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As we outlined last week, a quick and tidy conclusion to the war in Iran looks increasingly unlikely — which means markets are likely to remain volatile for the foreseeable future. What matters most is the magnitude and duration of the global oil price spike – currently around $112/barrel. Econometric analyses from Goldman Sachs, Moody's, and others place the ‘danger zone' somewhere above $125/barrel sustained for more than a month or two.
Currently, the media and stock market are hyper-focused on the relationship between the price of oil, driven by the damage caused by the Iran war, and expectations for an “end date” for the fighting. If or when the fighting stops, the next focus will be on how quickly international trade recovers and how depleted importing countries' critical resources, such as oil and fertilizer, are.
Plus, a judge halts construction of Trump's White House ballroom, and the splitter is driving MLB batters crazy again.
Marley Kayden breaks down falling consumer sentiment and a cooling labor market as the latest JOLTS data shows a low‑hire, low‑fire backdrop. Sam Vadas looks at pressure across semiconductors, recent moves in WDC, STX, and MU, and what upcoming data could signal about stagflation, while META and ORCL continue restructuring around AI.
Muddy Waters Capital founder and CEO Carson Block says investors are underestimating the risk AI poses to the labor market and US economy. Speaking on "Bloomberg The Close," Block also comments on credit spreads and where he is finding investment opportunities.
One of the most difficult parts of navigating the stock market for investors is the inherent unpredictability. On February 28th, the United States attacked Iran and began Operation “Epic Fury.
Wall Street surged on Tuesday, lifted by speculation about a potential de-escalation in the Middle East conflict that has sent oil prices soaring and fueled fears of global inflation in recent weeks.
Wall Street closed sharply higher on Tuesday, buoyed by growing speculation that the conflict between the United States and Iran could de-escalate, easing pressure on energy markets and global inflation expectations. All three major US indexes rallied after a report indicated that Donald Trump is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed.
Comprehensive cross-platform coverage of the U.S. market close on Bloomberg Television, Bloomberg Radio, and YouTube with Bailey Lipschultz, Katie Greifeld, Carol Massar and Tim Stenovec. -------- More on Bloomberg Television and Markets Like this video?
The S&P 500 and Nasdaq now offer quality companies at attractive valuations, making broad US equity exposure compelling for long-term investors. Index heavyweights like NVDA, AAPL, MSFT, AMZN, and GOOGL have experienced EPS growth and multiple compression, improving margin of safety.
Microsoft, Nvidia, and other Magnificent Seven stocks are cheaper relative to the S&P 500, but investors remain uncertain about the durability of the AI trade.
March saw a huge spike in volatility due to a new regional war in the Middle East, which triggered a huge rally in energy and other commodity prices. Global recession risks may hinge on whether the Strait of Hormuz gets reopened for transit over the next month.
Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Fourth Quarter 2025 Earnings Call. [Operator Instructions]. Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of March 31, 2026, and Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued March 31, 2026. If you do not have a copy of today's press release, you may obtain 1 by visiting the Investor Relations page on the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, Chief Executive Officer and President of J.Jill. You may begin. Mary Coyne: Good morning, everyone, and thank you for joining us today. 2025 marks the beginning of a strategic evolution for J.Jill. We embarked on a period of testing and learning in order to build a strong foundation for our business by expanding our customer file through product evolution, enhancing the customer journey and improving the way we work as an organization. While we delivered fourth quarter results that exceeded the updated guidance we provided in January, the period reinforced why this evolution is essential. We had an early assortment that did not resonate as hoped. We came up against earlier and deeper competitive holiday promotions. And we watch our direct customer continue to migrate towards the promotional end of the spectrum, taking value and discount rather than engaging at full price. Against this backdrop, our teams remained agile and reacted in season to ensure we ended the period with inventories in a clean position. As we enter 2026, we are taking the steps to transition and position the business for long-term growth. To achieve our objectives, we must expand our customer files. This requires patience and precision. We're expanding into new categories and modernizing our aesthetics to appeal to a broader customer base. but doing so in a way that helps holds the quality, fit and values that our loyal customers expect and trust from J.Jill. That's why our test-and-learn methodology is so critical. It allows us to validate new concepts with both new and existing customers before scaling, ensuring we're building sustainable growth rather than simply pursuing short-term gains. As we move through 2026 and beyond, you'll see us continue this balanced approach. And we believe the investments and strategic shifts we are making, will position us well to achieve our objectives. This evolution will take time, and we should not expect the path to be linear. But we are committed to maintaining