on the beverage segment. So in terms of just rising aluminum costs from the Midwest premium related to the tariffs and then additional supply shocks from the Iran conflict. How -- can you offer any color in terms of how hedged you are on your aluminum exposure? And how -- what's the benefit in terms of kind of scale that adding Carlsberg into the U.S. portfolio give towards managing that cost impact? Irwin Simon: So I'm going to let Carl talk about the hedge in a second because we are hedging on some things. But listen, adding Carlsberg in there with a good-sized business, adding BrewDog in there and then being able to buy on global contracts is going to be very, very helpful for us. Right now, a lot of our hops for BrewDog internationally come from Washington State. But we, right now, as we put this together and listened, having Carlsberg, who is one of the largest brewers in the world and possibly buying into their contract, and we still have left over whether there are hops in that from our ABI stuff. So there's lots of opportunities from a scale to be buying hops and cans, and that's the big one to watch out for is as aluminum prices have gone up and Carl, will talk about hedges. Listen, the big watch out there is what happens with fuel and from a standpoint there is the unknown. But Carl, from where we're hedged -- Carl, do you want to talk about that? Carl Merton: Yes. I mean you answered most of it, but just specifically on the hedge for aluminum, we're currently hedging 65% to 75% of our buy on a month-to-month basis, and we're hedging a year out. Xin Ma: Got it. And just one last question, if I can. In terms of just the distribution gains from the shelf resets that typically happen in the spring. How are those conversations going? How is that tracking? Any color you can share there? Irwin Simon: So going well. I will say this here, we gained and we lost. And the big part of it is this here, we're in the craft beer category, lost some space out there. But I think the big thing is this here, where we didn't -- when we bought the Molson's piece and prior to that when we bought the ABI piece, from a timing standpoint, we lost a lot of SKUs where we had no influence in no part of it. So again, it goes against us. Now we've gained a lot of distribution. And the big thing is this here just because we gain distribution and make sure the product sale. So plus-plus, we probably lost more. But again, it's okay because it was the SKUs that were not part of us at the time. And the new SKUs and the new products and new innovation is what we're excited about and where we've gained. And we had some big days at Walmart. We had some big days at Kroger, Albertsons and some other ones across Shop & Shop across the board. So all in all, we're happy with what we got. And listen, I'd rather the set get smaller and us be a bigger player in a smaller set than just have a big set out there. So there's a lot of resetting happening within the craft beer industry in regards to the size and what retailers need out there. Carl Merton: Just to supplement that a little, when Irwin talked about the acquisitions, it's more about the timing of the acquisitions because we bought those brands after the initial discussions on spring resets that already happened. Irwin Simon: And we were not the ones presenting those spring resets. But now whether it's the Molson or the ABI, and that's sort of where we'll be next year in January as we take on Carlsberg, we'll be out there presenting in February -- January, February for the next spring resets for Carlsberg. Operator: Our next question is from the line of Bill Kirk with ROTH Capital Partners. William Kirk: I want to spend a little time on the improvements at Tilray Pharma. Carl, you mentioned a focus on the highest velocity SKUs. So what SKUs or product types are those that are leading the way? And then maybe more importantly, how can you or how are you leveraging this improved CC Pharma for your cannabis business in Germany? Irwin Simon: So I'm going to -- Rajnish, since you're on the call, I'm going to let you jump in here because you're the one managing this. I think there's three things here. Number one, it's the buying that our guys are doing over there. Number two is our assortment. And number three, as we now look to sell our products into Italy and we sell our products into the U.K. Rajnish, do you want to go into the specifics of what the products are that we've really seen the increase in sales? Rajnish Ohri: I mean, there is a group of products revenues, we have about 2,800 SKUs. So what we have done is basically identified SKUs which have higher velocity to go. So there is a bunch of about 50 top SKUs which are right now working where there is a high velocity which we focus on, not just on velocity, but also on the gross margins. So these are the two criteria for us to look at in terms of the growth. And then we are adding the medical cannabis portfolio. I mean, the medical cannabis portfolio is helping us to grow both in margins as well as in revenue because per unit revenue is much higher and margins are better. So these are the two big things in terms of the selling side of the business. And of course, on distribution, we are now -- with our new alliances, which are coming forward, we are now actually increasing our distribution across the pharmacy channel, which helps us to grow not just per unit, but also in the depth of distribution and the width of coverage of pharmacy. So this is really on the seller side. But more importantly, also on the buy side, I think we are now -- our purchasing is becoming much more robust in terms of the timely decisions. We've implemented automation in our purchasing system, which predicts the pricing patterns and then it helps us to take decisions quicker. So I mean these are a few things which in the pharmacy distribution is helping us to grow. And then, of course, on the operations side, a lot of our business, we are also looking at in-house packaging to out-house packaging and whichever way is working for us, there's a big team, which is working to make sure that there is a consistency in supply from the operators, both in-house and out-house, and that's also helping us to improve the margins. Irwin Simon: When we bought CC Pharma, that was a big part of it. But again, it was bought during the Aphria time was for a tender, and was the age of sub-pharmacies. That was not really happening, number one. Now -- and there was challenges with getting different medicines as we're buying all different types of medicines. But as Rajnish said, we're focused on the core medicines with the higher margins. And we've done a lot of automation at CC Pharma. The other thing is what's happened, we've gone from servicing 13,000 drugstores now to 16,000 drugstores. So we've expanded the amount of drugstores in Germany. The other major thing is as we expand out CC Pharma into Italy and into the U.K. is a bigger platform that we'll be selling through. Not the highest margins, but again, as the volume grows, there's a lot more contribution. And as we put a lot more cannabis through it with much higher margin, you're going to see the margin grow there dramatically. William Kirk: Awesome. Thank you for the detailed answers. My second question, Irwin, in the opening comments, you talked about now being a run rate of $1.2 billion in revenue. The last 12 months, I think, it's something like $850 million. So is the bridge between the two? Is that mostly the revenue from acquired BrewDog assets? And I asked because you didn't take all the assets. So how much of the BrewDog revenue that they've released in their annual reports is generated by the assets that you took on and now have? And how much of their annual revenue was tied to assets that you didn't take. Irwin Simon: So let's say between $225 million to $250 million is what we have taken, okay? And again, we took all the U.K., Ireland, Scotland distribution through retail, we've taken it through on-premise. And we've taken 16 brewpubs in U.K., Ireland and Scotland. We've taken the brewpubs in Australia, we've taken the distribution in Australia. We've taken three brewpubs ourselves, and -- 2 brewpubs ourselves and there's three franchises. There's 15 other franchises out there today around the world that we sell them beer to and we get some type of royalty. In regards to the U.S., we've taken the distribution, the manufacturing in the U.S., and we've taken with them Las Vegas, Columbus, St. Albany and Cincinnati is -- and Cleveland, I'm sorry, and the airport in Columbus. That's what we've taken there. So it's somewhere between $225 million and $250 million in sales that we have taken. In regards to the other piece, Bill, it's all coming from growth, and that's where it's going to come from. And don't forget, you saw from a standpoint there, what we've gone through is SKU rationalization in regards to our beer business. If you take what we're down this year and what was SKU rationalization, what was distributor rationalization, and what was product rationalization, I mean quite a bit of sales come out of our business. Operator: Our next question comes from the line of Aaron Grey with Alliance Global Partners. Aaron Grey: First question for me. I just want to dig a little bit more in terms of hemp. So in terms of your outlook potentially for changes to come before the ban on any product is more than 0.4% THC coming to fruition in November. And then taking that into context, how you're looking at the CMS program, you mentioned potentially looking to enter into that. So how are you looking at potential opportunity there, particularly if there is a restriction on THC products and how appealing that program will be for patient adoption or rejection? And then just how you think about that longer-term opportunity there? Irwin Simon: So number one, let me go back to HDD9 and how we're looking at that. We're looking at it three ways. Number one, it gets extended and stays as is. Number two, there is some type of new legislation that comes out that regulates it either 3, 4 or 5 milligrams, and which would be great and that way we can sell it or the ban in November of 2026 happened, and it completely stops. Listen, I think it's going to be one or two. That will be my opinion. In regards to our CBD drinks into Medicare and that within the U.S. Listen, we have Happy Flower, we have the drinks, we're prepared for that now. It's just making sure that as we talk to the FDA, and we talk to them that how we go about it and how we do it. So we're able to do it. We have the products to do it. It's just making sure the right approvals, and we have a team that is working on this within the U.S. regulations and what could happen here. So stay tuned for that. Aaron Grey: Okay. Great. Appreciate that color, Irwin. Second question for me, I just wanted to go back in terms of alcohol gross margin and the outlook. Carl, I know you mentioned in terms of how you guys are hedging some of the aluminum. But just taking a step back and -- level, there's been some lumpiness. You guys now have Project 420 now completed. So how should we think about that margin for the segment going forward? 4Q, I imagine obviously be higher just given the higher sales flow-through, but just on a full year basis, just how best to think about the gross margin there? Carl Merton: So Aaron, good question. If you look at where we are right now, I think this represents the bottom. We have done a significant amount of work, and we'll continue to do work to manage costs and to keep costs at a reasonable level versus where our volume is. As we said on the call, we've got some headwinds with aluminum costs, and there's potential for headwinds with fuel surcharges and things like that, that we're going to keep a close eye on. But the key is really in the overhead utilization rates. And as we've adjusted to that, and we continue to make adjustments going forward, like we'll see that start to come up over time. And right now, we think this is the bottom of the trial. Irwin Simon: And Aaron, I think there's -- once again, you remember, we get in the beer business in late 2020, with Sweetwater and the acquisitions of the three brands in the West Coast and Montauk and then the ABI pieces and the Molson pieces. We had a onetime had 10, 11 manufacturing facilities. And since then, now with Carlsberg coming on, with the rescaling of the beer business and the SKU rationalization. It hasn't been the easiest road for us, but nothing dissimilar that was cannabis in regards to as we opened up the grow facilities, and we had to go deal with it. But now we got time. We now have the right sets in place. We have the right new products in place. We had some new products out there that didn't do as well as we thought. So as Carl said, now with the purchasing power between BrewDog International, between bringing Carlsberg on with us, we feel good about moving forward where we've done a lot of the overhauling. We're now down to 7 manufacturing facilities. We might even get smaller in regards to that. In regards to the facility in Columbus, Ohio, which is a beautiful facility. And what are we moving there from HDD9, if that is a product that's able to stay within the portfolio. We have a great energy drink called, High Voltage, that's growing in leaps and bounds. Some of the other non-alc products that we have out there today that we will move into our facilities. And as we introduce a lot of Vodka Seltzers and some of the other drinks that we're doing, we'll look to bring most of that in-house. And we will have capacity, as we have a great plan to grow Carlsberg. We think the growth opportunity of Carlsberg is tremendous of what we can do with that brand. So again, it's -- we've only been at this 5 years where most craft brewers have been out there a long, long, long time. And we've had some pain, but we've managed through it. And I think we've really got it in a good place now from a scale standpoint. I don't -- I know, I could be wrong, I think we'll combine with BrewDog and what we're doing today, it's almost 18 million cases of beer that we'll be selling that's between the worldwide. So we're buying lots of cans, we're buying lots of hops, we're buying lots of ingredients here. And yes, some of it is across the water. We're buying lots of kegs, but how do we utilize that? We're just not a little craft brewer anymore from a standpoint there. Operator: Our next questions are from the line of Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Yes, congratulations on the very strong international growth and also very nice to see the share count being stable quarter-on-quarter. Look, I have three questions on Germany specifically, and I'll try to keep it brief. The first question I want to get your take in terms of the advantage of being vertically integrated versus the many distributors out there, I mean for a while, we saw that the distributors were growing faster. We saw consolidation, Curaleaf by Four 20, High Tide by Remexian, more recently. But now with lower prices, some of the distributors are being squeezed out and they don't seem to have a very stable supply chain. So I'm just trying to understand if you can remind people of the advantages in Germany, especially where the market is evolving or being vertically integrated versus the distributor model. The second question is that it would help if you can expand on your route to market? Like how many people do you have on the ground? How many people are visiting doctors? How many people -- what are the efforts in terms of reaching out to patients given all the restrictions. But just if you can give more color on your route to market in Germany. And the third, which is related to all of this, I could make the argument, playing devil's advocate, that pharmacy reach does not matter too much, right, that all these numbers that we hear about CC Pharma and Alliance now are not so relevant when the doctors and the patients are making the decision and the 80/20 rule applies, right? We know that maybe 50 pharmacies, especially online account for the bulk of sales and only 1 of 7 pharmacies sell medical cannabis. So why does pharmacy reach matter in the short term and in the long term? I know there's a lot there, but there are three questions on international that would help if you can cover. Irwin Simon: I hope I can remember all three, okay? And number one, to your point, and I stressed this before, from a growth standpoint of having our Cantanhede facility and that up and going the way it is today and growing some of the best cannabis that it ever has and having the permits to get out of Portugal into Germany is a major, major advantage to us, and this is what helped us in the quarter to get the sales. And again, as we're getting yields and flower to become that low-cost, that low-cost seller in there in the marketplace and deal with price compression. Number two, you heard me talk about now as we bring on our facility in Gatineau, Quebec, that is a GMP facility. And that from a supply standpoint, and I got to tell you, because originally, we were going to sell that and thank God, we didn't because from electricity costs, from labor cost, that is an excellent facility and it's an excellent facility for us to have and supply the international market, and that's what it will do because it's GMP, because it's a lower cost facility. And then our German facility, which originally we were selling 2 to 3 metric tonnes that are there and Rajnish and the team has done a great job of getting that up into additional metric tonnes and before that we were only allowed to sell into the German government there. So to your point, Pablo, yes, we have supply. Yes, we can be that lowest cost producer. And yes, the big thing is we can be consistent. In regards to the customers that we're selling to. I'm going to let Rajnish talk about what we have on the ground there and the infrastructure in a minute, but just going through the pharmacies, you may not agree that having a vertical integration. So number one, having CC Pharma. The big part of the CC Pharma today's business is not the cannabis business. But there's 3 things CC Pharma does. It has 16,000 pharmacies and a lot of these pharmacies, Pablo, are buying medical cannabis. So now they have the ability and at the end to sell, it has the ability to go to pharmacies, number one. Number two, there's a lot they can do in regards to online and selling online through CC Pharma, and that is something that we're working on. And again, as we look at expanding our product lines in Germany, whether it is vapes, whether it is pre-rolls, CC Pharma has medical license and an application that they can do these things for, and we're looking at numerous things with the CC Pharma. So today, having it, it's very important for us. It has a tremendous network too with other CC Pharma types of distributors that we can sell products through them too. So CC Pharma has a relevance to us, and it's a big relevant for us in the cannabis grow market where no one else really had a CC Pharma today. Rajnish, in regards to your sales organization on the ground, go ahead. Rajnish Ohri: Yes. So two things here. I mean, so there is a price compression in Germany, which is kind of changing the route to market and the route to market is diverting, becoming more integrated. The distributor is now getting squeezed out because of the margins, et cetera. So I think -- we don't see it now, but we do see it going forward that the route to market will become more direct to pharmacies and through the channels of prescriptions to doctors, et cetera. So CC Pharma and our medical team there is presently working along with the prescribers and also in the pharmacies to work and build this integrated supply chain to reach the patients. So that's number one. Number two, to your question of what's the feet on street we have today 2 teams which work on the street. One is the one which work with the prescribers. This is a team of about 20-plus people who are medical representatives and medical advisers, who work on with the prescribers. And then we have a team with CC Pharma, which is also about 7 to 8 people who are basically telecall services people who continuously to work with pharmacies to make sure that the prescriptions, which we reach there and the stocks are available for them. So there is a twin approach there, both at the pharmacy and at the prescriber level at the ground in Germany. And as we go and see this forward, I think -- and these are signs which we see in the market today that the route to market is going more direct than through the distribution. So with CC Pharma and Tilray Medical team, I think this change we are seeing, and we also see data coming to us, which is telling us that the pharmacy sales are improving, still small, but improving compared to what the distribution sales have been. Irwin Simon: And Pablo, not only that, what we have internationally today, I mean, basically, we have marketing teams, we have R&D teams, we have quality teams. We have a researchers working on our different cannabis streams and genetics over there from a medical standpoint that when doctors prescribe for pain, for anxiety, for cancer we can grow and support it. So again, what we're not is just somebody selling into the marketplace. I mean, as Rajnish said, we have a big infrastructure in Canada and Portugal, we have in Germany. And then we have a team that support it in London in regards to the marketing team, and there's a whole supply team. And the good news is we have moved a lot of our Canadian colleagues over there to help us with this grow. You were going to ask something else. Go ahead, Pablo. Pablo Zuanic: I mean, that's great color. Can I add just one more quickly? You mentioned that you're keeping an eye on the CMS program in the U.S. for a full-spectrum CBD. Does that mean that you would be considering or looking at buying a U.S. CBD brand? Irwin Simon: So we have a brand today called Happy Flower, okay? We produce CBD products internationally. So we have formulations. We have products. It just got to fit to what the U.S. standards are and regs are here. But, listen, I've always liked if it made sense to buy something that gives you a foothold in there. But like anything, we have the ability today to do our own with CBD products. Operator: Our next question is from the line of Kenric Tyghe with Canaccord Genuity. Kenric Tyghe: The majority of my questions have been asked, but just a couple of quick follow-ups. With respect to the beverage segment, you called out trough margins in quarter. Is that including or excluding the BrewDog integration? Just trying to get a handle on whether that's a trough on legacy or trough on go forward, and how we should think about that evolution of the margins? Irwin Simon: No. BrewDog, from lease margins, BrewDog was acquired, March 2, so there's nothing in here in regards to BrewDog. And there's nothing in here in regards to Carlsberg from a margin standpoint. And again, from a procurement, from the sales, from an infrastructure, from manufacturing, again, I'm not going come out there with numbers, but I would think there would be upside just putting volume. Kenric Tyghe: Great. And that was the gist of the question was just on that evolution from here forward with Carlsberg and BrewDog, but I can leave it there. Just a follow-up with respect to the brewpubs and that footprint. Just with how consumer trends and consumption patterns have changed. How are you thinking about that footprint going forward? And is it becoming more important to you as a sort of a strategic buffer on the consumption side? Any color around the BrewDog -- sorry, around the brewpub footprint would be useful. Irwin Simon: Listen, good question. It's something today within Tilray, we have 18 of our own brewpubs here in the U.S. So again, it's something we understand. In regard to the U.K., Ireland, Scotland and the other markets, listen, I'm big on brewpubs to look at them from a marketing tool and to build our brand out there. So bringing people together. And that's the whole thing on longevity today to bring people together. And a big part, and I plan to spend a lot of time looking at our brewpubs in regards to what we got to do to interact with our customers that come there, how do we serve them good food and good value. I've also talked about whether it's Carlsberg, Guinness or our other beers of how we bring other beers into there because if they don't want BrewDog, we want them to come to our brewpubs at least to enjoy our food, enjoy the environment, and maybe we can convince them to have BrewDog. Is that going to be a big part of our growth as a part of our strategic plan to open up another 100 of those? No. It's a big part of those to look to upgrade them, to put more TVs, more interactive types of communications in regards to getting more and more of our consumers to that and is something, yes. Is there an opportunity for us to franchise more and more BrewDogs, where we did not take them and make them franchisees? Absolutely, yes. So there's some exciting things here as we look to grow from a franchise model as we look to increase the sales with the ones we own and where we license the brand today in airports. And that's something that we're looking at too because there's -- with airports today, you license your brand name, you collect a royalty and you sell product. So that's how we're looking at these brewpubs. Operator: At this time, I'll turn the floor back to management for closing remarks. Irwin Simon: Well, thank you, everybody. Number one, it April Fools' and our numbers are not April Fools' joke. So that's the good news, okay. Our numbers are some real strong numbers out there. Congratulations to the team on the growth. And not one of these businesses, nothing has been easy out there, in regards to what we deal from a regulatory standpoint, what we deal in regards to pricing, in regards to tariffs and just looking at the consumer today. And again, if you stop and look at Tilray from 2019 to hitting over that $1 billion mark with the acquisition of BrewDog, it's a very exciting time for us. In regards to where we're going in 2027 and with 2 months left in our quarter of 2026, there's a lot to be proud of here. And as you heard me talk about the big overall that we're going to do in the Canadian market in regards our genetics, in regards to our strains, in regards to using AI to help us there, in regards to how we modernize those facilities and take out lots of costs. And Blair and the team have done a tremendous job in doing that. And again, as you come back and think about what we have in grow today and how we've converted these facilities to much more economical and dealt with the challenges of the cost of utilities in Ontario. So again, we've accomplished a lot in the Canadian market and the only market where recreational cannabis is legal in the world and at the same time, dealing with and growing our medical market and introducing more and more patients and consumers to the product. In regards to the U.S., listen, again, I'd like to see some better results coming out of our beverages