a disciplined operating model, carefully managing expenses and leveraging our strong financial position and strengthen balance sheet as we pursue this course. None of this transformation would be possible without a best-in-class team. A combination of strong internal leaders with deep knowledge of J.Jill, and outside leaders bringing relevant experience and new perspectives. Throughout 2025, we've made deliberate decisions to strengthen our leadership bench by recruiting proven talent with deep expertise in brand transformation. We brought Courtney O'Connor onboard in July as Chief Merchandising Officer to support our product evolution. And [ VIVREDKey ] in November as the company's first-ever Chief Growth Officer to lead our e-commerce and AI initiatives. As we grow, we will continue investing in talent that complements our existing strengths and supports new capabilities. Turning now to our 3 key strategic pillars. First, evolving the product. In 2025, we analyzed our assortment and identified areas in which we needed to streamline remove redundancy and evolve to capture a greater share of our customers' wardrobe. We began testing categories and concepts to expand the relevance of our product assortments. In Q4, for example, we successfully tested small capsules in areas where we saw potential but wanted to validate customer response before making larger commitments. We also piloted a localized merchandising strategy, adjusting our assortment to better reflect the lifestyle needs of specific markets. What became clear through those tests is that when we gave our customer the newness she wanted, she responded even in a highly challenging promotional environment. These learnings shaped how we approach our 2026 assortment and are informing our broader merchandising strategy going forward. As a reminder, our summer 2026 assortment, which will be introduced in Q2, we'll capture the first influence from our strengthened merchant and design team. and we expect continued improvements in assortment as we move throughout the year. There will be more newness with silhouettes and fabrics as well as the beginning stages of expansion into areas of accessories such as bags and belts. Our goal is to continue to provide our loyal customer the quality and value she knows and loves us for, while introducing relevant and compelling products focused on the new customers who we aim to attract. Our second pillar is enhancing the customer journey. This past fall, we began to look at our marketing strategy differently and how we think about customer acquisition and engagement. Historically, our marketing spend has been disproportionately focused on our existing customer base. And while customer retention remains important, we know this approach was limiting our ability to expand our customer file and drive the kind of growth we're targeting. In 2026 and beyond, we plan to continue to rebalance our marketing investments to address the top of the funnel, building broader brand awareness and capturing new customers who may not yet be familiar with J.Jill. We believe these awareness building initiatives will help us reach a larger, more diverse audience. Our third pillar is operational improvements. Throughout 2025, we focused on strengthening our operational capabilities and leveraging new technologies that we expect to support future growth. We successfully implemented our new OMS system, providing us with a more modern platform, and created the Chief Growth Officer role to fully maximize e-commerce NII to help drive long-term success. As an organization, we are embracing the capabilities and efficiencies that AI can enable. With every potential use case, we ask ourselves: Will it increase revenue, will it increase efficiency and will it drive speed to market. As we begin 2026, we are introducing several new tools across the organization and have kicked off a significant project, the implementation of a new merchandise planning and allocation tool from Anaplan. We plan to leverage this predictive AI powered forecasting model to optimize how we plan and allocate inventory across the business. Thanks to the hard work of our team, we are on track late in the second half of 2026 with meaningful benefits expected to begin in 2027 and we will continue to improve as the system learns and we scale it to drive better demand forecasting, smarter allocation by location. As we look forward to 2026, we are confident in our strategic direction while being realistic about the current consumer environment, the impacts of tariffs and the work ahead. While the quarter has seen a challenging start largely driven by continued price sensitivity, particularly in our direct channel, we are encouraged by the performance in our stores supported by trained associates, providing personalized guidance and tactile experiences that excite both existing and new customers around the brand's product evolution. Importantly, we are taking key learnings from these first few weeks of the year to inform our go-forward plan, all of which is reflected in our outlook, which Mark will review. In closing, we're viewing 2026 as a period of deliberate accelerated change to expand our customer file while maintaining our operational discipline. We remain committed to our methodical test-and-learn approach, building on validated successes around new initiatives before scaling investments. I am confident that this measured approach, combined with our strong balance sheet and operational rigor, will position us to achieve our objectives and deliver long-term shareholder value. And with that, I'll turn it over to Mark. Mark Webb: Thank you, Mary Ellen, and good morning, everyone. As Mary Ellen outlined, 2025 marked the beginning of a strategic evolution for J.Jill, a deliberate period of evaluation, testing and learning, that began to build the foundation for expanding our customer file. As we enter 2026, we are deploying these learnings which, while we expect will take some time to fully take hold, we are confident we'll position the business well for long-term sustainable growth. Before discussing our 2026 outlook, let me provide context on fiscal 2025, which demonstrated the resilience of our operating model even as we began this evolution and despite significant external headwinds. We generated $23.2 million in free cash flow in the year, maintained a solid gross margin rate of 68.7% despite incurring approximately $7.5 million of incremental net tariff costs, we opened 4 net new stores, successfully upgraded our order management system and delivered adjusted EBITDA of $84.3 million on sales of $596.5 million cash interest expense. We repurchased $10.4 million or about 638,000 shares of J.Jill stock and paid approximately $5 million in ordinary dividends demonstrating our ongoing commitment of returning cash to shareholders and supporting total shareholder return. These results reflect the operational discipline and agility of our organization in navigating a complex environment. The tariff policy enacted in April created unprecedented operational complexity and we experienced a slowdown in our customers' shopping behavior throughout the year, contributing to a 3% decline in comparable sales for the year. I want to thank our vendor partners for their support amidst these challenges and recognize and thank our cross-functional teams for their agility and resilience adapting their work and processes in response to the changing business requirements. Many of the same team members manage the successful March 2025 cutover to our new OMS system, a major modernization of our technology foundation. As we move into 2026, we are planning for a year of strategic investment and measured transition. We're building the foundation for sustainable, profitable growth by expanding our customer file modernizing our product offering and further strengthening our operational capabilities. This requires deliberate investments that will pressure near-term profitability, but position us for stronger performance in 2027 and beyond. Our financial approach doesn't change. We're being disciplined about where we invest, measuring returns carefully and maintaining financial flexibility to adjust as we learn. Our strong balance sheet and cash position provide flexibility to execute this strategic evolution while continuing to return capital to shareholders. With that context, let me walk through our fourth quarter performance and then provide our outlook for fiscal 2026. Total company sales for the quarter were $138.4 million down 3.1% compared to Q4 of 2024. Total company comparable sales for the fourth quarter decreased 4.8%, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024, driven by soft traffic and conversion, which were partially offset by stronger average unit retails and average transaction values in the quarter. Net new stores contributed approximately $2 million in revenue. Direct sales as a percentage of total sales were 53.5% in the quarter, compared to the fourth quarter of fiscal 2024, direct sales were up 2.6%, driven by markdown sales, which benefited from ship-from-store capabilities. Q4 total company gross profit was $87.3 million compared to $94.8 million last year. Q4 gross margin was 63.1%, down 320 basis points versus Q4 2024, driven by approximately $4.5 million of net tariff costs incurred during the quarter and deeper year-over-year discounting amidst a very competitive promotional environment. These headwinds were partially offset by favorable freight costs this year compared to last. SG&A expenses for the quarter were about $87 million compared to $89.3 million last year as increased selling expense and G&A overhead were more than offset by lower marketing management incentive, nonrecurring costs and stock-based compensation. Adjusted EBITDA was $7.2 million in the quarter compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4, down about $500,000 compared to last year, driven by the term loan refinance completed in December. Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share compared to earnings of $0.32 per share in Q4 2024. Average weighted diluted share count in Q4 this year of 15.3 million shares reflected the impact of repurchasing 637,700 shares in fiscal 2025. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations. Turning to cash. We ended the quarter and full year with $41 million of cash. For fiscal 2025, we generated $42.1 million of cash from operations and $23.2 million of free cash flow, defined as cash from operations less capital expenditures. We refinanced our $75 million term loan in December extending the term through December of 2030 and saving [indiscernible] approximately $10.4 million of share funded from cash on hand. As of January 31, 2026, a there was $14.1 million of availability remaining under the stock repurchase authorization that expires in December 2026. Looking at inventory. At the end of the fourth quarter, total inventory, excluding the impact of tariffs was about flat compared to the end of fourth quarter last year, including approximately $9 million related to net tariff costs reported inventory at end of Q4 was up 14% compared to end of Q4 inventory last year. Capital expenditures for the quarter were $10.1 million. Total capital expenditures for full year 2025 were $18.9 million focused on new store openings and the OMS project. With respect to store count, we opened 7 stores