business. But on the other hand, as you bring everything together since late 2020, and we're here where we are today, I see some good light at the end of the tunnel here of what we're building here and being the fourth largest craft brewer out there and the fourth largest craft beer business. There's been a lot of changes in the craft beer business, it's been a lot of changes in the beer business. And one thing I can tell you is I really feel we got the footprint right, we got the model right, and now we got the product right because we brought up a lot of SKUs. We have over 18 brands. We have over 900 distributors. We've had multiple people, multiple contracts out there that we had to deal with, whether it's buying kegs, cans, hops, et cetera. So as we bring all that together. In regards to our spirits business, you heard me talk about our depletions on Breckenridge being up. We've dealt with lots of distributor transition out there with RNDC, now being acquired by Reyes, which is good news for us, and it's something that we will consolidate into the new Reyes distribution system. In regards to some other changes in the market, it's something we're going to do. But what I'm really happy about and seeing our Breckenridge, some of the new stuff that we're really coming out with in regards to our tequilas, our drinks with moonshot -- our Mountain Shot, it isn't moonshot. Some of our non-alc drinks and some of our products there. But it's great to see some of the stabilization that's going to happen in regard to the distribution business. Listen, this industry is a difficult industry with a 3-tier system, and you can have the greatest products, but it's the distribution that you need. In regards to international, again, Rajnish and team have done some great things in regards to the international piece and the grower and dealing with the regulated market in regards to medical cannabis, dealing with permits when you ship out of the country or permits when you ship into the countries. And again, what we've had to do to get our Cantanhede facility up to the yields and up to the grow that we've done in Canada and up to being able to supply consistent product to the marketplace and back to Pablo's point before, that's something that Tilray now is going to be known for because if you think about it, look where our volumes are today and look where they were a year ago and how we've doubled in the quarter. So a lot to be proud of there. And again, there's a lot more that we're going to do in those marketplaces. We had to overcome Germany being only sold into the German government, which we're losing money and almost doubling the amount of production coming out of that facility. And now we're running Cantanhede probably at 50%, 60% capacity, and we have tremendous opportunities to grow more and more in our Cantanhede market. Really, the highlight is where we've come with CC Pharma. Where we are at 2%, 3% margins and closer to 5%, 6% margins now and really see the opportunity in that business and see opportunities from an integration standpoint and even seeing it grow throughout the rest of Europe. And last not -- well, our wellness business in regards to Manitoba Harvest, and the growth within that business and the growth in regards to some of the beverage businesses that's been in that business. Listen, we'll see what happens in regards to Delta-9, I think as you heard me say, there's three options out there, either 1 or 2 will happen. I'll be disappointed if it's 3. But again, we're out there in full force selling our products today that we have in the marketplace and sticking with it and out there lobbying the government to really take a hard look at that. So last but not least, on March 2, I just sort of want to step back one second in regards to Carlsberg as we announced our partnership with Carlsberg. And it's something I'm very proud of because I grew up in Carlsberg. It's a worldwide brand. It's one of the largest brewers out there. What a class organization to be associated with. I spent lots of time with the Carlsberg team. And it's tremendous what we can learn from Carlsberg. And what we have the ability to tap into their knowledge base, tap into their new products, tap into their marketing things. And I always say this here, when I grow up, I like just to be like Carlsberg. It's something that we aspire to, and having that for the U.S. and the U.S. being the biggest beer market in the world, Carlsberg is looking for some big things for us, and I promise we're not going to let them down. Last but not least, in regards to BrewDog. Listen, I looked at BrewDog numerous times throughout the years in the acquisition, I congratulate the founders for what they did in regards to building this brand and what they did in regards to opening up these beautiful brewpubs around the world today. And since 2015, and basically 10, 11 years what they've built. Unfortunately, not everything goes as planned. And Tilray, when it had the opportunity to participate in the administration to buy this without being able to do due diligence, the way we could, but we knew the brand, without being be able to go into data rooms and ended up buying this at a little over EUR 40 million is something that I'm excited about. But I always say it's not what you bought it for, it's what you do with it. And with that, there's a lot to do. And this changes a lot within Tilray in regards to our beverage business, our worldwide known of who Tilray is. You heard me say in my comments, that I've done lots of acquisitions, whether it's at Anheuser or here, and I've never had so many reach outs about the brand, BrewDog and the excitement that is. So we're pretty excited. It's just a month that we owned the business. We're in the midst of getting our hands around this. And one of the big things, this business as it was going through in administration was in the midst of either being shut down or sold in pieces or sold as a whole like us. So it's almost like we're starting this back up again, and getting it back up to capacity, getting the factories back up, making sure we have hops, where suppliers didn't get paid and there are ransom suppliers that we've got to do that. There was employees that had their resume on the streets that didn't know if they were going to have a job or not, and that's something that we've got to make sure. So stabilization, as I keep saying, is the key to this here. And with that, we will have in place great strategic plans to grow the business in the U.K., Ireland, we'll have great plans in place for Australia. In Europe markets, we'll have plans in place for a franchise and what we will do with our current brewpubs, and what we're going to do in the U.S. So there's a lot of exciting things with BrewDog that we can do and will do. And remember, there's a lot of heavy lifting there and how do we integrate it within our business. So with that, some exciting things happen at Tilray. Let me tell you, as I always say, there's 2x4s that hits you in the head every day. And that's something we live by and how do we deal with it. I want to thank everybody for getting on our call today and listening to us. Happy Passover, Happy Easter to everybody, and enjoy some good beer out there, enjoy some of our good cannabis and to March Madness. Hey, when you're watching March Madness this weekend, make sure you have one of our great beers that we produce out there. Thank you very much for listening to us today. Operator: This will conclude today's conference. You disconnect your lines at this time. Thank you for your participation. Have a wonderful day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Quadrise Interim Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'm sure the company will be most grateful for your participation. I'd now like to hand over to the team from Quadrise. Peter, good afternoon. Peter Borup: Thank you very much, and thank you very much for joining us for the interim reporting for Quadrise. As always, we start with a disclaimer. I will leave that to you and jump straight into the presentation. So the strategic challenges of Quadrise are clear and well known. So our focus is entirely on getting the MSC Cargill trial up and running. We have also since we last time met been having a meeting with OCP face-to-face that suggests we might be running a second trial with them leading into a commercial offtake agreement. But perhaps even more importantly, we have been upping and accelerating our efforts to build support from refineries. So we have feedstock supply available, or at least plausible for when we need to scale up after these trials. I have mentioned at previous occasions, latest at the AGM that we are looking at whether we can identify other shipping clients who would be willing to do commercial trials perhaps in other segments. And this is an ongoing effort where we've been speaking with a good number of people that we believe are willing to be upfront users or first movers rather than the traditional shipping approach where you are first adapters rather. And I think we know pretty much who this is. So we've had meaningful discussions. We are talking to the right departments and all these companies, but it's something that takes a little bit of time, but it's an effort that is ongoing. We're also aware that while our focus is entirely on the trial and on the scaling up the refinery efforts, we really need to look at the future as well. I think we have a great platform on the bioMSAR platform, but it's also one where much of the bio feedstock will vary. There's simply not enough feedstock in any one product to meet the IMO requirements should they ever be adopted. So as you will know, we have a stable product with the glycerine. We have been trying out the cash no oils, and we are trying out other feedstocks that are perhaps a little bit further away, but it's really important that we can speed up our, say, product or research to market time. And one of the ways of doing that is being -- modernizing our data infrastructure. It's actually quite good, but leading into building digital twins. We're already part of an EU project in that respect, but it's something that will help us fine-tune before we do the actual machine test, fine-tune exactly how do we make the feedstock, and prepare it for that test. And we can do that then in cyber instead of doing that on a machine. So hopefully speed up the whole process. We've been trying to sharpen our focus. Of course, we've conducted a lot of projects over the years. We're painfully aware that some of these are projects that are research-minded, so there can be longer periods of hibernation where nothing really happens and then they take off again. And that's just part of running a portfolio of different projects. But we also have more specific projects that you've heard about before and we're going to talk about today. And we just have to be very mindful that they continue to make commercial value to keep them alive. So that's an ongoing process. We have a clear focus on shipping clients. We have to make a choice. But it also means that in terms of power plants and industrial clients, they have to be really promising for us to invest time in it. Some of these other projects are far, far away geographically at least, but we are trying to focus on them by also using external clients to speed up the process to market. We'll come back to that on the individual projects. We are, of course, affected, and we are watching what is happening on the regulatory front. Fuel EU is moving along according to plan. We are very mindful that a number of countries are looking at the fuel EU rules and regulations to seek inspiration, and they are likely to be adopted there if IMO doesn't go ahead. Timing is uncertain. Localization is also a little bit uncertain. And clearly, as a former shipowner myself, there's nothing that shipowners fear more than having a number of different regulatory regimes, having the level playing field and having one set of rules has enormous value. What we're hearing from the IMO is that the talks are ongoing. The Americans have offered their view on how it to proceed, not very positive last Friday. Others have also offered their views. We're mindful that Liberia and Panama both suggested solutions that are close perhaps to the Greek position, which is lower fines, a broader base, more LNG involvement in the range of fuels that can be used. The feeling right now, certainly from my side, my personal view is that this is likely to take longer than just a 1-year suspension that the IMO decided last year in October in London. From the market point of view, we actually feel that the -- what happens at IMO might not impact Quadrise's technology that much. The main thing is that there are fuel EU rules, they're driving change. What we are mindful of is that there are a lot of other things on the agenda, also shipowners and most businesses the pace of technological change, not just in AI, but in many other technologies where exponential changes in these technologies is really changing the business landscape and no business can afford to ignore it or not be well briefed on it. Same thing we have on a broad term geopolitical transition that we have not seen at all at this level before in terms of a [indiscernible] role of international law, change in alliances, certainly uncertainty about many of the traditional alliances that we've been working with in the past, but also trading blocks changing quite rapidly. And that means that any company operating in this environment needs to look at their operational expenses before they look at anything else. So my clear impression from the last 6 months where we've been seeing a lot of shipowners and a lot of related businesses is that there's a strong focus on the green transition, but everybody understands that they need to make sure that their businesses are strong, so they are going to be around for the green transition. So the focus will be on cost to a very large extent. And that also matters for, of course, for the choice of technology that we can offer. We are still selling both MSAR and bioMSAR, but there's no doubt that the ability to deliver MSAR at below the cost of conventional fuels is a major for. And that's even before talking about the current conflict in the Middle East. What we are seeing is that many of the players we are dealing with are no longer competing on price or freight rates or even the availability of ships. It's about availability of bunker fuels, which is not a given, and that is impacting the value chain. Clearly, where sometimes we've been finding that we are dealing with much bigger players than ourselves, and that holds its own challenges because they have many, many concerns to take into account. In a case like this, dealing with primarily large players have some benefit because they will be first in line to get the bunker fuels. And I'm not saying it's easy for them either, but it's something that gives us some consolidation as we are trying to get trials in place with MSC and Cargill in the first place. We are -- if we look at the projects, first and foremost for us is the trials that have been planned for such a long time with MSC and Cargill -- we've had quite frequent meetings and discussions with both of them over the last 3 months. I think they're positive. They're down to a few items now. What also happens when things take time and, people are checking carefully the agreements they entering into is that certain things come up again. Most recently, we've been looking into whether VAT issues in the EU for the Antwerp trial would affect or would come into play with a tripartite agreement. It seems not to be the case. So that's been sorted out. We're now discussing or looking at the terms and conditions, which are standard for a big buyer of fuels. And my feeling is that we are getting very close now. We've had meetings again, face-to-face. We are experiencing that MSC is committed to the 2 trials that have been agreed, so one for MSAR and one for bioMSAR. But we're also experiencing that they are very helpful when we are talking to refineries, and others and pushing and endorsing not only the trial, but building a scale up in terms of feedstock supply afterwards. So I think that's quite positive. Some of the issues, some of the things that have to happen now, we have filed for a branch in Belgium, enabling us to start the production in Antwerp, and that might be a little bit early as we haven't signed yet, but we just want to make sure that doesn't hold it up. There'll be some certifications that have to be renewed, but it's -- the whole process has been simplified. But again, we want to do that already now, so we don't have to wait for that. So I think while I can't tell you that it's all been signed and dusted, we're ready to go. My feeling is that we're getting quite close. And our focus has shifted -- not shifted, but has now also been on how do we make sure that we can scale up after an expected successful trial. So no longer than 3, 4 weeks ago, Jason and I and Linda as well were in Singapore exactly to look for potential supplies from refineries, but also from buyer suppliers to make sure we're ready for that and had very positive meetings. Cannot really reveal who we've been talking to. But hopefully, we can talk more about that later in the year. With that, I will hand over to you, Jason, on OCP. Jason Miles: Thanks, Peter. Yes. So in terms of OCP, again, Peter and myself earlier this year, went out to Casablanca and met with the main people there. Quite surprising meeting because they were extremely positive in terms of the cost leadership program, which MSAR fits in with. So the current status is that the updated trial agreement is well underway. So basically, we're now sort of detailing exactly which site we're going to be at. The likelihood is it's not going to be the same kiln as we had before, which is slightly constrained with this OEM issue, which we documented before. But the key thing is, I guess, the time behind the amendment to the agreement, we make sure that there's an operational board, obviously involving Peter and the head of OCP there to make sure that it's got management buy-in and make sure we try and avoid the delays that we've seen so far. The trial itself, the actual duration depends a little bit on the scale of the kiln that we're operating on. So if it's a smaller kiln, it will be 30 days. If it's a bigger kiln, it's likely to be less. So really, the plan is to basically carry out that trial. And that's a longer-term trial is needed. We did -- the previous trial was done over a period of a week or so. OCP want at least a longer-term trial of a couple of weeks minimum to actually get the full operating data that they say is needed before they commit to commercial supply. So that's what we're doing. And in the meantime, our equipment remains on site and any costs that are being incurred, we're getting reimbursed for by OCP still, and that process has been working very well. In terms of the next project in the U.S. with Valkor for basically heavy sweet oil, which is essentially a low sulfur bitumen -- ultra-low sulfur bitumen product. We received obviously the first payment. We revised terms that people remember of the agreement last year. We basically received the first installment this year -- sorry, last year as well. We basically invoiced the second installment, which is due at the end of this month. So we're expecting payment of that 300,000. And then there's another 650,000 due at the end of the year. The samples that have been long overdue as well, they've been -- essentially the Valkor have been going through a change -- slight changes in their exact processing. So they've been holding back the samples until they know exactly which technology route they're going for, but that's now been finalized. So they're doing pilot runs at the moment to generate the samples that we expect to get fairly soon, so we can do the testing in the second quarter of the year. Their pilot plant that is due to go in, be operational in Q3 has been delayed slightly because of the site that they selected was not fit for purpose. So they had to move site to a new location. So that delayed some of the civil works that was planned to be up and running by now. But that's moving ahead. So they expect to be the installation to happen during Q3, and the plant to be up and running in Q4. In the meantime, we're preparing -- we prepared our unit. It's nearly complete now for shipment, and that will be done during the second quarter of the year to the U.S. with expected deployment then in what's obviously just part of the installation program in Q3. So really, the plan is then to carry out a paid for trial for -- to produce actual trial volumes of fuel for local consumers and it also initiates a marketing program that we've had in plan for some time with Valkor as well now that is actually live. But yes, Valkor they're fully funded. Obviously, they've got a position now in TomCo as well in the U.K. In terms of Panama, again, as you remember, we carried out a trial in July, which went very well. Essentially, we've got a letter of intent from Sparkle, basically stipulating what their demand will be. We know that there's other demand from other -- both plants, both within Panama and Central America region, specifically around Honduras. The fuel permitting process, we've got basically MSAR and bioMSAR have been basically approved as alternative fuels. So these are fuels that can be utilized when -- as they're trying to phase out potentially fuel or diesel. So that's been approved. The process for an import permit has also been detailed now. But obviously, we now need a live case where we can actually bring in the fuel with a partner. So we're discussing that with regional refineries and other logistics companies in the region with regards to commercial supply to Panama. And in the meantime, we've had some new arrivals to the team, including Matt Hyde from -- who's coming from BP, who's really helping with the sort of getting a deeper understanding of refinery economics there as well in that region. In terms of the bioMSAR program, which is ongoing, we've been doing a lot of testing with additional biofuel feedstocks, including doing things in the lab, but also doing testing at third-party facilities in Germany, where these engine facilities are used by quite a lot of parties. So it's a good endorsement for the fuel. We're also kicked off -- we also kicked off a collaboration with the University of Bath not just in terms of fuel research, but Peter mentioned before, some of the AI digitization as well. That's something that Bath can utilize in the future. And obviously, it's potentially a good talent pool for us going forward in terms of their engineering and the technical people as well. And in the meantime, as Peter mentioned before, there's a world beyond glycerin for the biofuel, which really comes from biomass-derived material, which is abundant, but obviously, there's different technologies to extract it. So we're working with the main technology providers there, but all of which has its own features and challenges, but we're working through to actually get some of their products to market faster than they would normally expect through some of their other technology platforms, which is why they're working with us. And then as part of the development program as well, we have an EU-funded project, which we're part of us amongst sort of 18 other companies ranging from universities through to people in the marine space as well and actually owners of vessels as well. So that's been going very well, and it's actually -- it's been quite active this year in putting together this digital twin, which again, Peter mentioned at the beginning, which is looking at 4 different types of existing vessels and 4 different types of new build vessels to see what's the optimum technology platform to decarbonize shipping, and it's looking at a range of different technologies of which MSAR is one of those on the biofuel space. So it's a good platform for us to market our technology. And then sustainable ships is something that we launched again with them today -- sorry, this year rather, with Linda and Alfie especially have been very active in getting that up and running, doing an online seminar. And that's brought through some quite good introductions already as part of that program. But it's a good way of comparing how MSAR competes with other -- MSAR and bioMSAR competes with other fuels. The next slide really just gives you a pipeline of the different fuel types that we're using and explains really what the bioMSAR is a mixing technology. It's a platform technology, which enables us to bring in a range of different biofuels into the finished product on the right, which needs to go through the appropriate engine testing, but ultimately can then be rolled out to the shipping fleet and really answer some of the questions around the abundance of biofuels. That's what we're really looking to nail and provide quite a unique difference in what we're offering because we can blend oil and water together. Some of these products like the sugars that we mentioned, some of the pyrolysis sugars and other means of other sort of components on here actually be water soluble as opposed to being easily blendable with oil. So we have the ability to blend both. And I'll hand over to David. David Scott: Thanks, Jason. So our results for the period are largely in line with the same period last year. Our loss has gone up a little. We've got some additional project and development costs in there this year. The main thing that is of interest based on the questions is our cash balance. So at the end of the period, at the end of December, we had $4 million in the bank. Now in addition to that, as Jason alluded to earlier, we're expecting another sum through from Valkor overall to take us through up to the USD 1 million that we're getting on the license fee, and that's expected in over the course of this calendar year. Now where that's going to take us to, we're going to have to see where we get to with our -- hitting our milestones and our projects for the period. So it's too early as yet to say how far that's going to take us to. We're based on our cash spend rate, which is historically about $3 million per year. We've brought in some new additions to the team. So that cash spend has gone up, but maybe only 10%, 15%. So that GBP 4 million is still way more than 1 year's worth of cash spend plus the Valkor money. So we're in a pretty healthy position cash-wise. The loss for the period -- loss per share for the period is in line with the prior period. And our tax losses of GBP 68 million will be there when we come to generate profits. And that's everything for me for the moment. Thanks. Peter Borup: Thank you. So there have been a few updates to the team. You will have noticed our RNS on Lauri stepping down from the Board and Michael Covington joining us. Michael brings in many years' experience in investment banking and private equity leadership also in energy. And just as importantly, he