in the fourth quarter with no closures. We ended the year with 256 stores, a net increase of 4 for the year as 9 new store openings were offset by 5 closures. Turning to our expectations for fiscal 2026. As mentioned, we expect 2026 will be a year of deliberate investment. Our guidance reflects this along with the continued uncertainty in the consumer and geopolitical environment, the turbulent trade policy landscape and the expectation that it will take some time for new customers to respond to our evolving product assortments. As Mary Ellen mentioned, and as is reflected in our first quarter guidance, we have seen a softer start to Q1. We expect this performance to gradually improve in second quarter as the new assortment hit in their entirety [indiscernible] incurred and for products landed before for February 28, 2026, will expense through the P&L during the first half of 2026. As a reminder, these tariffs were an average rate of approximately 20% and net of vendor offsets are expected to result in about $5 million of added cost of goods sold in the first quarter compared to 0 tariffs incurred in Q1 2025. Going forward, we are now assuming 10% tariffs on goods received after February 28 through the end of the first quarter and 15% on goods received for the rest of the year. Given these rates we expect the second quarter to incur approximately $4 million of incremental net tariff costs compared to less than $1 million incurred last year in Q2 and Q3 and Q4 to incur approximately $3 million of net tariff costs each compared to $2.5 million and $4.5 million in Q3 and Q4 last year, respectively. Total tariff load net of vendor offsets in 2026 will be about $15 million compared to about $7.5 million incurred in 2025. Our assumptions related to tariff rates are all subject to any additional changes the U.S. may enact to global trade policies. Further, our guidance does not assume receipt of any refunds of tariffs paid to date. For the first quarter of fiscal 2026, we expect sales to be down approximately 5% to 7% compared to last year, with total company comp sales down approximately 7% to 9%. We expect adjusted EBITDA to be in the range of $15 million to $17 million, reflecting approximately $5 million of tariff pressure. For Q1, we expect gross margin to be down about 400 basis points compared to Q1 2025 as the annualized impacts of tariffs is incurred and product and marketing strategies are still evolving. While the quarter is off to a challenging start, as discussed, we are seeing relatively better performance quarter-to-date in our retail channel. For full year fiscal 2026, we expect sales to be down 2% to about flat compared to last year. Total company comp sales to be in the range of down 3% to down 1% and adjusted EBITDA of $70 million to $75 million. This guidance assumes full year gross margins down about 50 basis points compared to 2025 and as we expect headwinds related to tariffs in the first half to be partially offset by better full-price selling, lower promotions and lower year-over-year tariffs beginning in Q4. Regarding inventory, we will continue to take a prudent approach to inventory investments given the relative uncertainty we have discussed with unit purchases positioned down in the mid-single digits. Regarding store count, we continue to see opportunity to expand, but remain disciplined in our approach amidst our brand evolution. We are pleased with the performance of new stores opened to date and expect to grow net store count by about 5 stores by the end of fiscal 2026 of our planned openings, approximately half are in reentry markets. We expect reentry stores to ramp very quickly given the customer reception and brand awareness that exists in these markets, while new markets are experiencing a longer ramp period. We expect openings in new markets to experience about a 3- to 5-year ramp to maturity. New stores represent an attractive investment opportunity and we are excited to continue to expand our footprint at a disciplined pace. With respect to total capital expenditures, we expect to spend about $25 million in fiscal 2026 with investments focused on new stores and a new merch planning and allocation system that is projected to be completed toward the end of 2026. Regarding free cash flow, we expect free cash flow for fiscal 2026 of about $20 million. And finally, with respect to cash distributions we announced today that our Board of Directors approved a $0.09 dividend, reflecting a $0.01 or 12.5% increase in our ordinary dividend payable April 28 to shareholders of record as of April 14, and we have $14 million remaining on our fair repurchase program, which is authorized through December 2026. It is important to note that given the timing of year-end and Q4 earnings announcements, our Q1 repurchase window tends to be shorter than other windows during the year. In summary, we believe we are making the adjustments necessary to position the business for sustainable growth. We are confident the modernization and evolution of our product and marketing efforts will enhance and broaden the appeal and awareness of our incredible brand. And we believe the investments we are making in our front-end MP&A platforms will position us well and provide benefits into fiscal 2027 and beyond, all while continuing with our commitment to distribute excess cash to shareholders through our ordinary dividend program and share repurchases. Thank you. I will now hand it back to the operator for questions. Operator: [Operator Instructions]. Your first question comes from the line of Jonna Kim of TD Cowen. Jungwon Kim: Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? Would love any color there? And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day. Mary Coyne: Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1 had a challenging start was a midst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers. But we do believe that the macro environment had an impact in this quarter for sure. With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by product drop that is coming in the 10 days before. Operator: Your next question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: A lot of work underway. As you think about the product assortment and the test and learn that is put in place, what is changing bottoms, tops, sweaters, style, look, print patterns, what is changing? And what do you expect to see and when will the new full assortment be there? And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward? And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs. Mary Coyne: Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe. We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years. accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life. We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have, we are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, -- we love this customer segment. She's loyal. She's responsive. She is -- has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience. Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience. Mark Webb: Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. what we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera. What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates maybe up a tiny bit that we would have factored in that I mentioned in Q4 was the first quarter in a while where we actually had great -- small freight savings. And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward. Mary Coyne: Yes. And I just want to circle back for 1 minute, Dana and just reiterate, while we know we have a great customer, we also are now the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward. Operator: Your next question comes from the line of Corey Tarlowe of Jefferies. Corey Tarlowe: Great. Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date? Mark Webb: Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter it was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November. I think we messaged some of that in some of our inter-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter. And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall. -- and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter. Corey Tarlowe: Understood. And I think you mentioned a new merchandise planning system. I know that there have been other initiatives that you've undertaken, whether it was the OMS project or other items. Can you talk a little bit about the benefits of this what the costs are and then how we should think about other incremental projects that are coming in, in this year, which I think you called it an investment year? Mary Coyne: I mean, Corey, I'll start just by saying we are so excited about the MP&A project through out of plan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right step at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative. Mark Webb: Yes. And Corey, the one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned. With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted projects than an OMS project would be an LMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct -- the direct business, et cetera. So that's kind of what's behind the expectation of it being and investment here with respect to capital. And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward. and then obviously, payroll and some of the investments we've made in talent. Operator: Your next question comes from the line of Dylan Carden of William Blair. Unknown Analyst: This is Ann bingo on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement? Mary Coyne: So I'll start you for the question. as we're entering 2026, we are in a period of evolution, and we are testing and learning every day -- what I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4 we will see learnings from our marketing initiatives that we're attaching where we are rebalancing spend where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't. Mark Webb: Sorry, I was just going to add with respect to the Q4, as Marion mentioned, the product, obviously, it's -- we're still pre the new assortments in -- and we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts. -- that Q4 would then turn to a small tailwind. So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well. Unknown Analyst: Understood. And then on pricing, do you guys see additional opportunity for targeted price increases in 2026? Is this reflected in the current guide? Or does the current consumer environment or a more cautious approach? Mary Coyne: We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price. Operator: And your next question comes from the line of Janine Stichter of BTIG. Unknown Analyst: You've got Eaton Sage on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date? Mary Coyne: Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule we saw success in expanded categories in outerwear, we saw the start of accessories, which has really moved into Q1 as a success story. -- and we tested some price points, particularly in sweaters with Casimir and soft success. As we moved into Q1, a we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our 2 product evolution. -- where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there. Operator: With no further questions, that concludes our Q&A session and also concludes today's conference call. Thank you for your participation. You may now disconnect.