brings in a lot of energy, and drive and a willingness to contribute and participate on the board and in the daily work. So we're looking forward to that. We have also brought in Matthew Hyde, who has more than 30 years in refinery economics, most recently from BP. And that's a reflection of our decision to accelerate how well do we actually understand refinery economics because it's not something we can just do after a successful trial. Once we are having a production trial, we need to make sure we can scale up afterwards. so we can supply the material and the fuels to our clients. Right now, we're down to about probably a gross list of 25 refineries that has a good match to the kind of residues we are looking for. And then Matthew will need to analyze that further to find out which are the ones that will benefit the most from using the MSAR technology and the bioMTAR. So that's ongoing work, but also really important. And I feel we already -- we have already learned a lot compared to when he started. In summing up, -- we -- I feel we are making small steps forward in almost everything we are focusing on. And I'm really looking forward to being able to announce hopefully, the MSC agreement being done and then being able to move on to the next steps. And I'm also very mindful that it looms large to have the agreement signed now or the agreements signed, the next steps are going to call on something else from [Indiscernible] and we have to get into project management phase. We need to mobilize. We need to set up. We need to make sure that the crew on the ship or ships in question are ready for the trials, so we get the most out of them. And then we need to make sure that we scale up properly, that we have agreements in place with refineries -- and while we're starting in Anterp, it's quite clear that some of the next places we have to go, of course, shipping up like Singapore, it might actually be the Persian Gulf again at some point, but also the Mediterranean and the Americas. So that's what we are focusing on and trying to run a tight ship, of course, also on the resource side, still investing in our future, investing in the data platform and accessible data lakes. So that's where we're at. We have had a number of questions come in, I think 45. I'm going to hand over to David to take us through as moderator of the questions that have come in and the questions that you can still post on the platform. So with that, David. David Scott: So thanks to everyone who's submitted questions in on the INC platform. We're going to deal with the pre-submitted questions first, and we've grouped them into segments. So we're going to be going through each segment. After that, we will come in with the live questions that are coming in as we speak. And any questions that we don't want to address today will be dealt with on the INC platform in due course, likely early next week. So I'm going to start now with some of the strategy questions for Peter. And the first question is, what efforts are Quadrise applying to the market of new built dual fuel ships fitted with scrubbers? And how big is this opportunity? Peter Borup: Our focus right now is on talking to owners who have a willingness to move first. So owners who control their own ships. So one thing is owning it, but another one is actually controlling the daily operations. And of course, we're looking for ships that has the highest possible consumption per day of fuel because that's where we can really test them and where we really want to sell. So that is our priority. Secondarily, we are probably looking more for vessels with electronic fuel injection main engines because that works better with our technology. And that's even before looking at scrubbers or no scrubbers. But -- so I think we have a fairly good take of the segmentation there, both from the experience I have and Tony Foster and Linda Sorensen has in the shipping industry, but obviously, also because we have fairly good access to data from various databases on where the ships are with high consumption, and the fuel injection or electronic fuel injection, but also with scrubbers. So we can break that down, and we -- that's how we approach the marketing, if you will. Unknown Executive: Probably worth adding that the dual-fuel ships tend to prioritize LNG, right? There's a reason normally that people have built a dual-fuel ship that's to take advantage of LNG. So it wouldn't be our obvious first choice necessarily. But having said that, there are a number of dual-fuel vessels that are using fuel oil still if they can't get LNG. So -- but it's not the first choice, I would say. David Scott: Okay. So the next few questions are with regards to bringing in additional shipping companies. Do you expect to sign up an additional shipping company once the trilateral agreement is signed between MSC, Cargill and Quadrise? Can you update on how the search has progressed for additional shipping companies? And can you put a time scale on that? Peter Borup: So I -- we are hoping to add another trial. We are talking to tramp owners. We are talking to other types of owners. The time scale is a little bit hard to predict because right now, with all of them, I actually feel we have good access. So in some, we've started with the bunker departments. And then we referred to the technical departments. In others, we've been in with the technical departments first and then talk to the bunker traders or their ESG departments. We had a number of very good meetings in Singapore when we were there, too. So we are sort of spreading it out. We have been talking to family-owned companies, and to listed companies. But again, what we're looking for are people who have proven that they're willing to look at green transition fuels, who have invested in that because it comes often at a cost for them. If we can find owners who have vessels in place for Antwerp, that's another benefit. Predicting when something will be signed is way too early. All I can say is we're having fruitful and meaningful discussions. And some of the ones we've talked to will probably want to wait simply because they don't have ships in place or because the segments that they're operating in are under some pressure at the moment. So I don't want to put a time line on. All I can say is that I feel we are talking to all the right people, and I'm hopeful that we'll get another trial. David Scott: And are you seeing the interest being primarily BioMSAR or MSAR or both? Peter Borup: I would say both, right, at this stage. For some of the bigger players, I'm pretty convinced that the real interest will be for MSAR, but that's yet to be proven, right? But I just know what kind of cost pressure most of these owners are going to be on right now, and the uncertainty that they're operating in. And this is something that shipowners have done for centuries, right, dealing with uncertainty and volatility. So they know how to do that. But it always starts with making sure you have your cost under control. And MSAR is a great product for exactly that. David Scott: Okay. Up to Antwerp, what is the next plan to install MSAR or bioMSAR production? Can you confirm if this will be terminal blending or at refinery or both? Peter Borup: Yes, that's a great question. That obviously depends on our clients. But if you're looking at a very large line of network, or if you're looking at the temporary one, the obvious next place would be Singapore. That's where -- that's the biggest bunkering port in the world. It's a board that has done a lot to improve the transparency of their fuel markets, generally speaking. So they've had issues in the past with cappuccino bunker and all sorts of other substandard fuels, and they've dealt with it using transparency and different mechanisms. We had a fantastic number of meetings, both with governments and fuel providers in Singapore when we were there. I think a lot of what's going on is really, really exciting. But for a sheer size as a bunkering port, that's an obvious place for us to be. For the next places, we've looked at also refineries and suppliers in a number of different places, including in the Persian Gulf, but with what's going on right now, that's not -- doesn't seem to be a viable third place to set up, but we are mindful of the advantages once it becomes accessible again. But East and West Med, the Americas are obvious places. The trial that Jason spoke about with Sparkle is not just about a power plant, but it's also a strategic location for supplying fuel to shipping, right, at the natural bottleneck. So we are looking at these places, trying to identify what are the suppliers available on location that we could collaborate with. David Scott: You said in your interview this week about MSAR offers price competitiveness. So that's where our focus has to be. Is the intention to roll out MSAR commercially once the proof-of-concept data analysis is done and the proof of concept is signed off and successful by MSC? Peter Borup: We will roll it out as soon as we have a client willing to commit to it. Right now, a lot of the clients are willing to do this, their path to adoption will be much easier as a successful trial. So that's why the trial is so important. If somebody is willing to use it now, we have some experience with using the technology in the past in power plants. Now we have to prove it for shipping, but theoretically, there should be very few real issues. There's something about the mobility, et cetera. But if somebody was willing to take -- sign a takeoff agreement now, we would be willing to go ahead with that. But the trial is important for a lot of the owners we are talking to. So we do that first, and then we hope to be able to sign agreements or maybe trial supply agreements with shipowners as the trial shows some results. David Scott: And lastly, on this section, just one on sustainable ships. How is the Quadrise Fuels price model working as a sales tool? Peter Borup: I think it gets people interested. It also works as a sort of a uniform way of calculating because one of the things that we don't always talk about when we talk about biofuels or alternative fuels is that there are so many assumptions that goes in. So at what load do you run the engine, at what speed, what is the weather conditions like, at what end of the range? I mean, many of the -- certainly, many of the articles being written tends to overemphasize the high end of the range of any given product. So I think the sustainable ships platform offers a standardization of that, so we can compare better the different fuels. So I think it has helped us in getting people in the door, but it's also something we use on a daily basis when we are presenting to shipowners, or to people who are interested in the product in general to show what it would work like for a different ship type or a given conditions, or at a given time, right? Because let's not forget that fuel EU changes over time. So requirements will change in 30 and 32, I believe. And the same thing with the proposed IMO framework. So it's helpful for that reason alone. David Scott: Yes. So I'm going to go on to the technology section now, and these are primarily directed at you, Jason. So the first one is just on refinery setup. Is it true that new and updated refineries are having crackers fitted to extract more value from the input crude and that this will reduce the amount of residue available? Does this, therefore, mean that bunker and storage companies producing MSAR or bioMSAR are the path to success for Quadrise rather than refinery bio MSAR production? Jason Miles: Yes. I think in terms of existing refineries, I think those refineries actually installing, I guess, upgrading equipment in the minority. There's not many companies actually investing in downstream assets anymore. So -- but new -- certainly the case for new refineries. If you're building a new refinery, that tends to be a full conversion refinery and you don't produce any fuel oil at all. I think if you look at -- and people are doing this on the basis of a long-term plan that might be 5 or 10 years out, right, with the expectation that fuel oil or especially high sulfur fuel oil is in a decline. But in reality, it seems to be quite a popular product and it's still on the rise in terms of how it's being utilized. And there's still a very large market for heavy fuel oil. Based on our assessment, Peter mentioned before, we've got -- we've done an assessment of all the refineries available and there's at least 25 on our short list, which are really good candidates. And indeed, some of those actually have put cracking capacity in, but they still have a resid stream, which they have to blend the fuel oil, right? So not everybody is going not just because you put a cracker in doesn't mean that you have no fuel oil at all. Some still produce quite sizable amounts of fuel oil. So that's really where we see the refinery is key. I'd say that's the source of the lowest cost feedstock. But having said that, in the middle of that, refineries don't have a lot of tanks and not always involved in the bunker business. And that's where the storage companies and the bunker traders, et cetera, are also important to us as well. So I wouldn't rule them out as partners in the future because they are key to unlocking the logistics of getting it from the refinery to the end user of the shipowner. David Scott: What is the plan for supplying residual streams of bioMSAR at MAC2 to replace the HFO component and further reduce bioMSAR cost base? Also, do you plan to deliver biogenics to refineries to produce bioMSAR at the refineries, and minimize the cost base? Jason Miles: Yes. I think in terms of the, I guess, the residual streams, we're certainly looking at using the more viscous forms of fuel oil or a fuel or derivative. So the heavier the resid, obviously, the lower the cost. But it doesn't mean we can start using refinery resids at that particular facility because of the viscosity of it is just too high and the temperature that you need to handle it in makes it quite complicated from a logistics point of view. But we're certainly looking at the most viscous forms of fuel oil you can buy out there as one of the components. Yes. And in terms of other biogenic components, we're certainly looking potentially to supply those to refineries in the future where we can put a system in the refinery. Certainly, that would be an opportunity to supply them with a biofuel in the future to make the bioMSAR product as it becomes of interest. But the primary driver probably in the refinery is most likely to be the MSAR products initially. But every refinery likes to know that there's a biogenic pathway going forward as well, and we've got a range of different options and a pretty low-cost solution as well compared to some of the other things we're looking at. David Scott: Thanks. My next question is just on MSAR and bioMSAR production. Can MSAR be produced at refineries and then shipped to a bunkering location for further processing in the bioMSAR. So the question is, can we make bioMSAR out of MSAR? Jason Miles: The reality is it's a bit more problematic because MSAR has 30% water and bioMSAR has 10% water. So there's a limitation to how much bioMSAR we can turn into -- sorry, MSAR, we can turn into bioMSAR. So in reality, it's much better to produce the individual fuels. That's not to say it couldn't be blended in the future, but there are some physical limitations in terms of what you can do because ideally, what you'd want to do is replace the water with a biogenic component in the water phase. David Scott: Makes sense. Post BioMSAR, when could we expect other Biogenics to enter the bioMSAR offering at the commercial level? Jason Miles: I mean that's something we're testing at the moment. So there are -- Peter mentioned before, some available products, which are commercially sold today, but have the limitations in the case of methyl ester residues and cash in nutshell liquids and some of the other products out there that we could -- we're looking to introduce at an early stage. That requires some engine testing that we're still doing to confirm that. And obviously, then we need to present those engine test results to Wartsila and others and get a candidate vessel to actually utilize the fuel as well. So it's work in progress, but we're making very good progress in that regard in terms of offering another pathway for these products. David Scott: Okay. Just one here now on ISCC certification. Is ISCC certification a prerequisite to getting the trial agreement signed? Or does the fuel actively have to need to be produced, and the on-site setup audited in order to secure the ISCC certification? Jason Miles: Yes. So the ICC certification process, we're working on together with Cargill. We made some very good progress in that regard. And the new regulations that covers the EU, especially has simplified the process. So in terms of the application process, we're in good shape. The final part of that jigsaw is to actually get the -- an audit done once the plant is up and running -- basically once the plant is installed at MAC2 and being commissioned, that audit can take place, and that's the final rubber stamping. And to answer the first question that you had, I mean, the IC certification process is not holding up anything in that regard in terms of signing the agreements. That's purely the commercial and legal discussion being finalized between MSC and Cargill. David Scott: Yes. Okay. Thanks. There's a couple here on the financials. So I'll just deal with those ones. What is the other income of $12,000 in the interim accounts? So that $12,000 is grant income. So we received grant income for the SEASTARS project. Overall, it's about $50,000. So we've actually got that cash. And what we do is we release that in the P&L as the work against that program is completed. So as of December, we've released $12,000 against the P&L. And then a couple of questions just on where we're at with cash. I did cover that on the presentation, but just to reiterate, -- we've got 4 million at the year-end, which is still more than 1 year's worth of fixed costs despite the increases to the team and the headcount. On top of that, we're expecting USD 950,000 worth of some in from Valkor throughout the course of this year. So we need to work out where we're going to be over the next 6 months by reaching our milestones as to how long that's going to take us to. Then there's one in here as well. Shareholders have been advised that the last fund raise was sufficient to take the company through to commercialization. Given the cash holding and spend rate plus delays to revenue-generating contracts, does that guidance of sufficient cash to commercialization still hold true? And how appropriate was that guidance? So when that guidance was given, that was during -- after the last fundraise and during the last IMC, which is about 6 months ago. And that's where our projections were at that time. Obviously, things have been delayed a bit. So it's not a clear cut, but it's still too early to say. We need to see which milestones we hit over the next 6 months. The next section is on MSC, and I'm going to direct this to you, Peter. Can you provide -- can you provide detail on the delay associated with signing the MSC trial agreement and why trilateral agreement is now mentioned in the interim results RNS? Also specifically, what do you mean when you state in the RNS post-trial commercial considerations? What considerations constitute MSC putting in to paper? Peter Borup: Yes. So we have been talking about bilateral agreements, four lateral agreements and at some point, even bilateral agreements. And some of this is driven by attempts to make this work, right? So there was a concern about being subject to EU VAT in Antwerp. And that led us to look at if we could inject a bargain company in the agreement as well and hence, avoid it. It turns out not to be necessary. So we're back to a tripartite. It's not a fundamental change of the agreement at all. It's now we're back to the original tripartite, but still with a discussion over some of the terms and conditions that Cargill is going through as we speak. So that, I think, was the first question. On the second question, it was about the MSAR, was it? Of course, commercial considerations. Yes, that's really refers to the scale-up in the commercial contract, right? So my expectation is that, that will be for MSAR. My expectation is also that we need to have refineries ready, and we're hoping for MSC to use some of the leverage in helping us get in. But we're not leaving it at that. We are doing our homework. As I mentioned, we've hired Matt to help us do that homework, but we're also using 2 different consultancies who have different kinds of access and different perspective on this, and we can call on them when we need to get a little bit closer to any one of these refineries to make sure we can clinch such a supply. David Scott: Yes. Okay. Peter recently stated that the remaining parts of the draft agreements are now predictable, and we can expect signature soon. Was Peter referring to both tripartite and bilaterals, or just the tri-part idea? And have MSC and Cargill shared their view with the team that they will also expect the remaining parts to be predictable and signed off soon? Peter Borup: The outstanding contracts, a couple of bilateral ones and there's a tripartite as it looks right now, are all related. So it's the same issues that needs to be sorted out in order for us to finalize these. David Scott: So you would expect them all to be signed together? Peter Borup: I would expect it to be one signing, yes. I'm certainly hoping it will be, but I see no reasons why it shouldn't be. My conclusion that these are small is based on 30 years of doing shipping contracts and the issues that are remaining, I believe, is of a pragmatic nature rather than a principal nature. But with large companies, you want to make sure and you will involve your legal departments. So -- and that's where we're at, right? So what we can do now, I'm not going to give you a time frame because that's born to be something I regret. But what I can say is that we try to keep the pace up on this and try to make it a little bit simpler to get it expedited and push your own legal departments rather than us just waiting for it or answering us. So I think these are smaller -- I think these are -- of course, they're not small issues, but they are pragmatic issues, and we should be able to sort them out. But I'm also mindful that if you're running a fleet of 750 ships and you certainly can't get oil out of the Persian Gulf, that's probably going to be your prime area of focus right now, right? So we are competing with that. That's for sure, right? But that's one of the few things I can see should hold it up further. David Scott: Okay. Is the plan for MSAR rollout post MSAR proof-of-concept completion? Can you provide some detail on the plan once the MSAR proof of concept is confirmed as complete? Peter Borup: Well, it is that we need to be able to provide the manufacturing units in the locations where it's required. And it's going to be a gradual rollout. We're not going to open up all over the world all at once, but we will prioritize the big bunkering hubs, spoke a little bit to it earlier. So Singapore is an obvious choice. It's a very, very significant bunkering port. Maybe build out in Northern Europe, certainly in the Mediterranean at some point in the PG because on the Persian Gulf. Right now, that's off the table, obviously, and then the Americas. But that will also depend on the clients and what their preferences are, and they are also likely to perhaps change a little bit as the world changes around us. So we're flexible on that. As you know, we have collaborators who can help us scale up also on the production of these manufacturing units. Fundamentally, it comes down also to the partners we have both on the refining side and also in some places on the bio feedstock side. David Scott: Can you confirm if MSC has informed Quadrise that they'd be willing to use MSAR commercially under the interim law? And if so, how many vessels would that involve assumed agreements were reached? Peter Borup: We have not gotten into the detail like that, no. David Scott: Okay. Do MSC still regard MSAR as the main Quadrise fuel choice in the immediate future with bioMSAR use dependent on economic considerations going forward? Peter Borup: Yes, I think that's a very good question. It's probably one that MSC should answer, right? So my expectation is that there will be a strong focus on whichever one offers better saving over conventional fuel, and that would be MSAR. So I would expect that to be the case. David Scott: Okay. What is the status of MSAR supply to MSC, which we have been told is running independently of MAC2 facility with preferential supply in the Mediterranean? Peter Borup: We are assessing all the locations where we can provide this. But ultimately, it's up to -- it's also up to MSC and collaboration with us and other suppliers to determine where we can deliver the fuels. David Scott: Can you clarify the status of the interim loan oil for MSAR, and whether MSC have explicitly confirmed they would proceed to commercial use without a full loan oil following a successful proof of concept? If so, how have insurance implications been addressed to ensure this does not become a barrier to uptake? Peter Borup: Maybe, Jason, you could take the loan oil part. Jason Miles: I'll take the question if you want. I mean in terms of the interim loan oil was issued to Maersk from -- by Wartsila. So that's the status of the original interim loan, obviously, of which MSC is very much aware, right? So from their perspective, something is in place that covers that. And in terms of the, I guess, the trial itself, obviously, the test vessel is insured in terms of the product liability risk of using MSAR or bioMSAR that's fully insured as part of the development process. As part of doing the trial, obviously, you generate a lot of data and initial -- sorry, further approvals then in terms of the products that we're supplying, all of which helps to alleviate some of the initial risk that you get from insurers and others in terms of obstacles to actually move ahead. So our -- we're in very good contact with our broker and the underwriter on Lloyd's who covers this risk at the moment for us. And obviously, as data is approved upon as the tests progress, then that we should reduce the premiums in terms of using the fuel on various vessels. And we don't see that as a constraint going forward because it's being done with other fuels as well. David Scott: Yes. Okay. Have MSC indicated a desire to get our fuels used in their engines? Jason Miles: They have in the past. And obviously, Peter has been involved with discussions with M&A quite recently in Denmark in terms of what the approval process will look like. So that's something that we are progressing. So yes, I think -- but yes, for sure, M&A or Evolent is now called now are an important OEM that we need to bring up to speed as we get the