Eyal Cohen: So good morning, and thank you for making the time to join our full year 2025 results call. Joining me is Mr. Moshe Salzer, our Chief Financial Officer. And I'm pleased to report that '25 was an outstanding year for Bosch on multiple metrics, and I'm grateful to our team for the hard work and commitment in achieving these results. We delivered strong revenue growth throughout the year, setting multiple record quarters and increasing our outlook 3x. Ultimately, we completed the year '25 growing 27% year-over-year to a record $51 million in revenues -- and our net income grew year-over-year by 57% to a record $3.6 million, demonstrating our ability to drive profitable growth leverage in our model. Even with this growth, we exited the year with a substantial contracted backlog of $24 million, giving us good visibility into the year ahead. Looking forward, I want to share the key trends that shape -- that will shape our trajectory in 2026. Demand in the defense sector remains robust and is expected to continue driving growth in our Supply Chain and Robotics division throughout the year. We maintain strong backlog visibility and healthy customer relationships across this segment. Alongside that, we are taking steps to extend our geographic reach. In March 2026, we appointed an Indian company to represent Bosch in the Indian market as India is emerging as a growing subcontracting hub for global defense programs. This is a meaningful step in our global expansion strategy. On the product side, our organic growth model is built around continuously broadening the portfolio of manufacturers we represent and embracing the new technologies they develop. Because our manufacturing partners invest heavily in next-generation solutions, we benefit from self-relenishing flow of innovative products to bring our clients. Turning to our RFID division. The ongoing geopolitical tension in Israel since October '23 have continued to weigh on the Israeli commercial market, which represent the primary revenue base for this division. Therefore, we recorded goodwill impairment charges of $700,000 in 2024 and an additional $1.2 million in year '25. To reduce our exposure to geopolitically sensitive Israeli civil market, our 2026 strategic plan focuses on growing our business RFID business by entering the hospital segment, more stable and higher growth vertical within Israel. Successful penetration of this segment will require broadening our product offering, hiring personnel with relevant domain expertise and establishing new customer relationships. We expect to make this investment throughout 2026 with revenue contribution expected to begin in 27. On the currency front, the USD to Israeli shekel exchange rate opened 2026 at ILS 3.18 per dollar, reflecting an approximately 13% devaluation of the dollar against the Israeli shekel compared to start of 2025. As a result, we expect our Israeli shekel denominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. Another effect of the dollar's weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized this year, which arose from the revaluation of the Israeli shekel denominated balance sheet items following the sharp dollar decline. The gain is not expected to repeat in 2026, assuming the rate remains at approximately ILS 3.18 per dollar. Combined, these 2 currency-related items represent approximately $1.4 million in headwinds going into 2026. Separately, the $1.2 million goodwill impairment charge taken in 2025 is not expected to recur in 2026, which partially offset the leaving a net year-over-year drag of approximately $200,000. Our financial foundation has never been stronger. Cash and equivalents have grown to $11.8 million, up from $3.6 million at year-end 2024. Shareholders' equity amount to almost $29 million, up from $21 million at year-end 2024. We have positive working capital of more than $22 million and bank debt amounted to only $1.7 million. This strong balance sheet gives us the flexibility to capitalize on opportunities as they arise, supporting both organic growth and strategic acquisitions. We are actively evaluating a range of acquisition opportunities, each of which must meet our strict criteria, including a proven track record of profitability and high revenue visibility. Turning to our outlook. Consistent with our established policy of issuing conservative initial guidance with updates provided as the year progresses, we are projecting revenues of approximately $51 million and net income of approximately $3.6 million for 2026. We look forward to updating you as the year progresses and our momentum becomes clearer. On the Investor Relations front, in 2025, I conducted nondeal roadshow comprising 44 one-on-one meetings with potential investors and presented at 2 investor summits. Our stock appreciated 42% during that year, year '25, yet a significant valuation gap remains related to our benchmark index Russell 2000. Over the past 4 years, both delivered compounded annual earnings per share growth of 60% compared to 12% of the Russell 2000, 5x the rate of the index. Despite this performance, we trade near book value, while Russell 2000 trade at roughly 2.4x book value. And our price-to-earning ratio stands at approximately 9x compared to 20x for the index. We attribute much of this discount to limited market awareness. To address this, we will shift our IR strategy toward digital marketing starting this April, engaging alecommunication and Investor Relations firm specializing in digital investor outreach. We believe this approach will meaningfully expand our investor reach and visibility in a significantly shorter time frame rather than the traditional IR method. With that, we are happy to take your questions. Unknown Analyst: Congratulations on a really good year. This is Todd Felty. I was wondering if you could talk about the current conditions over there and how you expect your business impacted if the war, let's say, last another 30 days compared to what happens if it drags on for another 6 months with your various divisions. Eyal Cohen: Yes. So thank you, Todd. First, most of our business linked to the Defense segment. As you know, the supply chain, which was -- which is a primary growth driver of both -- most of its business is related to the defense segment and the Robotics division as well. So in that aspect, if the war will continue, it will positively affect the growth of those 2 divisions. In regard with the RFID division, currently, it's very sensitive to the geopolitical tension. And if the war will continue, it will negatively impact its business. But as I mentioned before, we are working to shift our sales resources and business development resources towards the new segments which are less sensitive or even the opposite are growing in such period like the hospitals in Israel, defense as well, but we will focus on the hospital segment in Israel. In addition, as you know, if the war will continue, we learn how to work with that. The economy will gradually return to its normal course of business despite several attacks a day. It's not new for us. We are in this situation for 3 years. And still, we are doing good. But hopefully, it will be ended. Unknown Executive: Okay. And there was a gentleman who asked a question in the chat, which is I thought a good question. He spoke about the growth rate you've achieved and why there is no growth anticipated in the guidance. I think your guidance is for $51 million, and that's basically what you did last year. So can you kind of give us some insight on that? . Eyal Cohen: Yes. First, we reached to a record level of revenues, $51 million revenues, compared to $40 million revenues in the previous year, it's phenomenal. Our revenue growth depends on the consumption of our components by the different segment, mainly and the Israel aircraft industry, and there are 100 subcontractors around the board. I believe that there is high potential for continuing growth because the warehouses are empty. But we currently have and at the end of year '25, we have like $24 million backlog, which covers 50% of our outlook for year '26. So we have to be -- as we did all the time to be conservative. And we will update, I believe we will upgrade the outlook quarter-by-quarter. According to the progresses. And we have to remember that we are in a very sensitive period in geopolitical tension. Every day, there are news and we have to be a little bit conservative. And I think that still with $51 million revenues and the $3.6 million net income and all the ratios that I illustrated before, that was illustrated before, compared to the index to the Russell 2000 Index, we -- there is no need for any growth to justify this current valuation. I think we are undervalued with the $51 million revenues and $3.6 million net income, and there is a great upside. Unknown Analyst: Okay. My last question is just on the M&A front. I see your cash position is up to $11.8 million, can you just kind of go over your M&A strategy? I believe in the past, you plan there would be no dilution on any M&A that you did and that any acquisitions you did would be immediately accretive to revenue and earnings. Is that still the case? And do you plan on investing some of that cash maybe in short-term notes or securities if there's no M&A on the immediate horizon. Eyal Cohen: Yes. So first, as we have the $12 million cash in hand, I think there are opportunities of M&A are increasing because we can acquire a larger company that can move the needle. So it's great -- it's a great tool to have on hand, and we have several acquisitions that we are evaluating. Hopefully, we will close an acquisition during the year '26. Until then, we invest the cash on hand on on security funds. And that bear like 4% to -- 4%, 5% interest per year, something like that. So the money is working and waiting for utilization. And regarding the dilution, it's not on the -- it's not included in the plan. There is no plan for dilution with $11 million to do an acquisition, it's nice acquisition. And if we want to increase it, we can leverage it