data from the testing that we progress. moving to Morocco. David Scott: So we're going to move on to the OCP questions now. Can you remind us why the Morocco trial is actually needed given that there was already a successful trial in November 2023. Also, is the fuel to be used the same fuel that was shipped in December 2022? Jason Miles: Yes. So the additional test is needed because the first test that we did was designed essentially a proof-of-concept test by OCP. So that worked very well at Kariba. We basically tested both MSAR and bioMSAR. -- going in that over a short period of time. So the requirement from OCP was that that's gone well, very happy, but we need to have a longer-term test of up to 30 days depending on the kiln to get the data. So that's what we're planning for next is to complete that subsequent trial, anything between sort of 15 to 30 days is the plan at the moment. And we'll be utilizing -- we won't have to make fuel and bring it to Morocco. So all the fuels from the previous test, sorry, was utilized successfully without any problem. So it's not like we've got fuel sitting around there for that period of time, although that will probably still be stable if I'm honest. But yes, so we've been making new fuel in Morocco and using that for the test going forward. David Scott: Okay. For OCP, are you looking to set up Mediterranean fuel supplies previously? Or would the fuel now be made in Antwerp and shipped to Morocco? Jason Miles: Yes, probably have answered that one in terms of we'll be making it in Morocco as opposed to making it outside of the country at the moment. David Scott: I think this has probably gotten our post trial considerations. Jason Miles: Yes, yes, I guess this is with the OCP trial. But yes, in terms of post trial, definitely, that would be -- we'd be looking for most likely a refinery in the Mediterranean region in Africa. David Scott: Okay. And then one for you, Peter, on OCP. Haven't recently met OCP, what is your take on the general attitude to an interest using MSAR? Peter Borup: Also, I mean, we went to Casablanca for the meeting. I was quite positively surprised by their interest in using it. Also an approach that I think makes a lot of sense in involving the different business units to make sure they are motivated and they're measured on it. It's a reasonably small trial, obviously. But we have the equipment on location, if you will. And I think it makes a lot of sense for us to stick around and conduct the trial, and just make sure that the project management around it is something that we can all learn from and that it leads into a commercial takeoff agreement afterwards. David Scott: Okay. A couple of questions now on Valkor for you, Jason. Can you detail the plan on producing MSAR or bioMSAR at the Balcor facility? And how this gets to bunkering locations if MSC are prepared to trial the fuel? Jason Miles: Yes. So I guess the initial plan of Valkor is to produce an MSAR product because that's the simplest thing to do. We're using their heavy sweet oil, which is a very low sulfur asphalt type material to make a low-cost alternative to low sulfur fuel oil diesel potentially. So that's the initial plan is to produce an MSAR product. Obviously, the key thing about that is that as part of their production process, if they're able to demonstrate that the carbon intensity of the product is lower than low sulfur fuel or diesel as well, that's quite important because that gives you carbon credits we can utilize. But the initial market is to really focus on the sort of industrial and power type applications, first of all. The volumes aren't there yet or we don't expect the volumes to be there initially anyway to supply the marine sector other than maybe for the occasional trial volume. But in the past, we've discussed this with MSC at a high level. And in principle, they're obviously interested in testing it if it meets the specifications that we need to for marine fuels, especially around sort of levels of aluminum, silica, et cetera, which oil sands is important to reduce. But yes, so if it is supplied to the marine sector, we've looked into that. There are -- there's rail supply that's very reasonably low cost to get it from Utah, either to the West Coast or down to the U.S. Gulf Coast as well, which is the main markets for bunker fuel. But that's some way off at the moment. So initially, we want to stimulate a local demand, get up and running with that. And then obviously, as they expand, then we can start looking at the marine sector. David Scott: Okay. My next question is just on the status of the samples that we're expecting from Valkor, sort of why have they been delayed? And what's the current expectation? Jason Miles: Yes. I mean we've had some, I guess, some interim samples in the past, right, which have not necessarily been representative of their commercial products. So we were quite specific with them. We didn't want to waste time -- we're testing that if it wasn't essentially a good representation of what they'll be supplying. And in the meantime, they've also been changing some of the technology in terms of what they're installing, both in the oil sands plant and obviously, the downhole drilling program as well to overcome some of the issues they had initially. So that's now been settled. The pilot plant, as I mentioned in the presentation, is now up and running and producing a sample, hopefully, several [panamas] of samples that they're sending across to us. Imminently for testing, and then we obviously think can analyze that and provide a market spec for it as well that we can go out and start selling to end users. So that's all ongoing, but it has been delayed for sure, but not really down to us. David Scott: Okay. So that takes us on to spot. There's a couple of questions here. The first one is just on the Panama power market. Are you aware of the Panama 0 126 power tender where thermoelectric plants running on bunker or diesel that with long-term government contracts must convert to cleaner fuels within 36 months. Is this a target for BioMSAR, BioMSAR Zero with any of our Panama clients? Jason Miles: I mean the answer is yes. We're very much aware of that particular tender. Sparkle made us aware of it. And that's one of the reasons why it was important to get the approval of the Panamanian authorities for both MSAR and bioMSAR to be considered as alternative fuels basically to fuel oil and diesel, which they are. I think initially, the pathway will be still to go the MSAR route, first of all, to reduce the cost of generation there and be competitive, obviously, to LNG, which is the other source other than obviously renewable sources. But ultimately, bioMSAR is certainly seen as a viable means going forward as well compared to LNG and LPG, which are the main alternatives to them. David Scott: Okay. I don't think -- this is probably the last question because I don't think we've got time for many more after this. We were advised that the Panama fuel permits were expected to be received by the end of 2025. What has held them up? Are you working with the government on getting our fuels cleared to be used as cleaner fuels as per the Panama Zero 126 tender? Is this part of the permitting plan now? Jason Miles: Yes. I probably semi answered this in the last answer. But yes, I mean, in terms of the actual approval of the alternative fuels, certainly MSAR and bioMSAR are now considered by the authorities as such. In terms of getting the import permits, we actually need to have now the supply logistics nailed down in terms of which refinery, which terminal we're going to bring in, which partner potentially in Panama might we wish to use. And then we can apply either ourselves or through that particular partner for the import permit, which we've been given the procedure that we need to follow, all of which seems to be fairly straightforward, and meeting the guidelines that we're well used to in Europe and other places. So we're using internationally established guidelines to then get the fuel approved and imported. So we don't see any real holdups now in terms of other than bring the fuel in and make sure there's a commercial contract in place between buyer and seller. David Scott: Okay. Operator: That's great, David. Thank you very much indeed for moderating through the Q&A. Ladies and gentlemen, thank you for your engagement this afternoon. I know investor feedback is particularly important to you. And Peter, I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, I wonder if I may just ask you for a couple of closing comments. Peter Borup: Yes. Thank you so much for listening in. Thank you for your support. Thank you for the many very good questions. I know there are a couple of questions that have come in on the platform live during our presentation. We will address them, as David mentioned earlier, on the platform latest by next week. So once again, thank you very much for listening in. Operator: That's great. Thank you very much indeed. Ladies and gentlemen, we will now redirect you for feedback. On behalf of the management team of Quadrise, we'd like to thank you for attending today's
Operator: Ladies and gentlemen, thank you for joining us, and welcome to Penguin Solutions Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Suzanne Schmidt, Investor Relations. Suzanne, please go ahead. Suzanne Schmidt: Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss Penguin Solutions Second Quarter fiscal 2026 results. On the call today are Kash Shaikh, Chief Executive Officer; and Nate Olmstead, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call on the Investor Relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company. I would also like to remind everyone to read the note on the use of forward-looking statements that is included in the press release and the earnings call presentation. Please note that during this conference call, the company will make projections and forward-looking statements, including, but not limited to, statements about the market demand, technology shifts, industry trends and the company's growth trajectory and financial outlook, business plans and strategy, including investment plans, product development and road map, anticipated sales, orders, revenue and customer growth and diversification and existing and potential strategic agreements and collaborations. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today as well as in the company's most recent annual and quarterly reports. The forward-looking statements are representative only as of the date they are made, and except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the GAAP to non-GAAP measures is included in today's press release and accompanying slide presentation. And with that, let me now turn the call over to Kash Shaikh, CEO. Kash? Kash Shaikh: Good afternoon. Thank you for joining our second quarter FY '26 earnings call. This is my first earnings call as CEO of Penguin Solutions, and I'm excited to step into this role. I want to start by thanking Mark Adams for his leadership and for the strong foundation he built. Since joining in early February, I've spent significant time with customers, partners and our teams around the world. I've witnessed the strength of the company, both in our technology and our customer relationships. What is clear is this. AI is moving from experimentation to production with workloads increasingly shifting towards real-time inference. We are already seeing this translate into customer demand beyond hyperscale across enterprise, neoclouds and sovereign AI markets. We expect this transition to expand our addressable market and drive increased demand for integrated AI infrastructure, where Penguin is already winning. We see this firsthand in the breadth of our deployments from a sovereign AI factory, Haein in South Korea to enterprise voice AI with Deepgram to large-scale research systems with Georgia Tech, along with a growing pipeline across all 3 market segments. What makes this opportunity so significant is that the architecture of AI is also changing. Model training was largely compute bound, inference powering agentic AI is memory bound and latency sensitive. We believe this is driving a rearchitecture of the data center across compute, memory, interconnect and software. We also see AI driving memory demand, not only for the high-bandwidth memory or HBM used with GPUs or other accelerators, but also for general-purpose memory. General purpose compute wraps around every GPU build-out and whether it's reinforcement learning pipelines or inference serving, that workload runs on processors backed by significant memory content across the entire system. So while memory markets are cyclical, we believe AI is adding a more durable layer of demand for memory. As AI factories scale, I expect customers to increasingly prioritize partners that deliver with speed and precision, along with full stack AI factory platform capabilities, including compute, scalable memory systems, cluster management software, end-to-end services and a partner ecosystem to deliver a differentiated solution. Time to deployment is now directly tied to time to first token. Against this backdrop, we are building Penguin into an AI factory platform company. Our AI factory platform is built around 6 core elements. First, Penguin ClusterWare, our AI infrastructure management software. Second, our new Penguin MemoryAI line of systems designed specifically for AI inference workloads. Third, Penguin Advanced Computing Systems optimized for AI workloads. Fourth, Penguin OriginAI factory architectures, our reference designs for AI factories. And fifth and sixth, end-to-end services and our partner ecosystem. Production-grade AI factories require full stack design across compute, memory, storage, networking and software. We partner with leading AI companies, including NVIDIA and SK Telecom and partners like Dell. We also offer complete end-to-end services spanning design, build, deploy and managed services. We are strategically positioned at the intersection of AI infrastructure and memory with a long track record in both. Few, if any, companies combine these capabilities at scale. We believe that together, our AI infrastructure and memory expertise position us to meet the evolving requirements of AI infrastructure as it shifts towards inference workloads. This supports our ability to develop differentiated solution. Given the momentum we are seeing in our AI infrastructure business and the significant market opportunity ahead of us, we are very focused in this area. We plan to invest more in our AI factory platform to accelerate our AI business growth, specifically in product innovation, go-to-market and customer engagement. In March, at NVIDIA GTC Conference, we announced 2 AI inference-centric solutions aligned with this strategy. First, the Penguin MemoryAI server. Building upon our Compute Express Link or CXL-based memory expansion capabilities, we introduced a new line of scalable memory systems called MemoryAI. CXL is a high-speed interconnect that enables scalable, shared memory across GPUs and CPUs. We also announced the immediate availability of our new MemoryAI KV Cache server. Here KV or key value cache stores inference context to accelerate large language model responses. Second, the expansion of our OriginAI Factory Architecture portfolio, which now includes blueprints that address the larger workloads and the low latency demands of AI inference. We also continue to expand capabilities of ClusterWare toward a unified control plane for AI factory infrastructure, integrating the open ecosystem to deliver repeatable production scale deployments. To accelerate the innovation and strengthen our leadership team, we recently appointed Ian Colle as Senior Vice President and Chief Product Officer. Ian brings more than 2 decades of experience building AI infrastructure platforms and scaling high-performance computing, most recently at Amazon Web Services. He was recently named by HPCWire to its People to Watch 2026 list, reflecting his reputation in the industry. Now let me briefly address our second quarter performance. In Q2, we delivered net sales of $343 million. Non-GAAP gross margin was 31.2%. Non-GAAP diluted earnings per share were $0.52. These results reflect strong demand and execution in memory and continued progress in our AI/HPC business. Before turning to the segments, I would like to address our updated outlook. As Nate will describe in further detail, following our solid Q2 net sales and EPS performance, we are raising the midpoint of our full year net sales and EPS outlook. We are raising our outlook for our integrated memory business, fueled by AI-driven demand, strong execution by our team and favorable pricing dynamics. While our second half advanced computing net sales outlook is lower than our prior expectations, we are encouraged by strong year-over-year Q2 bookings growth for non-hyperscaler AI/HPC business, which included 5 new AI/HPC customer wins that brings our first half total this year to 7 new AI HPC logos compared to 3 in the first half of last year. With that context, let me turn a closer look at each of the segments. Starting with advanced computing, net sales for the quarter were $116 million, representing 34% of total company net sales and declined year-over-year. Advanced Computing net sales for the second quarter reflect both the timing of large deployments and our transition away from hyperscaler concentration. They also reflect the previously disclosed wind down of our Penguin Edge business. We believe diversification of [ net sales ] and wind down of Penguin Edge will strengthen the long-term quality of the business. As I mentioned, we are transitioning our AI infrastructure business from hyperscaler concentration toward a more diversified customer base across enterprise, neocloud and sovereign AI. This transition is showing very encouraging progress, but we still have more work to do. Non-hyperscale AI/HPC net sales grew 50% year-over-year for the first half of the year, representing over 40% of first half segment net sales, supported by strong non-hyperscale year-over-year booking growth in the quarter, including 5 new AI/HPC logos across financial services, biomedical research and energy. We expect further diversification in the second half of the fiscal year. Our AI HPC pipeline continues to strengthen with opportunities to acquire additional logos in the second half of the fiscal year across enterprise, neocloud, sovereign AI customers. As previously discussed, these engagements typically progress over many months from prospecting to design to award, followed by contracting and ultimately, system build and deployment. While the sales cycle can be long, often 12 to 18 months and can introduce quarterly net sales variability, it also supports deeper customer relationships, repeat business and a more durable long-term growth. I'm encouraged by the trajectory of the business and the signals we are seeing in the market. Beyond the numbers, we are also seeing increased activity in specific enterprise verticals. For example, we recently announced our collaboration with Deepgram and Dell to support enterprise voice AI deployments. This win highlights the growing demand for low-latency, production scale inference infrastructure in real-time applications. In this engagement, Penguin designed and deployed an optimized inference environment built on Dell PowerEdge servers and NVIDIA RTX Pro 6000 Blackwell GPUs. This solution facilitates Deepgram's speech-to-text, text-to-speech and voice agent functionalities for applications within health care and retail sectors. This case study also demonstrates how design and integration expertise delivers differentiated value. As inference workload scale, we expect these types of deployments to become an increasingly important driver of AI infrastructure demand. Georgia Tech's AI Makerspace developed in partnership with NVIDIA is a strong example. Our relationship with Georgia Tech continues to grow and validates Penguin's ability to help organizations move efficiently from concept to production-grade AI infrastructure. Now turning to Integrated Memory. Net sales for the quarter were $172 million, representing 50% of total company net sales and grew 63% year-over-year. AI-driven demand remains strong across networking, telecommunications and computing market segments. Pricing dynamics were favorable and although supply remained tight, we continue to manage constraints effectively through our supplier relationships and disciplined procurement. Stepping back, our AI/HPC and memory segments taken together enable us to integrate compute and memory architecture in ways that meet the requirements of production AI environments. Memory architecture is becoming increasingly central to AI performance, particularly as inference workloads scale. Our early investments in CXL position us well as customers evaluate more dynamic memory architectures. Furthermore, we are beginning to see this demand translate into customer deployments, including a recent substantial order for CXL cards from a generative AI company building solutions for inference workloads. This reinforces our strategic position at the intersection of memory and AI infrastructure to capitalize on the next phase of AI, focused on inference powering agentic AI workloads. These solutions are sold to enterprise AI infrastructure buyers, the same customers we serve in our AI HPC business. For example, we sold our CXL-powered KV Cache servers to a Tier 1 financial institution for their on-premise AI factory. In parallel, we continue to advance development of our Photonic memory appliance or PMA, formerly referred to as OMA, which is designed to extend memory capacity and bandwidth for large-scale AI environments. We were an early investor in a photonic memory company, Celestial AI, reflecting our long-standing focus in memory architecture innovation and our early conviction in the importance of optical interconnects for next-generation AI systems. Celestial AI was recently acquired by Marvell in a multibillion-dollar deal. Beyond the portion of proceeds we received from the acquisition as an investor, we are positioning ourselves for future growth in this market. As inference workloads expand, technologies like PMA can help address key memory scaling challenges in the next-generation AI systems. Last but not least, LED. Net sales for the quarter were $56 million, representing 16% of total company net sales and were down 7% year-over-year. The business continues to operate with focused leadership and dedicated operational discipline. While market conditions remain mixed, we are maintaining a disciplined approach to investment and capital allocation. We are focused on optimizing portfolio value while concentrating resources on areas where we see the strongest long-term returns. In close, the demand for data center AI infrastructure and memory is expanding rapidly. AI factories are becoming infrastructure that powers artificial intelligence across a range of industries. As AI shifts toward inference and agentic systems and scales across large enterprise, neocloud and sovereign AI environments, we expect demand to accelerate. At the same time, memory is becoming a defining constraint and a defining opportunity. Penguin sits at the intersection of AI infrastructure and memory innovation. And we believe that is a powerful position to be in. Our focus is clear. We are prioritizing 4 areas. First, to invest in product innovation across our AI factory platform, particularly at the intersection of AI infrastructure and memory to drive profitable growth; second, to execute with speed and precision; third, to deepen customer engagement and our ecosystem to support long-term growth; and fourth, to continue diversifying our customer base while building toward more consistent and predictable growth. We believe this focus positions us well to execute in a rapidly evolving market while continuing to build a durable and scalable business. With that, I'll turn it over to Nate. Nate Olmstead: Thanks, Kash. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP in our earnings release tables and in the investor materials available on our website. With that, let me now turn to our second quarter results. In the quarter, total Penguin Solutions net sales were $343 million, down 6% year-over-year. Non-GAAP gross margin came in at 31.2%, which was up 0.4 percentage points versus Q2 last year. Non-GAAP operating margin was 13.2%, down 0.2 percentage points versus last year, and non-GAAP diluted earnings per share were $0.52, flat year-over-year. In the second quarter of fiscal 2026, our overall services net sales totaled $64 million, up 1% versus the prior year. Product net sales were $279 million in the quarter, down 8% versus the prior year. Net sales by business segment were as follows: In Advanced Computing, Q2 net sales were $116 million, which was 34% of total company net sales and down 42% year-over-year. This sales decline reflects both the ongoing wind down of our Penguin Edge business and hyperscale hardware sales in Q2 last year, which did not recur in Q2 this year. Drilling down deeper into our advanced computing results, our non-hyperscale AI/HPC net sales were down 35% year-over-year in the quarter, but up 50% for the first half of the year. Given the project nature of the business, where sales can be lumpy from one quarter to the next, we believe looking at the multi-quarter trend is a helpful way to evaluate the growth in this portion of our business. In addition to solid first half growth in our non-hyperscale AI/HPC business, we continue to make good progress on diversifying our net sales to new customer segments. For the first half of the year, the non-hyperscale AI HPC business represented more than 40% of total advanced computing net sales versus approximately 20% in the first half of last year. We expect to see our mix of net sales from enterprises, neoclouds and sovereign AI customers increase further in the second half of this fiscal year. In Integrated Memory, Q2 net sales were $172 million, which was 50% of total company net sales and up strongly with 63% growth year-over-year. And in optimized LED, Q2 net sales were $56 million, which was 16% of total company net sales and down 7% versus the same quarter last year. Non-GAAP gross margin for Penguin Solutions in the second quarter was 31.2%, up 0.4 percentage points year-over-year and up 1.2 percentage points sequentially with strong margin performance in each business, driven primarily by product mix in advanced computing, favorable pricing in memory and tariff recovery in LED. We currently project lower gross margins in the second half, driven by a higher mix of lower-margin AI hardware and memory sales, rising memory costs in our AI factory solutions and less tariff cost recovery in LED. Non-GAAP operating expenses for the second quarter were $62 million, down 3% year-over-year and relatively flat sequentially. We expect a modest sequential increase in operating expenses in the second half, reflecting normal seasonality and increased investments in R&D, including for our ClusterWare software and MemoryAI solutions. Q2 non-GAAP operating income was $45 million, down 8% year-over-year and up 9% versus last quarter. Operating margins were down 0.2 percentage points versus the prior year, but up 1.1 points sequentially, driven by higher sequential gross margins in both memory and advanced computing. Non-GAAP diluted earnings per share for the second quarter were $0.52, flat versus Q2 last year and up 7% versus the prior quarter. Adjusted EBITDA for the second quarter was $50 million, down 6% year-over-year and up 11% versus the prior quarter. Turning to the balance sheet. For working capital, our net accounts receivable totaled $371 million compared to $330 million a year ago, with the increase driven by higher memory sales volumes and variations in sales linearity across the quarters. Days sales outstanding were healthy at 50 days, consistent with the prior year and down 1 day versus last quarter. Inventory totaled $322 million at the end of the second quarter, up from $200 million a year ago, reflecting increased memory costs, growth in our memory business and strategic purchases to fulfill memory and AI demand in the second half of the year. Days of inventory was 51 days, up from 37 days a year ago and 38 days last quarter, primarily due to our strategic memory purchases and the timing of receipts and shipments. Accounts payable were $401 million at the end of the quarter, up from $238 million a year ago due primarily to higher memory costs, growth in our memory business and the timing of purchases and payments. Days payable outstanding was 63 days compared to 44 days last year and 55 days last quarter. The year-over-year and quarter-over-quarter movements were due to the timing of purchases and payments. Our cash conversion cycle was 38 days, an improvement of 5 days compared to Q2 last year and up 3 days versus last quarter due to the timing of purchases and payments. Consistent with past practice, days sales outstanding, days payables outstanding and inventory days are calculated on a gross sales and a gross cost of goods sold basis, which were $672 million and $578 million, respectively, in the second quarter. As a reminder, the difference between gross and net sales is primarily related to our memory businesses logistics services, which are accounted for on an agent basis, meaning that we only recognize the net profit on logistics services as net sales. Cash, cash equivalents and short-term investments totaled $489 million at the end of the second quarter, down $158 million versus Q2 last year and up $28 million sequentially. The year-over-year fluctuation was primarily due to proceeds from the issuance of preferred shares in Q2 of last year, offset by debt repayments for our term loan in Q4 of last year. Sequentially, the cash increase was due to cash generated from operating activities as well as approximately $32 million received from proceeds from the disposition of our investment in Celestial AI in connection with its sale to Marvell Technology. These sources of cash were partially offset by our share repurchase activity in the quarter. We ended the quarter with $450 million of debt, down $20 million versus last quarter due to the retirement of our 2026 convertible notes. In total, we closed the quarter in a net cash position. And based on our current debt maturity schedule, have no further scheduled debt payments due until 2029. Second quarter cash flows provided by operating activities totaled $55 million compared to $73 million provided by operating activities in the prior year quarter. The decrease in cash flow in the quarter versus last year was due primarily to investments in net working capital to support growth for the second half of this fiscal year. For those of you tracking capital expenditures and depreciation, capital expenditures were $2 million in the second quarter and depreciation was $5 million for the quarter. Wrapping up our cash flow activities, we spent $32 million to repurchase approximately 1.7 million shares in the second quarter under our stock repurchase program. As of February 27, 2026, an aggregate of $64.5 million remained available for the repurchase of our common stock under the current authorization. And now turning to our outlook. Given our solid half 1 performance and an improved half 2 outlook for our Memory business, we are raising our full company net sales and non-GAAP diluted EPS outlook for the year, which at the midpoint now calls for 12% net sales growth and $2.15 of non-GAAP diluted EPS, up from our previous outlook of 6% net sales growth and $2 of non-GAAP diluted EPS. As a reminder, our full year outlook assumes that we will continue to diversify our customer sales mix and does not include any advanced computing AI hardware sales to hyperscale customers. And also consistent with our assumptions from last quarter, our FY '26 financial outlook reflects the ongoing wind down of our high-margin Penguin Edge business. We expect sales from this business to essentially cease by the end of fiscal 2026. The combined effect of these 2 assumptions in our FY '26 outlook remains approximately a 14 percentage point unfavorable year-over-year impact to our total company net sales growth and approximately a 30 percentage point unfavorable impact to Advanced Computing. With that said, our full year net sales outlook reflects the following full year growth ranges by segment. For Advanced Computing, we now expect full year net sales to change between minus 25% and minus 15% year-over-year. While our Advanced Computing net sales outlook for this fiscal year is lower than our previous forecast, we are encouraged by our AI HPC bookings, including several new logos and pipeline growth. As it has previously, this outlook reflects the Penguin Edge and hyperscale hardware sales impacts mentioned earlier. For memory, we now expect net sales to grow between 65% and 75% year-over-year, driven by strong demand and a favorable pricing environment. And for LED, we continue to expect net sales to decline between minus 15% and minus 5% year-over-year. Our non-GAAP gross margin outlook for the full year is now 28%, plus or minus 0.5 percentage points. We adjusted our gross margin outlook down by 1 percentage point to account for a higher mix of memory sales, which have a lower gross margin than our company average and higher memory costs in our AI hardware business. Our full year expectation for total non-GAAP operating expenses remains $250 million, and we have narrowed that range to plus or minus $5 million. For FY '26, we now expect a non-GAAP diluted share count of approximately 53 million shares, down from our prior outlook, primarily reflecting the impact of our recent share repurchases. Our non-GAAP full year diluted earnings per share is now expected to be approximately $2.15, plus or minus $0.15. Our forecasted FY '26 non-GAAP tax rate remains at 22%. And while we expect to use this normalized non-GAAP tax rate throughout FY '26 and beyond, the long-term non-GAAP tax rate may be subject to changes for a variety of reasons, including the rapidly evolving global and U.S. tax environment, significant changes in our geographic earnings mix or changes to our strategy or business operations. Our outlook for fiscal year 2026 is based on the current environment, which contemplates, among other things, the global macroeconomic environment and ongoing supply chain constraints, especially as they relate to our advanced computing and integrated memory businesses. This includes extended lead times for certain components that are incorporated into our overall solutions impacting how quickly we can ramp existing and new customer projects and fulfill customer orders. Our outlook also contemplates the industry-wide higher costs for memory, which may slow customer demand for our products and solutions and may lower our gross margins in our advanced computing and memory businesses. Overall, we believe our focused execution, disciplined expense management and balance sheet strength provide a strong foundation for sustained profitable growth. We expect these qualities to support our continued progress as we pursue opportunities to enhance long-term shareholder value. Please refer to the non-GAAP financial information section and the reconciliation of GAAP to non-GAAP measures tables in our earnings release and the investor materials on our website for further details. With that, operator, we are ready for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Katherine Murphy from Goldman Sachs. Katherine Campagna: I'll ask about the raised Memory segment outlook for 65% to 75% growth. How much of this is from increased favorable pricing versus demand for new product categories? And as a follow-up, how should we think about the impacts to the operating margin outlook for this segment and the investments that need to be made into new technologies like CXL and photonic memory appliances? Nate Olmstead: Kath, it's Nate. So on the memory outlook, listen, we're really pleased with the demand that we're seeing as well as the favorability that we see in the pricing environment. I would say for the increase that we're seeing in the second half, that's majority pricing but demand is also very strong across telco, networking, AI-driven demand is just very strong. In fact, to get to the high end of that outlook really just refers to our ability to secure materials, which is really the only inhibitor we see right now to raising that outlook here in the second half. So we're chasing materials. We're using the balance sheet to strategically purchase ahead where we can, but the demand is very strong in memory. In terms of the investments, we've reflected it in the outlook. So I kept the OpEx for the year at $250 million, plus or minus $5 million. We're balancing the portfolio as we always do, to look for opportunities to accelerate our investments in innovation in AI or in the memory solutions that we've been talking about. But that's all included in the outlook. I expect the operating margins for memory to remain pretty healthy in the back half of the year. I do expect some pressure on gross margins in AI as we see a higher mix of new hardware shipments in the second half as well as factoring in some of the higher memory input costs that we have in that business. Operator: Sorry, your next question comes from the line of Brian Chin. We're experiencing some mild technical difficulties. My apologies. Your next question comes from the line of Brian Chin from Stifel. Brian Chin: Maybe first question, I guess, in Advanced Computing, what changed that caused you to lower the midpoint of your prior guidance to the new range you've communicated? And can you describe how booked you are to that midpoint of that new range? Kash Shaikh: So one of the main factor is the lag between our bookings and the revenue. Our revenue lags about 3 to 6 months from the time of the bookings. And this is primarily driven by the timing of the deployments, in some cases, the material availability and so on and so forth. And given where we are in terms of our fiscal year, we have 5 months remaining. So going forward, most of the bookings that we are expecting may not materialize into the revenue for the second half of this fiscal, but we believe that it will have a positive impact, obviously, going into the first half of the next fiscal. So that's one of the reasons that we are lowering the guidance for advanced computing driven by the deployments. But we are seeing strong momentum in our pipeline as well as bookings. Bookings grew very significantly in Q2 for non-hyperscale AI/HPC business, which is very strategic for us, and we are encouraged to see the progress. We closed 5 new logos with AI/HPC in Q2. And in first half, that takes the total to 7 new logos as compared to 3 new logos last year. So we are very confident in our ability to execute. The main issue at this point is timing. Brian Chin: Okay. Yes. I appreciate that, Kash. And it sounds like you're pretty well booked into the fiscal second half lowered outlook and that some of these new bookings are more kind of beyond a 6-month window. Also thinking about growth in the business, obviously, there's that sort of headwind that you helped to clarify in terms of reduction in hardware revenue to the new hyperscaler, the wind down of Penguin Edge. And so 30 percentage point impact, if we kind of net that against the guidance, maybe 10% growth for this year, net of that in that segment. So moving forward, as you survey the business and you haven't been in the role that long, and you think about what that sort of apples-to-apples growth rate was or is tracking to for this fiscal year, how are you thinking about sort of target growth rates for the advanced computing business moving forward? Kash Shaikh: So overall, let me give you a data point. So the first half of this fiscal, our net sales grew about 50% year-over-year for non-hyperscale AI/HPC business, representing 40% of the overall mix of advanced computing, which is almost 2x of what we closed last fiscal. So the growth is substantial in terms of the bookings as well as the revenue that we see, and we expect that to continue. And as we continue to close the bookings converting the pipeline, we see strong pipeline across all 3 segments that I mentioned between enterprises, on-prem AI deployments, significant activity with sovereign AI customers as well as neocloud customers. Operator: Your next question comes from the line of Matthew Calitri from Needham & Company. Matthew Calitri: Matt Calitri here from Needham. Do the new memory launches mark a shift in strategy on that front? Just curious because in the past, the company has talked kind of more about the niche parts of the integrated memory business and noted it's early on things like the CXL front. But now it sounds like memory is expected to be a larger driver as part of this AI factory platform. So just wondering if anything has changed there. And what gives you confidence there's durable demand here? Kash Shaikh: Yes. So it is a part of our strategy. The MemoryAI appliances that we launched about a month ago starting with GTC is a part of us investing more in our AI factory platform strategy. So there are 6 elements to this strategy and MemoryAI is one of the strategic elements where it is very timely if you look at how AI is transitioning from model training to inference. And in the workloads where you are focused on inference, memory becomes an increased requirement because of lower latency as well as larger context size for inference, powering the agentic AI. So this is very strategic for our business. In fact, we are leading the market in this area, taking advantage of our unique position at the intersection of memory and AI infrastructure. and combining the deep understanding and architecture, we introduced this MemoryAI KV cache server as one of the products in the line of MemoryAI. We are working on other products, and we will continue to invest and in fact, invest more in this area to take advantage of the market opportunity because the timing is perfect and our leadership in the MemoryAI line of products. To give you a proof point, the, one of the new logos we acquired Tier 1 financial institution. Not only we are deploying the AI infrastructure, AI factory deployment for them, they also purchased our CXL-based KV cache server, which is a proof point of as customers are transitioning from training and bringing AI on-premise in their factories, deploying on-premise, focusing on inference and powering agentic AI, it is very strategic for us and the timing is just right. So we expect to see this demand, and we plan to continue to invest in this area. Matthew Calitri: Awesome. That's great to hear. And then, Nate, with a new CEO in the seat and some moving pieces around sales cycles and supply chain, did you change the guidance philosophy at all or embed any additional conservatism? Any color on the puts and takes there would be helpful. Nate Olmstead: Yes. Matt, no, no change in the philosophy. We -- Kash and I are very quickly aligned, I think, on how we think about tracking the business and looking at things. And in fact, I think with our new CRO, who came in a couple of quarters ago, he's done a nice job of adding some more rigor to the planning process in our AI business and just improving the visibility there a little bit. But it's a challenging environment from a supply chain standpoint, and we're, of course, got a lot of experience managing supply chain in our memory business. And I think that that's an advantage for us in an environment like this. Operator: Your next question comes from the line of Samik Chatterjee from JPMorgan. Manmohanpreet Singh: This is MP on behalf of Samik Chatterjee. So my first question is I just wanted to double-click on your advanced computing guidance. You mentioned that a lag of 3 to 6 months for the revenue, which you will book in your second half. But was there a change observed for the bookings which you did in first quarter or any change relative to what were you expecting to do in 2Q? And I have a follow-up as well. Nate Olmstead: Yes. MP, I think bookings were strong in Q2, really good growth sequentially and year-over-year. I do think that the deployment cycle has lengthened a little bit with some of the supply constraints, in particular, on memory, things have gotten a little bit longer. But we're really pleased with the 5 new logos. And I think demand is good. We're seeing good strength in the pipeline, and it's also diversifying nicely across the non-hyperscale segments such as enterprise and neocloud and sovereign. So I think we feel really good about the demand. I think this is just an issue of a little bit of timing as we can convert bookings into revenue. Manmohanpreet Singh: Okay. And my second question would be also on advanced computing and your AI factory-related business. Like does NVIDIA coming up with their own reference designs for factory-level solutions? Like how does that play relative to you? Like is that a tailwind for you? Or is that a headwind for you? Like can you please help us understand...? Kash Shaikh: Yes, we believe this is an advantage for us. So we work very, very closely with NVIDIA and some of the wins that I mentioned, for example, the Tier 1 financial institution recently along with our MemoryAI product in this transaction. NVIDIA worked very closely with us, and we are working with NVIDIA leveraging their reference design, combining that with our AI factory platform and complementing NVIDIA's NVI as an example, to provide full stack to our customers. So their blueprints are more complementary to our AI factory platform and the components that make up for it. So we are actually quite excited about those blueprints and working very closely with NVIDIA to capture the opportunities, especially as NVIDIA is increasingly focused on enterprise, it aligns with our strategy and go-to-market. Operator: Your next question comes from the line of Ananda Baruah from Loop Capital. Ananda Baruah: A couple, if I could. Kash, and maybe Nate as well, earlier remarks were that you're seeing increased momentum across neocloud, sovereign and enterprise. And you mentioned 1 of the 2 of the new wins. Do you have -- and I think, Kash, you had mentioned you've made some specific or at least general inferencing remarks, including around agentic. Do you have any specific context you can give us around what your customers are telling you their thrust in inferencing is right now and maybe the degree to which agentic is showing up there. Like we just want to get a sense of what the customer activity tone is like behaviorally, say, over the last 90 to 180 days. Do you have anything there you can share with us to make it a little bit more experiential for us? And then I have a quick follow-up too. Kash Shaikh: Sure. we believe we are early in the adoption of inference with these customers, but it is increasingly deployed as in customers as they move towards agentic, inference provides the opportunity for powering the agentic. And when you think about inference, I'll give you an example of why the architecture is changing and why memory is becoming increasingly critical in inference as compared to the model training. So for example, let's say, if you are writing a book and if you have to write a new sentence without having the memory as a supporting component for you, you will have to reread the entire book before writing the next sentence. So in the inference, you're doing an inference on a lot of data you already have. And if you have a component where the book you have written so far is stored, so before writing the new sentence, you don't have to reread the book. That's kind of how it is changing for the enterprises and other segments. And we see customers already deploying it and the architecture is changing, which is why not only we have the opportunity and advantage to provide them our AI infrastructure as well as the services, increasingly, we are seeing the demand for our MemoryAI portfolio, where they are deploying AI infrastructure and increasingly inference, they need products like that to be able to provide that memory component for the inference so that the responses of LLMs can be much more faster than they would be otherwise. Ananda Baruah: I got it. That's helpful. And just one last -- one quick follow-up, I'm mindful of the time here in case there's anybody behind me. The CXL product, it sounds like you -- to the earlier question, it sounds like you guys are a little bit more enthusiastic about the CXL sleeve today than you were maybe 90 days ago, you have the new products out at GTC. Is that accurate statement? Are you expecting maybe it's because of these new products, a little bit more -- and certainly some of the NVIDIA announcements at CES as well. But are you expecting a little bit more revenue a little bit sooner than maybe you were CXL-wise 90 days ago? And then a quick second part to that. Do you need photonics to work before you really get CXL amplification? Like do you need CPO or photonics to work before you can really amplify CXL and scale out -- or scale up? That's it for me. Kash Shaikh: Yes. So let me address your CXL question first. I think CXL adoption is timely given the transition to inference because, as I mentioned, with inference, you need increased memory for faster LLM responses. And what CXL provides compute Express Link is you can share the memory between for GPUs and CPUs. So what it allows is new memory pooling, which is an advantage in inference workloads. So while CXL was obviously available for the last, I'd say, few quarters, it is driving that -- that inference adoption is driving the adoption for CXL and this transaction that I mentioned where we received an order, it's actually an enterprise generative AI company working on inference workloads. So you can imagine, CXL cards make sense for them because those workloads need increased memory and the memory pooling capabilities provided by CXL between GPUs and CPUs are an advantage for those kind of customers. And then in terms of photonic memory appliance that we are working on in our partnership with Celestial AI, which is now obviously Marvell, that provides increased capability because obviously, when you have photonic connectivity, then you have increased capacity to share the memory. So it takes it to the next level. However, CXL in itself is an advantage. We can take it to the next level with the photonic appliance. There is another element which is KV Cache that I mentioned, MemoryAI, KV Cache server, which is essentially providing much more responsiveness for larger context workloads, again, used in inference. So various requirements, you can think of it as inference has various requirements related to memory and the type of workloads it has and some of it is latency. So these components between CXL or the CXL-based KV Cache which provides increased responses and larger memory -- largest context sizes and then taking it to the next level photonic memory make up various use cases for inference. So inference gets mainstream, we will have an advantage of this portfolio helping with various use cases of inference. Operator: Your next question comes from the line of Kevin Cassidy from Rosenblatt. Kevin Cassidy: And just the gross margin for the memory, your gross margin was up in the quarter and memory revenue was up strong. And I just want to understand what the dynamics were there. Nate Olmstead: Yes, sure, Kevin. We saw a little favorability in memory margins. Some of that is mix, a little bit stronger demand in flash actually, which is a little bit higher margin product for us within the portfolio. And then also some of the pricing increases, we were able to capture a little bit of margin upside on that just based on the timing of our inventory purchases relative to the timing of shipments and sales to customers. Kevin Cassidy: Okay. So you kind of -- as you look out to the second half of the year, you see that catching up to the price increases compared to... Nate Olmstead: Yes. So as the price increases slow, right, if that's an assumption that you use that price increases are going to slow, then we would see -- we would expect to see less margin favorability from that because it'd be less of a timing difference between -- or less of a price variation between the timing between purchasing inventory and selling. But we have been using the balance sheet to try to secure inventory where we can. It's a tight market. So it's not unlimited supply. But where we can, we're using the balance sheet to try to gain a little bit of an advantage. Kevin Cassidy: Okay. And maybe just as we're talking about memory, as you get to these CXL systems, would you expect that's going to be higher margin than the module business? Nate Olmstead: Yes, we do. It's really a solution. It's got software aspects to it, some good differentiation on the hardware as well. So I see that as a nice margin opportunity for us down the road. Operator: At this time, there are no further questions. I will now hand the call over to Kash Shaikh, CEO, for closing remarks. Kash Shaikh: Thank you, operator. We see AI shifting towards inference with demand expanding beyond hyperscaler to enterprise, neocloud and sovereign AI customers. We are still in early shift in this transition, but the combination of our customer demand, product innovation and booking momentum gives us the confidence in the path ahead. We believe we are well positioned at the intersection of AI compute infrastructure and memory, and we are making good progress diversifying our customer base. My focus is on strong execution across product innovation, customer engagement and diversification, disciplined capital allocation and investment in our AI/HPC business to support the long-term growth. We look forward to updating you on our progress. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. I am [ Gaily ], your Chorus Call operator. Welcome, and thank you for joining the Bally's Intralot conference call and live webcast to present and discuss the Bally's Intralot trading update. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Robeson Reeves, CEO of Bally's Intralot. Mr. Reeves, you may now proceed. Robeson Reeves: Good morning, everyone, and thank you for joining. As a standard reminder, this call may contain forward-looking statements. Please refer to our 17th March full year results announcement for the full disclaimer detailing FY 2025 [Technical Difficulty]. Operator: Mr. Reeves, if I apologize, this is the operator. Can you hear me. Mr. Reeves, I apologize. This is the operator. Can you hear me? Robeson Reeves: Yes. Operator: I'm sorry. Your line is very bad. I cannot hear -- we cannot you very well. Robeson Reeves: Okay. I'll try again. Apologies. Operator: No problem. Robeson Reeves: Good morning, everyone, and thank you for joining. As a standard reminder, this call may contain forward-looking statements. Please refer to our 17th March full year results announcement for the full disclaimer and detailed FY 2025 financials. Today, I want to do 3 things. First, briefly recap the key numbers we published on the 17th of March '26, so we're all working from the same base. Second, reaffirm our 2026 adjusted EBITDA guidance, and I want to be clear that reaffirmation is exactly what it is. And third, give you the Q1 2026 trading data, which I'm providing because it directly supports the confidence behind that reaffirmation. Let me get straight into it. On the 17th of March, we published our full year 2025 results. I'm treating that filing as read and want to reconfirm the headline numbers disclosed previously remain unchanged. A few points worth reiterating. The 39.7% adjusted EBITDA margin reflects the structural quality of this business. A U.K. operator running at that margin has a different risk profile to any operator running at 20% to 25%. That matters particularly now as we enter the period of U.K. gaming duty change. EUR 172.7 million of levered free cash flow gives us clear capacity to service debt, return capital and pursue M&A simultaneously if the right opportunity arises. The EUR 50 million of capital returns represents less than 30% of annual free cash flow. And we continue with our plan on deleveraging the balance sheet towards our 2.5x target. That is the base. Now let me tell you where we stand on '26. Our 2026 adjusted EBITDA guidance of approximately EUR 422 million is reaffirmed. From today, the 1st of April, U.K. remote gaming duty moves from 21% to 40% of gross gaming revenue. We have been preparing for this since Q4 last year. So we have a mitigation bridge. If I go to the start point, that's approximately EUR 431 million. That's our 2025 pro forma adjusted EBITDA. So we get this gross tax impact of EUR 95 million, the direct cost of the duty increase on our U.K. gross gaming revenue. With our first mitigation, that's our generosity reductions and marketing optimization, we add EUR 25 million. That's already in motion, phased in Q1 and in the run rate now. Our second mitigation are the cost savings, headcount and operating expenditure adding EUR 10 million. That's been actioned in Q1. Mitigation 3, that's the transaction synergies, adding EUR 15 million, which tracks to be in line with the commitment we made at the time of acquisition. The final mitigation is just our organic growth across all markets, including our Lottery division with 0 U.K. gaming duty exposure, adding EUR 34 million. The net result of that is approximately EUR 422 million. That's a 2% impact on the 2025 pro forma. That is what I told you this cost would be, and that's where we remain. On leverage, we're at 3.46x. We are entering this tax change with approximately EUR 173 million of levered free cash flow. The mitigations are operational levers within our control. And as the Q1 data I'm about to give you will confirm, we are entering this change with stronger underlying trading momentum than at any recent point in our history. On margin, our B2C adjusted EBITDA margin was approximately 40% in Q4 2025. Most comparable operators are running below 25%. When Gaming Duty nearly doubles on gross gaming revenue, not profit, a 20% to 25% margin compresses to near 0. A 40% margin does not. That asymmetry is why our guidance is reaffirmed with confidence. Now on to trading. The reason I'm giving you Q1 data today is straightforward. Q1 trading is strong, and I want you to have that as context when evaluating our guidance reaffirmation. This is not a separate story. It is the evidence base. Please note that these numbers are unaudited and could change slightly as we close our Q1 accounts. So now I want to touch on sequential quarter-to-quarter performance. So Q4 to Q1. Q4 is always the biggest quarter, our biggest quarter. It's always that every time. October, November, December has the autumn sporting calendar, the Christmas build, peak promotional intensity across the entire market. So in Q4 '25, U.K. net gaming revenue was GBP 148.8 million. Q1 '26 was approximately GBP 147.9 million. That's essentially flat quarter-on-quarter against Q4, right? Q4 is always the biggest. So flat is exceptional performance. So that is the first thing to hold. Q1 2026, when we look at that for the quarter in full, U.K. B2C NGR for the quarter, as I said, GBP 147.9 million, up approximately 10.5% year-on-year. Every single month of Q1 delivered year-on-year growth. B2B performed in line with our expectations across the quarter. The B2B division is a core part of the business, and it's stable with a strong contracted revenue base, which provides additional resilience to the group during this tax transition period. Touching on some other customer metrics in Q1. Active players were flat quarter-on-quarter, so against a really strong Q4 base. This reflects sustained momentum in both acquisition and retention as well as efficient welcome offers. First-time depositors were up 10.8% quarter-on-quarter and 59.4% year-over-year. The customer pipeline is expanding into the tax change, not contracting. B2B is stable. It's operating within our expected parameters, and there's no material surprises. Noncore international markets are also stable. There are modest FX translation headwinds in certain markets and some market-specific dynamics we flagged at the FY '25 results. That picture has not materially changed. The group margin is carried by UK iGaming and our Lottery division. Both of those are performing. Noncore stability means they are not a drag. That's the message. This is the trading base on which we reaffirm our EUR 422 million of adjusted EBITDA guidance for 2026. Now on to capital allocation. So I'll start with buybacks. Approximately EUR 20 million has been executed since the EGM authorization. I believe our shares represent outstanding value. I intend to continue utilizing related TRS products of international banks that do not immediately impact our cash on balance sheet and give flexibility to execute buybacks when we determine that timing is right. On to dividends. The Board is recommending approximately EUR 30 million to the Annual General Meeting, leaving EUR 173 million of levered free cash flow, EUR 50 million returned, well within our capacity while deleveraging. On leverage, net leverage at year-end was 3.46x pro forma. The medium target remains at 2.5x, and we have a clear line of sight. On M&A, the tax environment is creating very motivated sellers, and we have the platform, the margin headroom and the management team to act on the right opportunities. So we are active. My closing remarks, I'll just give you a nice summary. FY 2025 published on the 17th of March, pro forma revenue of EUR 1.0858 billion, adjusted EBITDA EUR 430.8 million, margin of 39.7%, leverage 3.46x and free cash flow, EUR 172.7 million. 2026 adjusted EBITDA guidance of approximately EUR 422 million is reaffirmed and our mitigation program is in execution with all 4 levers active. Q1 U.K. B2C NGR of approximately GBP 147.9 million, flat on the seasonal peak of Q4, up approximately 10.5% year-on-year. Active players flat Q-on-Q, but up 8.7% year-on-year. First-time depositors up 10.8% quarter-on-quarter and 59.4% up year-on-year. The customer pipeline is expanding into the tax change. B2B is performing in line with expectations and noncore international markets are stable. EUR 20 million of buybacks have been executed and a EUR 30 million dividend recommended. Deleveraging is on track to 2.5x. I said this before that the strong don't only survive, but they do get stronger, and I believe that we are getting stronger. We'll now take your questions. Operator: [Operator Instructions] The first question is from the line of Chinchilla Ricardo with Deutsche Bank. Luis Chinchilla: I wanted to start on the M&A front. As you mentioned that there is opportunities and that the press has recently mentioned that you are active. While respecting the company's confidentiality regarding specific targets, I would appreciate an assessment of the company's M&A appetite. This assessment could encompass suitable target profiles. Are you looking at B2C operators, technology stacks and a specific company within a market? And also, can you please also provide us with an evaluation of the maximum leverage that the company can sustain or that you will be willing to elevate just to move fast in an environment and consume something strategic for the business? Chrysostomos Sfatos: Robeson, shall I take this one? Robeson Reeves: Go for it, Chrys. Go for it. Chrysostomos Sfatos: Yes. Thank you for your question. We have said many times that we are on the lookout for any opportunity that will contribute towards either organic or inorganic growth. We're clearly on a growth path from this point on. So inorganic growth would cover -- our appetite for M&A is there. But on condition that we will be able to fulfill our financial policy goals as stated, which includes, first and foremost, our path to delever and the distribution to shareholders. So both goals, I think, on distributions, we've already covered enough on this call and through our announcement. On the path to delever, it remains our goal. We have disclosed what is the pro forma free cash flow generation. And with that, as you probably know, we have an amortization schedule with regard to our bank loans in our capital structure. And so we intend to make significant repayments and reduce the gross debt in the next 2, 3 years. So we are committed to deleverage. We will do whatever M&A is necessary by adding EBITDA by considering anything that's meaningful in terms of very, very substantial synergies that we feel comfortable we can deliver or cost reductions on the target. And at the moment, this is our message to the market. Luis Chinchilla: Got it. If I may do a follow-up. The company recently opened that casino in Newcastle and you had mentioned in the past that they wanted to expand into sports betting. Can you provide your thoughts on additional casino footprint in the U.K. And if you rather acquire a sports business or build it yourself from the ground up? Robeson Reeves: I'll take this one. For us, the retail casino in Newcastle is much more of an R&D piece. It's very, very small part of the actual footprint. There's no intention to expand into retail within Bally's Intralot. The retail presence we'll have will remain in the lotteries. With respect to Sports Betting product, we currently have an agreement with Kambi, who provides really a back-end sports betting solution. We're very happy with them. If we were to look at any opportunities out there, as we said, the U.K. market has become more attractive more because of the trauma, which has been created by this tax change. We would only consider things if we could see substantial cost-cutting opportunities as well as synergies. I would not underestimate how strong our margin profile is versus peers in this space. As long as we can bring things into our platform, and I mean our platform, how we manage things, how we operate things that gives us this margin improvement over others, then it can become very attractive. But we'll be very diligent and ensure that we protect our capital structure in whatever we do. Luis Chinchilla: If I could squeeze one last one. In the past, the company mentioned articulated growth opportunities contingent upon the integration of the [ Merck ] technology stacks. I was hoping if you could give us an update on these potential opportunities that at the time you mentioned that you would disclose once the merger was completed and you get permission. So any update would be very helpful? Robeson Reeves: So as we discussed previously, Ricardo, our intention is to launch into 2 B2C markets per year, utilizing the Intralot footprint and their relationships. These things are progressing. We will disclose those closer to the time. If we end up looking at other opportunities inorganically, that may change that plan if it accelerates expansion, but we're still on track for 2 new B2C markets being launched this year. Operator: The next question is from the line of Narula Raman with Principal Asset Management. Raman Narula: Just a couple from me, please. The first, just curious if you can disclose what percentage of your full year '25 U.K. revenue was Sports Betting and maybe the same for Q1 as well? And just if you could give a sense of how that's been growing, that would be appreciated. Robeson Reeves: Cool. Katherine, do you want to take this? Katherine Gomaniouk: Sure, Robeson. Thank you. Sports Betting still constitutes a fairly small percentage of our revenue, but we have seen healthy growth in that space as is demonstrated by the growth in our FTD numbers, which were in part driven by some sports events that happened in Q1. So we continue using sports as a funnel to acquire gaming customers, and that strategy seems to have been working as would have been demonstrated in our Q1 numbers. Chrysostomos Sfatos: And just to layer on top of that -- so thank you, Katherine. Just to layer on top of that, when we look at Sports Betting and iGaming, what you would have seen from many of our peers' recent releases around Q1 performance that there was a decline in Sports Betting and there was an increase in iGaming. Now if you've got the balance right between your product sets, so people might win on sports and they reinvest into iGaming and so on, then you would -- the net position would always be better, whereas actually, a lot of the peers are showing down by 5% or so in Sports Betting and up in iGaming by 5%. So they're not even really seeing any growth. What we've been very careful to do with our Sports Betting offering is ensure that it fits with all of the regulations which sit in the U.K. market, such as stake limits on slot machines. So you need to balance exactly the scale of bets that you would take alongside people's ability to reinvest. Sports betting just, call it, [ GBP 1 million ] or so per month is what we're seeing in the U.K. So small, but that's where a huge opportunity lies. Raman Narula: Understood. That's very helpful. And I guess as a segue into the next question, obviously, this year, huge sports calendar along with the World Cup. Just curious, maybe in a similarly stacked sports year like '24 with the Euros, I mean, what kind of effect did you see on your sort of core iGaming business during those months, those summer months when you had those big football tournaments ongoing? Robeson Reeves: We didn't see any -- if you're asking, is there any negative impact by having -- you have to understand, you've got the euros, you got the World Cup. How many of those matches are competitive and how many fixtures do they have in terms of volume. They are good acquisition drivers, but they're not necessarily big revenue drivers, right? You're going to have fixtures between Curacao and other matches, which are heavily one-sided. When it comes to soccer, you prefer fixtures, which are a bit more balanced or you have sufficient volume. The World Cup actually is, call it, a low period or the Euros is a low period in fixture volumes for actual revenues, but it does bring new customers to the market. So for us, this would aid the funnel for acquisition, and it's almost like a perfect storm in lots of ways because there's not enough matches for people to be betting on to constantly be active. If you think about normal Saturday, there's lots of fixtures for revenue to flow there. But actually, this will get the right prestige and coverage to acquire and then there's no matches, then people can play iGaming products and so on. Raman Narula: Makes sense. And then lastly, I just wanted to touch on dividend policy. Obviously, in the preliminary results, you stated that it's the intention to recommend a pre-dividend sort of along with the publication of H1 results. If you could just give us a sense of like the potential quantum? Is that going to be a percentage of the pro forma adjusted EBITDA? Or is that still a percentage of adjusted net income? Just if you could give -- remind us of your dividend policy, that would be really helpful. Robeson Reeves: Chrys, do you want to take it? Chrysostomos Sfatos: Sure. At this point, we cannot give you an estimate about the pre-dividend. I think the combination of buybacks and the dividend that we will distribute the EUR 30 million, which is what we already have available for previously undistributed profits in the past, which we could not distribute at the time due to losses that we're now covering. That's the only specific thing that we would like to share at the moment. We don't want to preempt what the results are going to be. We will evaluate the entire situation, our cash flows at the time, and we will make the decision once the results are available. Raman Narula: Understood. And could you just clarify the medium-term target of 2.5x. Do you expect to sort of be there around mid of '27? Or what are you targeting? Chrysostomos Sfatos: That will be in line with our amortization schedules. Yes. By the time we get basically to 2029 when we have the retail bond maturing, the EUR 130 million retail bond, the unsecured portion of our debt maturing in February 2029, we intend to repay that. And we intend to repay through amortizations, as I said, and eventually on maturity at the end of 2029, the Greek bank loan. Well, these 2 tranches together is EUR 330 million of gross debt, which we intend to reduce in the coming period. Of course, it will all depend on the cash generation, on our CapEx requirements and all of this. So in this period, we think that it's achievable if we manage to deliver our growth targets. What we said is that basically the imposition of a new tax regime in the U.K. will have, as a result, the delay of our plan by 1 year because we will be able to capture market share from a market which we believe is going to change fundamentally in the next year. Operator: The next question is from the line of [indiscernible] with Credit Suisse. Unknown Analyst: As part of the bond offering last year, the company included the helpful KPIs. You mentioned the impressive growth, 8.7% increase year-over-year in the first quarter. Is that going to be included in the annual report that -- in upcoming presentations? Chrysostomos Sfatos: I think you're referring to the U.K. market or to the combined growth. Unknown Analyst: Yes. Maybe the active online players, revenue per active players, that type of disclosure was helpful and it was including the bond offering, and you mentioned it again today. I guess it was more of a request to include it as part of your presentations. Robeson Reeves: Yes. I think going forward, we'll share the most relevant KPIs, which can indicate the future pathway as best as we can guide. But that's why we showed new player volumes. New player volumes will build on your base and actually drive future revenues. So we're trying to be as -- we believe that transparency is always a good thing. So we'll be as transparent as is sensible without giving away too much competitor information, let's say. So we -- yes, we'll try and be as transparent as possible in every quarter going forward. Unknown Analyst: And what is driving the impressive growth in the first quarter? Robeson Reeves: Well, with respect to the revenues, as we said, we've made some slight adjustments to our products, so some of the configurations with regards to ensuring that players basically lose at a very sustainable rate. So our objective has actually been to manage player spend almost down slightly on a visit frequency, which means that people retain better longer term. But we've seen really good numbers coming from, call it, marketing performance from acquisition spend. As I've said to all of you, the day following the tax announcement in the U.K., we saw improved performance from the same marketing spend amounts because there was reduced competition. For me, that's a pretty amazing sign that the statement of tax coming caused a reaction. So from this day, we'll see what performance looks like given now this is the first time that people with suppressed margins will have to start footing a bill with the increased gaming taxes. I'm very hopeful that if I think about my history in this sector, when I started working here, there was no tax on revenues, no gaming duty on revenues. Then it went to 15% tax of net gaming revenue, then flipped across on to gross gaming revenue, then became 21% and this is the next tax change. In every single period of this, it's led to consolidation. And actually, through this cycle, our EBITDA margin has grown because we're very, very good at, call it, flying through a storm and operators who don't see there's a storm there, even if it might be a clear blue sky, they just don't see opportunities because you can continuously improve and continuously improve your margins and improve your growth. So I'm quite excited about this next period. This is opportunity. Operator: The next question is from the line of Gondhale Pravin with Barclays. Pravin Gondhale: Firstly, on U.K. sort of growth outlook for 2025 and 2026, what's your assessment on that given the tax changes? And then within that, are you seeing any changes in channelization of online gaming? I realize it's just day 1 of the new taxes, but what's your outlook for that as well? Robeson Reeves: Yes. Okay. So you're talking about the overall U.K. market, right? Just for clarity. Pravin Gondhale: Yes, please. Yes, yes. Robeson Reeves: Yes. So the U.K. market, as I was indicating when I spoke about some of the peers who haven't been able to see reinvestment of winnings from sports betting go back into casino, there will be a degree of channelization coming from that. So people -- because the reason why people can't reinvest is due to limits on what they're able to spend. This can do multiple things. People could move to the black market slightly. But bear in mind, the U.K. Gambling Commission are investing substantially in trying to police this. I don't see the market growing by that much, if growing at all this year because of these changes to stake limits. Having said that, I believe it's a significant period of consolidation. So I'd expect all the big operators to gain share in this. There are many operators out there who are willing to hand over databases for royalty fees and so on. They're willing to exit. And that will just mean that we can soak up that revenue. So I don't see the market really growing. It will be minimal, a couple of, like, call it, low single digit if growth, right? But there will be consolidation into the big guys. Operator: [Operator Instructions] The next question is from the line of Katsios Nestoras with Optima Bank. Nestor Katsios: Just a question from my side. Can you please repeat your free cash flow guidance because I missed that part. Chrysostomos Sfatos: We have not given the guidance for 2026. We have published the pro forma free cash flow for the combined entity at EUR 171 million -- EUR 172.7 million for last year. So that was on the background of an EBITDA of EUR 230.8 million -- EUR 430.8 million, sorry. So based on the guidance on EBITDA -- and it will depend a little bit on our CapEx requirements this year. Last year, the CapEx we published was around EUR 60 million. This year, it will be a bit higher because of certain renewals in the United States. And we are still waiting to hear from our bid for the Victoria Monitoring License in Australia. So we can't reveal the sensitivities on our CapEx. So it will depend on that alone. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Robeson Reeves: Thank you. Thanks, everyone, for joining us today. I'm sorry that we're interrupting your Easter break. I hope you all get a bit of time off. But we wanted to give you the most up-to-date summary of Q1, and I look forward to speaking to you again soon. Feel free to reach out to the company if you've got any further questions. So thank you for joining us. Goodbye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
Operator: Good morning, everyone, and welcome to today's PVH Fourth Quarter 2025 and Full Year Earnings Conference Call. [Operator Instructions] Please note this call may be recorded [Operator Instructions] -- it is now my pleasure to turn today's program over to Sheryl Freeman, Senior Vice President of Investor Relations. Sheryl Freeman: Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. Fourth Quarter and Full Year 2025 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer; and Melissa Stone, Interim Chief Financial Officer and Executive Vice President, Global Financial Planning and Analysis. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH's written permission. Your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH's view as of March 31, 2026, of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company's SEC filings and the safe harbor statement included in the press release that is the subject of this call. These include PVH's right to change its strategies, objectives, expectations and intentions and the company's ability to realize anticipated benefits and savings from divestitures, restructurings and similar plans such as the actions undertaken to focus principally on its Calvin Klein and Tommy Hilfiger businesses and its initiatives to drive more efficient and cost-effective ways of working across the organization. PVH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimates regarding revenue or earnings. Generally, the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP amounts are included in PVH's fourth quarter 2025 earnings release, which can be found on www.pvh.com and in the company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I'm pleased to turn the conference over to Stefan Larsson. Stefan Larsson: Thank you, Sheryl. Good morning, everyone, and thank you for joining our call today. I want to start by thanking our teams around the world for delivering a strong fourth quarter and finish to the year on our multiyear journey to build Calvin Klein and Tommy Hilfiger to their full potential and make PVH one of the highest performing brand groups in our sector. While there is, of course, more work to do, we have made important progress on this journey, and I will discuss this more in a moment. In the fourth quarter, we exceeded our guidance across revenue, operating profit and EPS. Total revenue for the company was up mid-single digits on a reported basis, above our guidance and flat in constant currency. Importantly, we drove better-than-expected gross margin performance in the quarter with sequential improvement across all regions. We continue to manage our operating expenses thoughtfully while strategically increasing marketing spend behind our 2 iconic brands, and we drove a 10% non-GAAP operating margin, which would have been 11.7% without the gross tariff impact. For the full year, we delivered on our financial guidance across both the top and bottom line. And as planned, we returned to revenue growth for the year. Despite the choppy consumer and macroeconomic environment, we delivered a non-GAAP operating margin of 8.8% for the full year, above our guidance, including the impact of tariffs. When excluding the impact of gross tariffs, operating margin was 9.6% -- we continue to simplify our operating model and drive more efficient ways of working, generating over 200 basis points of annualized cost savings. We further strengthened our supply chain, ending the year with a good inventory position, up 5% versus last year or up 1% when adjusted for tariffs, positioning us well for spring 2026. Finally, we returned over $560 million of capital to shareholders through our share repurchases, representing 15% of our shares outstanding. Looking ahead, while the macroeconomic environment remains uncertain, we have started 2026 with positive momentum and higher spring season sell-through trends across both brands and all 3 regions. While wholesalers remain cautious and the consumer macro environment continues to be uneven, our fall 2026 order books for Europe are positive. As we speak, we're in the middle of some of the most important weeks of the quarter with Easter this coming weekend, which falls 3 weeks earlier than last year. For Calvin Klein, we have strengthened our global product capabilities and have addressed the transitory operational challenges we faced in 2025. Our deliveries are now on time and our growing margins are back on plan. This year, we will strategically increase marketing spend and further invest in the shopping experience across digital, shop-in-shops and store concepts. For fiscal 2026, we expect to grow total revenue slightly on a reported basis and be flat to up slightly in constant currency with planned growth in direct-to-consumer across both brands and all 3 regions. We expect our non-GAAP operating margins to hold steady at 8.8% or 11%, excluding the gross impact from tariffs. Additionally, we intend to continue to return capital to shareholders with a target of at least $300 million this year. Now let me share a brief update on what drove our performance for the fourth quarter and full year 2025. Starting with Calvin Klein. In 2025, we continue to drive strong brand relevance for Calvin in both product and marketing. We sharpened our focus on our core categories, strategically infusing innovation and newness in the worlds of underwear and denim supported by full funnel 360 marketing. We reinvented our biggest underwear franchises with the launch of the icon Cotton stretch amplified with Bad Bunny and Rosalia, which grew 20% in men's and 13% in women's, driving our broader underwear business up low single digits versus last year. We also grew our fashion denim category, which represents over 50% of our denim business with high single digits. In addition, Calvin returned to the runway, creating a strong halo for the brand. And during the year, we opened new Calvin Klein flagship stores in both Tokyo and New York City. In the fourth quarter, we leveraged key consumer moments and delivered strong engagement and results, generating higher full price sales versus last year and sequential improvements in gross margin. Turning to Tommy Hilfiger. Throughout the year, we took Tommy's iconic DNA of classic American cool and cut through in major cultural moments from the Met Gala to F1 the movie. We also launched our new partnership with Cadillac Formula 1 in Q4 with a positive consumer response. In addition, we announced one of the most significant new global partnerships for Tommy, our first football partnership with Liverpool Football Club. This news was the #1 most engaged post ever to go out on Tommy's social channels with strong resonance across Europe and driving immediate spikes in e-commerce traffic. In the marketplace, we further improved our e-commerce experience, opened new stores globally and in wholesale, we unveiled our new shop-in-shop concept at the iconic Gallery Lafayette in Paris. And finally, in the fourth quarter, just like in Calvin, we leaned into our best product categories where we drove strong growth for our iconic cable knit sweater franchise with sales up over 50% Overall, when I look at our global business for the holiday, we navigated an uneven macro environment across both brands, and I was particularly pleased to see that where we brought newness into key product categories, we were able to drive growth with higher full price sell-through. Now I will turn to our regional performance, starting with Europe. For the full year, the region declined 1% in constant currency with 2 quarters of strong D2C growth in the first half, followed by a more muted consumer in the second half. In wholesale, we delivered sequentially improving order books each season in Europe, returning to growth beginning with our fall '25 season. In the fourth quarter, revenue was down low single digits in constant currency, in line with guidance and against a muted backdrop. In constant currency, wholesale was down 1% as positive order book growth was offset by lower in-season replenishment and D2C was down mid-single digits. For both Calvin and Tommy, the areas where we have introduced the most product innovation into key categories continue to drive growth, and our focus continues to be on scaling that innovation across bigger parts of the assortment. We also continue to work more closely than ever with our wholesale partners. And in January, we held our second annual Global Partner Day to kick off the fall '26 market launch. We had over 500 key partners in attendance and received the strongest and most positive feedback yet. Next, turning to the Americas. For the full year, we delivered mid-single-digit growth driven by our wholesale channel and strength in our e-commerce business. The consumer backdrop has been uneven. And in stores, industry traffic trends were increasingly challenged, resulting in our total D2C business down low single digits for the year. In the fourth quarter, we grew overall revenue by 4%, driven by wholesale as well as continued growth in digital. D2C declined mid-single digits due to lower store traffic, partially offset by AUR growth. Product-wise, we saw strength in denim for both men and women. Our wholesale business increased high teens, partly driven by the takeback of our women's sportswear and jeans business with underlying growth in wholesale up mid-single digits. Despite lower traffic, we drove greater full price selling for the region and over 200 basis points in sequential year-over-year gross margin improvement. Moving to Asia Pacific. For the full year, revenue declined mid-single digits in constant currency or down low single digits, excluding the timing impact from the Lunar New Year calendar shift. But importantly, we delivered sequential improvements in our top line performance each quarter over the course of the year. In the fourth quarter, excluding the Lunar New Year calendar shift, our APAC revenue returned to growth and was up low single digits in constant currency. In digital, we delivered the second consecutive quarter of high single-digit growth as we successfully concluded Double 11 and the holiday period. Overall, we are seeing good conversion and positive traffic improvements across key markets, including China and Japan. We continue to execute with discipline in the region, driving gross margin improvements and reinvesting into marketing with key local talent. Both brands were proud to participate as first-time exhibitors at the China International Import Expo, building on our long-standing presence and commitment to the market. Before we turn to 2026, I would like to take a moment to reflect on the progress we have made through our multiyear PVH+ Plan journey to date. While we have important work still ahead of us, since 2022, we have navigated a series of external headwinds, including exiting our Russia business, the introduction of tariffs, and we have also navigated specific geopolitical dynamics. Throughout this period, we have remained steadfastly focused on executing our plan and delivering significant operational progress across all 5 critical areas of the PVH+ Plan, winning with our hero products and categories, driving strong consumer engagement, strengthening our distribution in the marketplace by deepening our partnerships with key wholesale partners and expanding our D2C business, building a global demand-driven operating model and driving operational efficiencies to power our investments in growth and in marketing. Through this work, we have built a more systematic, repeatable approach, which is a powerful foundation as part of our continued journey to build Calvin Klein and Tommy Hilfiger into their full potential. As we said we would, we divested profit-dilutive noncore businesses, putting 100% of our attention behind our 2 globally iconic brands, Calvin and Tommy. And on an underlying basis, ex divestitures, we have grown those brands at 2% CAGR in constant currency since 2021. At the same time, we have built a strong leadership team with experience to unlock our brand's full potential. Across our regions, we increased our Americas profitability to double digits ex tariffs. We drove higher quality of sales through our initiative in Europe, and in APAC drove a 5% growth CAGR in constant currency over the period. And as our important work continues, one of the biggest accomplishments is how we have driven brand relevance with the consumers who matters the most going forward. Our most recent consumer research not only confirms that Calvin Klein and Tommy Hilfiger are 2 of the most recognized and loved brands globally, both brands also outperform with the Gen Z and younger millennial consumers. And within these, both brands are performing strongly with the highest value consumer segments, the status-oriented shoppers and style enthusiasts. This is important because these consumers shop more often, have higher order values and are more loyal. This is a direct result of our multiyear work to ignite Calvin's and Tommy's brand DNA and make them even more relevant for today. A key part in our consumer engagement is the strength we have built on social, where Calvin has the most followers and the highest engagement of our competitive set with 44 million followers across our 4 biggest platforms. Tommy has the third largest following in the industry with 31 million and the same leading engagement levels as Calvin, approximately 4x higher than most of our competitors. In addition, our consumer insights confirm clear product authority in some of the biggest and growing categories in the market. For Calvin, this means the right to play and win in underwear, denim, outerwear and knits. And for Tommy, it means the right to play and win in outerwear, sweaters, shirts and knits. The strength we have built with the consumer guides our path forward. We are increasingly targeting the best consumer segments for each brand as we expand our product strength across the top 5 categories. We put innovation and newness into creating the best product franchises, and we drive our consumer engagement with a full funnel 360 approach. To make this possible, we are leveraging the strong global product and marketing capabilities for both brands that we have worked to establish. We are also well underway to successfully transitioning the licensed women's sportswear business in the U.S. wholesale channel for both brands to ensure that our product creation across both men's and women's are brand right and positioned to drive sustainable profitable growth. In the marketplace, we have both increased our focus on our key wholesale partners and have meaningfully strengthened our D2C execution, which now represents approximately half of our sales, up from 44% in 2021. We have done this while elevating the brand experience across digital and stores, delivering digital penetration that is nearly double pre-COVID levels. We have also made significant operational progress in our journey to become a more data and demand-driven company, improving inventory management and building new capabilities, including in AI. Our new collaboration with OpenAI, which we announced in January, will accelerate that progress. Importantly, we drove over 300 basis points of cost savings, including 200 basis points of annualized cost savings from our cost efficiency initiatives. Over the past few years, through the disciplined PVH+ execution and despite the multiple external headwinds, we have built a strong foundation in both Calvin Klein and Tommy Hilfiger to be able to drive sustainable profitable growth with increasing pricing power across our 3 regions. As I've said before, every season, you will see us expand on this further. Now as we look ahead, I want to share our actions for 2026 that will help us do just that. Let me start with Calvin Klein. We can't talk about Calvin Klein today without referencing Love Story, the TV show. The cultural resonance of Love Story reinforces the timeless power of the Calvin Klein brand and its authentic place in American fashion with a premier driving a surge in online interest in Calvin. We're capitalizing on the Love Story effect in multiple ways that are true to the brand, leveraging the '90s focus in our product assortment and marketing and supercharging it in e-commerce and stores with a spring '90s edit on calvinklein.com that is driving above-average social engagement and click-through rates. We are also styling key talent, including actress Sarah Pidgeon, who placed Carolyn Bessette-Kennedy at the recent Vanity Fair Oscar Party. And we hosted a New York Magazine pop-up collaboration at our new SoHo store, achieving our highest daily sales and visitors to date. We are continuing to lead the 90-style conversations globally, a look that we help define by leaning into the styles driving the trend today across our platform. You will see this across our Spring campaign featuring global ambassador Jung Kook, which pairs cultural influence with hero product storytelling to drive consumer demand. Here, strong social engagement is driving fantastic sell-throughs with sales of campaign items up over 50% after launch and the jackets Jung Kook wore reaching 60% sell-through in just 2 weeks. In March, we launched a new Spring campaign featuring FC Barcelona and Brazilian national team soccer star Raphinha, debuting our most recent underwear innovations, Icon Active Mesh and Icon Cotton Stretch with a stitch-free Infinity Bond waistband, we drove social engagement up 62% and sales of featured products were up 11% versus a similar campaign last year. Our most recent runway show at New York Fashion Week once again placed Calvin Klein at the center of the cultural conversation, supported by top global talent, including Jennie, Dakota Johnson, Brooke Shields and Lily Collins. The fall 2026 show was once again the #1 in share of voice and #1 in earned media value from all of New York Fashion Week. Finally, we just unveiled Calvin's latest Spring campaign, starring after Dakota Johnson, styled in new underwear and denim styles. Since the campaign launch, website traffic has been up double digits versus last year in Europe. Sell-through has also been strong. Sales in key featured items showed up 4x versus the time prior. For Tommy in 2026, we are doubling down on our core product categories and set out to create the best product franchises in the market. Moving forward, you'll see us expand our category acceleration across sweaters, outerwear and knits and shirts. We have started the new fiscal year with a healthy momentum with the launch of the brand's Spring 2026 campaign, which features an invitation to Tommy's aspirational world. The campaign has been very well received across markets, serving as both a brand beacon and amplifying our 2026 product priorities. We will continue to leverage our partnerships with Liverpool Football Club and Cadillac F1 throughout the year with a steady drumbeat of consumer engagement. As part of our new multiyear Liverpool partnership, Tommy Hilfiger will dress the full team from match arrivals 6 to 8 times per season, and each tunnel walk represents an opportunity to drive scaled brand visibility and product sales as we style players in our most aspirational Tommy icons and offer shop the look access. In our first tunnel walk, we drove a 200% increase in sales for these products in Europe compared to the prior week. For Cadillac Formula 1, we are activating the partnership with store pop-ups, driver appearances and local influencer styling. Following the first 2 races of the season in Melbourne and Shanghai, where we activated with Valtteri Bottas and Chinese driver, Zhou Guanyu, together with local Tommy ambassadors, our China Tommy D2C sales were up double digits in March versus last year. Our expanded partnership with Sergio "Checo" Perez also continues to drive a consistent uplift in traffic. And in the U.S., the Tommy icons Checo has won so far this season, such as our cable knit polo have seen double-digit sales increases. Overall, our exclusive Tommy partnerships are driving scaled global engagement with our consumers, generating over 700 million impressions and an increase of over 300% in media value versus prior campaigns. And earlier this week, Tommy announced Travis Kelce, American football icon, 3-time Super Bowl Champion as a global brand ambassador and creative collaborator, one of sports biggest stars on and off the field. Kelce will bring his unique perspective to Tommy Hilfiger as part of the series of campaigns kicking off in fall 2026. Looking ahead for our regions, we have started fiscal 2026 with momentum, which has continued through quarter-to-date, where we see spring product season do better than last year same time. In Europe, following a tough second half last year, this year, we are expecting a gradual improvement in top line trajectory as we progress through the year. You will see our investments in marketing and the consumer experience start to cut through in the marketplace. In wholesale, we closed our fall 2026 order book up low single digit, marking the third consecutive season of growth. When taken all together, we expect our overall revenue for the region to be up slightly in 2026 compared to 2025. In the Americas, we continue to work towards unlocking our full potential and expect to grow across all channels by elevating the brand experience, including targeted remodels, strengthening the marketplace distribution and driving pricing power. Overall, we expect modest growth for D2C 2026, and we expect continued growth in e-commerce as we continue to further strengthen our digital position. And in wholesale, we expect to see growth driven by the transition of previously licensed Tommy Hilfiger women's sportswear in-house. In Asia Pacific, we're off to a great start with Lunar New Year, where we launched a dedicated capsule featuring brand ambassador and global K-pop Superstar, Jisoo, exceeding expectations. We expect to continue to drive growth in the region in 2026, up low single digits in constant currency, powered by D2C. The region will continue to be a growth engine for us long term, and we expect to return to growth for the full year. Turning to our licensing business. We continue to build out our already strong licensing business, where our licensing partners help bring our vision to life across multiple lifestyle categories from watches and fragrances to eyewear and are critically important to how we drive sustainable profitable growth. In conclusion, our focus is clear to unlock the full potential of Calvin Klein and Tommy Hilfiger by building on the strong foundation we created and drive next-level execution of our PVH+ Plan. While we are seeing early momentum in 2026, we remain conscious of the current macroeconomic environment, and we are laser-focused on building out further strength in the consumer offerings in both of our brands. And with that, I'll turn the call over to Melissa. Melissa Stone: Thanks, Stefan. Good morning. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, our fourth quarter and full year results delivered or exceeded expectations across key financial metrics. In the fourth quarter, we generated 6% reported revenue growth, flat in constant currency, drove sequential improvement in our year-over-year gross margin percent and continued our focus on strong SG&A discipline. We drove significant sequential improvement in our operating margin, reaching 10% for the quarter despite a negative 170 basis point gross tariff impact and ahead of plan. EPS was 17% higher than the prior year. For the full year, we delivered 3% reported revenue growth, up slightly in constant currency, both in line with our guidance, with 8.8% operating margin for the year despite a negative 80 basis point gross tariff impact and EPS of $11.40. Throughout the year, we drove quarterly sequential improvements in our gross margin comparisons as we set out to do and exited the year with over 200 basis points of annualized cost savings from our Growth Driver 5 cost savings actions. We ended the year with healthy inventory levels, up 5% compared to last year and 1% excluding the impact of tariffs, well positioned heading into 2026. We delivered strong free cash flow for the year of over $500 million and returned over $560 million to shareholders through the repurchase of nearly 8 million shares of common stock through our accelerated repurchase program and open market purchases. Looking ahead to 2026, we are planning full year reported revenue up slightly compared to 2025 and flat to up slightly in constant currency. We project operating margin to be approximately 8.8%, in line with 2025, even with a negative 215 basis point gross tariff impact as we drive underlying gross margin strength and tariff mitigation actions while investing in our brands through full funnel marketing. I will now discuss our 2025 results in more detail and then move to our 2026 outlook. Reported revenue for the fourth quarter was up 6% and flat in constant currency, exceeding our guidance. From a regional perspective, EMEA was up 8% reported and down 3% in constant currency. Direct-to-consumer trends from Q3 generally continued in Q4, down mid-single digits in constant currency with wholesale down 1%. Revenue in Americas was up 4%, driven by high teens growth in wholesale, reflecting a mid-single-digit increase in the base business, the impact of bringing Calvin Klein women's sportswear and jeans wholesale in-house and initial shipping related to the Tommy Hilfiger women's sportswear and performance wholesale transition in-house. D2C revenue in Americas was down mid-single digits in total and in stores, partially offset by continued growth in our e-commerce business. In Asia Pacific, revenue was flat as reported and down 2% in constant currency, which included an approximately 4% headwind from the timing of Lunar New Year compared to the fourth quarter last year. Excluding the Lunar New Year impact, Asia Pacific returned to growth in the fourth quarter. D2C revenue was down low single digits in constant currency, but up excluding the Lunar New Year timing effect, with continued growth in our e-commerce business, driven by strong Double 11 performance in China. Wholesale revenue was down mid-single digits in constant currency as our wholesale partners in the region continued to take a cautious approach. In our licensing business, revenue was up 10%, primarily due to the impact of nonrecurring contractual royalties in the quarter. Turning to our global brands. Tommy Hilfiger revenues were up 7% as reported and up 1% in constant currency. Calvin Klein revenues were up 3% as reported and down 1% in constant currency. From an overall PVH channel perspective, our direct-to-consumer revenue was up 1% as reported and down 3% in constant currency, which included an approximately 1% headwind from the timing of Lunar New Year compared to the fourth quarter last year. Sales in our retail stores were flat as reported and down 4% in constant currency. Sales in our owned and operated e-commerce business were up 5% as reported and flat in constant currency as strong growth in Asia Pacific and Americas was offset by the decline in EMEA. Total wholesale revenue was up 11% as reported and up 4% in constant currency, which reflects the North America license transitions, partially offset by the decreases in EMEA and Asia Pacific. In the fourth quarter, our gross margin was 57.6%, stronger than planned, reflecting significant sequential improvement across all regions as compared to the third quarter. The decrease of 60 basis points compared to last year includes a decrease of approximately 170 basis points due to the gross impact of tariffs, a decrease of approximately 50 basis points from our North America license transitions, as we've previously discussed, and a marginally higher promotional environment. These decreases were largely offset by our proactive tariff mitigation actions, enabling us to mitigate over 40% of the increased tariffs in the quarter and our efforts to lower product costs as well as favorable foreign exchange. Importantly, we saw significant sequential improvement in Calvin Klein gross margins in the fourth quarter as we steadily work through the previously discussed transitory operational issues. SG&A as a percent of revenue improved 20 basis points versus last year to 47.7%, reflecting efficiencies from our Growth Driver 5 cost savings actions, partially offset by our increased full funnel marketing investments to build momentum heading into 2026. EBIT for the fourth quarter was $250 million and operating margin was 10%, roughly in line with 10.3% operating margin in 2024 despite the 170 basis point negative gross tariff impact. Fourth quarter EPS was $3.82, a 17% increase over $3.27 last year, reflecting a negative $0.70 growth impact related to tariffs and a positive $0.33 benefit related to exchange. Interest expense was $19 million, and our tax rate was approximately 23%. For the full year 2025, we delivered our overall revenue plan. Regionally, EMEA was down low single digits in constant currency with positive first half D2C trends offset by muted consumer activity in the second half, driven by a tougher backdrop in the region. In the Americas, we delivered a mid-single-digit increase in revenue, driven by the North America license transitions and strength in e-commerce. And in Asia Pacific, we drove steady quarterly sequential top line improvement after a challenging start to the year, ending the year overall down mid-single digits in constant currency, including a low single-digit impact from the Lunar New Year timing. While gross margin of 57.5% was lower than last year, including the approximately 80 basis points negative impact of gross tariffs, of which we mitigated approximately 30% for the year, it was stronger than planned. SG&A as a percentage of revenue improved 70 basis points over the prior year to 48.7% as we drove meaningful savings from our Growth Driver 5 cost savings actions. We achieved operating margin of 8.8%. Interest expense was $79 million, taxes were approximately 22% and EPS was $11.40, which included a negative impact of $1.10 from gross tariffs and a positive impact of $0.56 from exchange. This compared to last year's record high non-GAAP earnings per share of $11.74. And now moving on to our 2026 outlook. As Stefan discussed, in 2026, we will build on the strong foundation we've created and drive the next level execution of the PVH+ Plan. While wholesalers remain cautious and the consumer macro environment continues to be uneven, our European order books are positive, and we are expecting growth in D2C in both brands and in all 3 regions for the full year. At the same time, we expect to absorb the full impact of U.S. tariffs in 2026. Our outlook assumes a 15% tariff rate on goods coming into the U.S. starting from February 24 of this year, with inventory receipts prior to that at tariff rates previously in place. Our guidance does not assume any tariff refunds. We expect an approximately $195 million gross tariff cost and EBIT or approximately $3.30 per share based on these assumptions. We continue to take tariff mitigation actions with the benefit of our actions planned to increase quarter-by-quarter throughout 2026 as we work to fully mitigate tariffs over time. It's important to highlight that significant uncertainty remains around the conflict in the Middle East as well as evolving global trade policies, the broader macroeconomic environment and consumer spending behavior. Our business in the Middle East, excluding Turkey, is about 1% of our total revenue and solely a wholesale business, so the profit impact is disproportionate at approximately 7%. Our guidance is based on current macro and geopolitical conditions and excludes any potential impacts from a prolonged, expanded or more intense conflict in the Middle East. For the full year, our overall reported revenue is projected to be up slightly versus 2025 and flat to up slightly in constant currency. We expect full year operating margin will be approximately 8.8%, in line with 2025 and up excluding the impact of tariffs in each year as we drive operational gross margin improvements and annualize our Growth Driver 5 cost savings, some of which we will reinvest in the business, particularly in marketing. We are projecting earnings per share in a range of $11.80 to $12.10 compared to $11.40 in 2025. Regionally, in EMEA, where we saw lower traffic and weaker consumer sentiment in the market in the back half of 2025. For 2026, we are planning for a gradual top line improvement as we progress through the year. We expect the first half to continue to be tougher within this backdrop with second half improvement as our investments in marketing and in elevating the consumer experience drive even greater strength in the region. In wholesale, as Stefan mentioned, we closed our fall 2026 order books up low single digits. At the same time, the overall macro environment remains choppy, and we are planning our revenues prudently. We expect our overall revenue for EMEA will be up slightly in constant currency compared to 2025. In the Americas, we are planning revenue up low single digits compared to 2025 with growth in wholesale driven by the Tommy Hilfiger women's sportswear and performance wholesale transition. And in D2C, despite the choppy consumer backdrop and lower traffic trends in stores in 2025, we entered 2026 with momentum, which has continued in the first quarter to date. We also expect continued growth in e-commerce as we continue to further strengthen our digital position. Overall, we are planning modest growth in D2C for 2026. Next, in Asia Pacific, we are planning 2026 revenue up low single digits in constant currency, led by growth in D2C, partially offset by a decrease in wholesale as we expect our partners in the region to continue to take a cautious approach. Our licensing business is expected to be down low teens, reflecting the North America license transitions. Excluding the impact of these transitions, we expect low single-digit growth in the balance of the licensing business. Overall, the impact of the licensing transitions, net of the increase in wholesale is expected to result in a less than 1% net increase in our total revenue. We expect gross margins to be up slightly compared to 2025 as we plan to more than offset an approximately 215 basis point impact of gross tariffs in 2026, which compares to approximately 80 basis points in 2025 and an approximately 50 basis point impact from the North America license transitions, with gross margin improvements driven by our tariff mitigation actions, favorable product costs, including foreign exchange and other business improvements. We expect to mitigate approximately 60% of the tariff impact for the full year with the impact of our mitigation strategies becoming progressively more meaningful as we move through the year, exiting the year with over 75% mitigation on an annualized basis heading into 2027. We expect SG&A as a percentage of revenue to be up slightly as we reinvest savings from our Growth Driver 5 cost savings actions back into the business, including an over 50 basis point increase in marketing as a percentage of sales compared to 2025. We expect our full year operating margin will be approximately 8.8%, including the 215 basis point growth headwind from tariffs and in line with 2025. Interest expense is projected to be approximately flat compared to $79 million in 2025. Our tax rate is estimated at a range of 22% to 23% and EPS is projected to be a range of $11.80 to $12.10. Looking at the balance sheet, we are projecting capital spending of approximately $250 million as we invest globally to refresh our stores and our shop-in-shops in our wholesale partner stores and continue to strengthen our digital position. And we are planning at least $300 million of share repurchases in 2026. Now turning to the first quarter. We are projecting first quarter reported revenue to increase slightly versus 2025 and decreased low single digits in constant currency, with growth in D2C offset by lower wholesale. Importantly, as Stefan mentioned, we have started 2026 with positive momentum and higher spring season sell-through trends across both brands and all 3 regions. In EMEA, we expect revenue to be down mid-single digits in constant currency overall and in both channels, reflecting the choppy macro environment that has continued into 2026 and wholesale shipping timing, including a slightly larger portion of the spring season shipping in Q4 last year than in Q1 this year. In Americas, we expect revenue to be down slightly as growth in D2C is expected to be more than offset by lower wholesale, reflecting a first half to second half timing shift compared to 2025. And in Asia Pacific, we expect revenue to be up low single digits in constant currency as growth in D2C, including the favorable timing of Lunar New Year compared to the prior year is offset by lower wholesale as our wholesale partners in the region continue to take a cautious approach. In our licensing business, revenue is expected to be down mid-single digits, driven by the previously mentioned North America license transitions. The balance of the license business is expected to grow low single digits. Tariff impacts will weigh more heavily on our year-over-year gross margin comparisons in the first half due to the timing of when the tariffs were effective in 2025 as well as the sequentially increasing impact of our mitigation strategies. In Q1, we project a gross tariff impact of approximately 230 basis points, about half of which we expect to offset through our tariff mitigation actions in the quarter. Despite this significant negative impact, we are projecting first quarter gross margin to be nearly flat compared to the prior year as our operational improvements to drive gross margin expansion, including our tariff mitigation actions and favorable product costs, are offset by the negative tariff impact and the gross margin differential from transitioning license categories in North America back in-house. We are projecting first quarter SG&A as a percent of revenue to be up approximately 150 basis points versus 2025. We are reinvesting a portion of our Growth Driver 5 cost savings back into the business, including an approximately 100 basis point increase in marketing spend compared to Q1 last year. In the first quarter of 2025, we reduced our marketing spend due to the Calvin Klein product delays and the environment in China. This year, we are more heavily weighting our marketing spend to the first half to amplify our cut-through campaigns and drive brand heat early in the year. While this will drive our first quarter operating margin down, we'll see sequential improvement each quarter throughout 2026. In total, we are projecting our first quarter operating margin to be in a range of 6% to 6.5%, including the 230 basis point gross tariff headwind compared to 8.1% last year, which did not include the higher tariff. Earnings per share is projected to be in a range of $1.65 to $1.80 compared to $2.30 in the prior year. Our tax rate is estimated at approximately 22% and interest expense is projected to be approximately $20 million. Before we open up for questions, I want to reiterate that while we continue to navigate macro uncertainty, we have a clear focus on what is within our control and driving the next level execution of the PVH+ Plan. We have started 2026 with positive momentum and are expecting growth in D2C in both brands and in all regions for the full year. We are continuing to invest in our brands and our business throughout the year and expect to drive gross margin up despite the impact of tariffs with operating margin for 2026 at approximately 8.8%, in line with 2025 and reflecting underlying strength. And with that, operator, we would like to open it up to questions. Operator: [Operator Instructions] We'll take our first question from Bob Drbul with BTIG. Robert Drbul: Stefan, I was just wondering, can you talk about how you leverage the information about your consumer and the brand health across the PVH plan throughout the business? Stefan Larsson: Yes. Bob, thanks for the question. It's a really important one. So as we shared in our prepared remarks, we do extensive consumer research and really exciting to see that the work that we have done over the past few years result in standing stronger with the Gen Z and young millennial than our peer group. And within the Gen Z and young millennial, it's really the combination between the strength with the Gen Z and young millennial. And within those groups, the segments that the status interested segments, the style-driven consumer segments because we know that they shop more often, they spend more and they're more loyal. So the way we deploy that knowledge is through social, through e-commerce, expanding, we target these consumers and we build out our category strength from the 2, 3 categories where we see real strength already today in both Calvin and Tommy to the top 5 category. Top 5 categories, it's over 60% of the business. So it's really targeting the consumers where we are the strongest that spends the most and the most interested in style and status and then driving 360 consumer engagement with that consumer. And then that's how we are starting to turn the consumer flywheel. And that's part of why we delivered a stronger-than-expected Q4 and why we are off to a strong start despite the uncertain macro, that's why we're off to a strong start in the beginning of '26 as well. Operator: We will move next with Michael Binetti with Evercore. Michael Binetti: I guess this might be for Melissa, but maybe on the EBIT margins. So we entered the year with margins down 160 to 200 basis points in the first quarter, but then we get to flat in the year. So -- and I think you said EBIT margin improves each quarter. Could you just clarify, is that the level or the year-over-year? Maybe just give us a little bit of help on how to think about the cadence of EBIT margin through the year after first quarter? And then I guess backing up, Stefan, on Americas, the revenues planned down slightly in the first quarter, D2C growth, but I think you said wholesale negative. And I would think you would have about a mid-single-digit lift from the licenses. So maybe just a bigger picture thought on why you think -- and we can see all the marketing and we can see everything with Calvin going viral. I'm just -- I'm curious why you think wholesalers have such a gap to what you're seeing and some of the successes and growth in D2C at this point and if that can reconcile itself as we move through the year? Stefan Larsson: Yes. Thanks, Michael. Let me start and then Melissa will be able to take you through there is timing shift in wholesale, to your point, Michael, in Q1, and there are a number of other shifts as well like the tariff impact that starts off higher and then goes down. So -- but let me start from a business perspective and just say, so we are quite far into Q1 by now, and we have a positive momentum in the spring season sell-through for both Calvin and Tommy across all regions. So we see the stronger D2C trend across both brands, all regions. And in Q1, one factor that also impacts Q1 is that we are strategically increasing our marketing spend. And some of that spend is somewhat front-loaded in the year. So full year basis, marketing spend is up double digit. But the first quarter, as Melissa mentioned, there are shifts from the market conditions last year to this year that gives us the confidence to invest more early. And we see that in Calvin through the strength in the Spring campaign. We see it with the fashion show with the amplification of the Love Story interest. In Tommy, we see it through Cadillac Formula 1. We see it with the Liverpool partnership. We see it with the Spring campaign. So we're really leaning in to turn that consumer flywheel. But Melissa will be able to take you through more of the quarter-to-quarter timing. Melissa Stone: Yes, sure. Thank you, Stefan. So as we think about the trajectory for the year, there's several moving parts. Just on the top line, we have started the year, as we talked about, with positive momentum, with spring season product selling up versus last year in both brands in all 3 regions. And while the macroeconomic environment remains uncertain, we do expect growth for the full year. But in the first half, we're lapping the stronger comparisons in Europe and the Americas from last year. While in the second half, we expect to drive improvement as we continue to focus on what is within our control and see our investments drive strength to the consumer. And I would just add that in Q1, when you look at our overall revenue on a 2-year stacked basis, which takes out some of the wholesale timing that's impacting our comparisons, our total revenue growth in constant currency is sequentially improving from Q3 to Q4 and then from Q4 to Q1. And then when we look at the profit cadence, there are also 2 main parts that I'd highlight. I mean first, as Stefan mentioned, there's the tariffs. And in the first half, we are burdened by tariffs, which only had a very small impact in the Q2 last year. And at the same time, we expect that our tariff mitigation actions will become increasingly impactful as the year progresses, and we expect to exit the year with over 75% of the tariff mitigated on an annualized basis. And then the second piece, as Stefan mentioned, is marketing, where we've strategically weighted our investment in the first half, particularly Q1 ahead of the key consumer moments to align with our commercial plan and activate the full funnel and drive that heat early in the year. And you'll remember that in the second half of 2025, we had already stepped up our marketing investment versus our original plans and so that we lapped that in the second half of '26. And then lastly, from an FX perspective, there's just 2 things I'd highlight. With translation, we see a favorable impact year-over-year, more heavily weighted to the first half, and you can see that effect in our Q1 revenue guidance. And then on our inventory costs, it's actually the opposite, where we see the favorable impact building as the year progresses, and that comes through a strength in our gross margins. And importantly, I would just add that on inventory costs overall, we're starting to see the benefit in our product costs as we leverage the scale and the power of PVH and our 2 global product kitchens. And we saw that benefit start to come through in Q4, and we'll continue to see that benefit in 2026. So a lot of parts. But overall, we expect progressive year-over-year improvement in our operating margins. Operator: We will move next with Jay Sole with UBS. Jay Sole: I want to ask you about Love Story. I mean it really was a phenomenon. I just want to ask about the learnings from it just because it was it bigger than you expected? And how did it play out? And like I said, what are the learnings that you'll take going forward? Stefan Larsson: Yes. Thanks, Jay. It's almost impossible to have a conversation about Calvin right now without Love Story. So it's also a really, really great question. So could we anticipate it? I don't believe anyone could have anticipated the magnitude of the hit it has become globally and across generations. So if you look -- we just got the data yesterday that over 40 million people have watched Love Stories, Hulu's most streamed show ever. So what's the learning for us and what's the effect? When the show launched, we could see the search increase for Calvin Klein, e-commerce traffic, B2C is positive. The consumer is looking for iconic Calvin, starting with iconic underwear and iconic denim. The most sold denim style right now is the '90s fit. So some of the key learnings here is you can't plan for these things. But what I'm really excited about and is what the team has done over the past 3, 4 years is we have gone back to the DNA of what made Calvin collide with culture back in the '90s when that happened and really taking 100% of that iconic DNA and then working hard to make it 100% current. So when something like Love Story hits, we -- it's just a really nice sync up with where we are with the brand. So it also shows the power of the brand. So we are talking about since we started the PVH+ journey that there is something special in Calvin and Tommy because they are one of a handful of brands that have collided with culture and become globally iconic. This is a good example of this because the interest we see spans generations. And then one of the biggest audience parts of Love Story is also where we have built the most strength, which is within the young millennial and the Gen Z consumer. So Calvin really helped shape American fashion and the '90s look. And yes, just -- we see it in the demand. We see it in the interest for the brands, but this is something that has been built over the last 3, 4 years, and we just appreciate it. And for those of you who haven't watched Love Story, please do. It's a great show. Operator: We will move next with Brooke Roach with Goldman Sachs. Brooke Roach: Stefan, I was wondering if I could get your latest thoughts on the path to deliver sequentially and sustainably stronger sales momentum in your Europe business. Beyond the easier compares, what are the most important drivers of that sequential improvement that's planned throughout the year? And what is a more appropriate medium-term algorithm for European growth on a go-forward basis? Stefan Larsson: Yes. Thanks, Brooke. As we mentioned, there are 2 big factors here. One is that the spring product season in both Calvin and Tommy in Europe is up versus last year. We're still relatively -- sorry, relatively early in the spring. So we are 1 week away from Easter. Last year, it was 3 weeks later. But we have a very good read on early spring product up versus last year. And that is both in D2C and wholesale. And then the forward-looking wholesale order books for fall is up low single digits. So you will see that -- you will see it the combination of keep building the D2C momentum powered by our increase because also in Europe, we are stepping up the marketing investments, and we see the effect of that. And we will see the effect of that gradually improve over the year. So you will see our market presence for Calvin and Tommy step-by-step through the year improve. And then we build on the positive start to spring, and then we have the belief from our partners in the forward-looking order books. Operator: We will move next with Dana Telsey with Telsey Group. Dana Telsey: As you think about the uptick in the marketing spend as we go through the year, the first quarter having the most pronounced impact, how do you think of Tommy and Calvin, what we should be watching for, for newness moving through? And the addition of Travis Kelce to the platform, are there other new celebrities or sports icons that we should be watching for also? And Stefan, how do you think this as sales drivers for the brand? Stefan Larsson: Yes. Thanks, Dana. What -- so let me start with Tommy this time. So I'm really excited that earlier this week, as you alluded to, we revealed that American football icon, 3-time Super Bowl winner, Travis Kelce is becoming our Tommy brand ambassador and creative collaborator. And we know when we have done these collaborations in the past, how much power there is because there is a lot of love for Travis Kelce out there, a lot of love for Tommy and then combining those really creates energy and interest. And the way we build that collaboration is, again, going back to the DNA of Tommy's classic American cool. And then as I mentioned, for Tommy, we are building out the -- and putting innovation into our strongest franchises into our 5 most important categories. So when looking at categories for Tommy, it's outerwear, sweaters, shirts, knits, as an example. So it's putting innovation in newness. It's almost like internally, it's very clear, and I push it all the time with the teams is it has to be 100% iconic and 100% current. So that's what we're going to do through the collaboration with Travis. We are also doing it in Tommy. So what you will see more of is building out the Cadillac Formula 1 partnership and the Liverpool Football Club partnership. So Liverpool became, as I mentioned, the #1 engaged social post ever in the history of the brand. And what's really exciting about how the brand makes these collaborations shoppable is Cadillac Formula 1, we were able to launch the fanwear, the Tommy Cadillac Formula 1 fanwear at around the Super Bowl. And for a few days there, 50% of the sales in our U.S. e-commerce was Cadillac Formula 1 Tommy. So there is an enormous interest in that. And then through the races, we work with the drivers, we work with local influencers and then we have shop the looks. So when you see Tommy show up with your Formula 1 team that you follow or you see Tommy with some of the best footballers in the world in Liverpool, you can shop the looks starting from social all the way to e-commerce to e-mails. So some of the biggest impressions we have had since we launched Cadillac Formula 1 and Liverpool. So you'll just see us build out Tommy's presence through those partnerships. And then in Calvin, what you will see in Calvin is starting this spring, you just -- already, you have seen the Spring campaign with Jung Kook, the famous K-pop star, campaign items. So what we -- if you look closer at those campaigns, we build out newness and innovation in underwear, in denim, in outerwear, in knits, and you start to see how that drives sales. So if you look at the Jung Kook featured products prior to the campaign and after the campaign, they are up 50%. And the outerwear that he wore had a 60% sell-through in 2 weeks. Dakota Johnson, same thing. What she war in innovation in underwear was shop the look and became one of the highest selling underwear styles that we have. So when we introduce innovation and newness into our icons, whether it's underwear or denim, et cetera, that's how we drive this 360 engagement. So you will just see a consistent drumbeat of that towards that consumer target, the Gen Z, the young millennial and the standard shopper and the style enthusiasts. So that's -- over time, you'll just see us build that out. We have time for 1 more question. I look at Sheryl now, I get to signal 1 more question. Operator: We will take our last question from Tom Nikic with Needham. Tom Nikic: Just want to ask about the expectations for direct-to-consumer growth this year. And I'm wondering how much of that is driven by pricing in order to mitigate tariffs and how much is driven by expectations for improvement in traffic or unit volume? Stefan Larsson: Yes. Thanks, Tom. So let me start and then hand over to Melissa. But overall, we are pleased to see in North America, how we are able to take pricing by offering the consumer great value. So you see that in D2C, in -- you see that across channels really, but your question was about D2C. So you see the pricing power and the tariff mitigation that coming out of this year, we will have mitigated 75% of the tariffs. And then across the board, we make sure that we drive pricing power in multiple ways. But it starts by being really focused on these 4 or 5 categories that we accelerate and then putting innovation in the franchises and then cutting the long tail of product. There is a lot of pricing power and margin gain over time that we will tap into more and more. And then when we drive the consumer engagement on top of that product strategy and then make it come to life all the way through, that's when we see we're able to drive pricing power. So it's very much connected to where we strengthen the consumer offering. So in Calvin Klein, underwear, denim, we're able to drive pricing power because we offer something that's more valuable to the consumer. Melissa Stone: Yes. And I would just add to that, Tom, that from a D2C perspective, we're planning our overall D2C business up low single digits in 2026, and that includes growth in both brands and across all regions for the full year, not just in our North America business where we're faced with tariffs. Stefan Larsson: All right. Thank you very much, Tom, and thanks, everyone, for joining our call today. Looking forward to reconnecting after Q1, and we are heads down ready for the big Easter period here. So we're going to get back to business and looking forward to speaking with you in a quarter. Thank you. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
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