with the -- if it's a profitable company, we can leverage it with bank loans, long-term bank loans and together to reach to a significant amount of acquisition. It could be one, it could be two, so I don't expect for any dilution in that aspect in M&A in -- by the way, in any other aspect as well. Scott Weis: I have 2 questions. This is Scott Weis. How are you? Eyal Cohen: Fine. Thank you, Scott. Scott Weis: Good. Thank you. Regarding India, can you comment on if you've seen revenue in India to date? And what kind of numbers are you expecting for 2026? We see flow of revenues from India. We saw flow of revenues in year '23, in year '24, in -- and we opened the -- we established the officer, the agency there in order to urge it and to have more foot on the ground in India in order to increase this number. we didn't provide any outlook for how many revenues, but hopefully, it will increase significantly. During the year, it's not investment for 1 year, it's for long-term investment, and we will expand our investment in India as its progress -- according to the progress. so this is the -- our addressable market overseas. Can you share 1 or 2 of the larger customers from the Indian markets? Eyal Cohen: Yes. we are -- our clients, I believe, the biggest -- 1 of the biggest -- or the top 5 subcontractors of assembly subcontractors of electronic systems. They are working with the II. They're working with the Boeing, they are working with a global organization. Among the names are Cosmos, Vinas, DCX. I believe there is a long list of subcontractors that we have not reached yet. And this is a primary reason for having foot on the groud in India in order to go to visit more manufacturers, more assembly company and to start to do business with them because if we have a good offering for 1 -- for the competitors. So I believe we can increase ourselves we can increase our client base in India with the same offer. Scott Weis: My second question is regarding the RFID investment, what kind of investment spend are you expecting to add to the hospital market? Eyal Cohen: What kind of investment. Scott Weis: Both. Eyal Cohen: According to the initial plan, I believe it won't be a significant amount in the size of both, but it will be a significant amount for the RFID, it could be around $800 million to -- it could be -- in share, could be like $300,000 in year '26. And then in year '27, this new segment will be in breakeven and in year '28 to start to be perfect. But it is for the long term because in the intervision every time there is a geopolitical tension, it got impacted directly and immediately. So we have to -- and because we don't believe that in year -- going forward, there will be a long-term peace period. So we have to be ready for that, and we have to do this move. Scott Weis: Do you have existing relationships in the hospital segment? Eyal Cohen: Currently, no. But we have several candidates that we can hire with the related connections. By the way, it could be also through M&A of companies that are already in that field, and to use our system to support the sales and the sourcing of the product to this segment. Scott Weis: Okay. My last question is regarding the guidance. I realize we've been, but the guidance suggests that you've seen a slowdown. And I just want you to flesh that out a little bit. Have you seen any changes from Q4 to Q1 to where we are today? Eyal Cohen: No. The opposite, I see that the backlog increased. The backlog of the group increased in the first quarter. Scott Weis: Thank you very much. Eyal Cohen: You are welcome and hope to see you soon in Israel, Scott. Unknown Analyst: Hello. This is Igor oarletzo. Good afternoon and good morning for me. I have a question, and I think somebody else had the same question about your guidance. So you're projecting the same revenue and the same net income as you had this year. So I understand the revenue part, the net income was affected by 2 things this year, which I assume will not be going forward or maybe it will be. The second part, you paid no taxes are going to pay the taxes next year. So maybe you can just walk me through and say, on the EUR 51 million, how do you get exactly the same metric 1 you had 2 significant items affecting it this year. Eyal Cohen: Yes. Thank you for your question. I think that Moshe described that we had to point that was impacted year '26 report. And Moshe can return on what you just said regarding the currency exchange, the weakness of the dollar and what what was the impact in '26 is 5%? And what do we expect in year '26? Moshe Zeltzer: Yes. In the financial income, in 2025 cause of the Bonacia in Jan, we accepted that our Israeli shekel dominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. So another effect of the weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized last year, which arose from the a revaluation of the denominated balance sheet items following the sharp dollar decline. This gain is not expected to repeat in 2026. So the about the impairment of the goodwill, it will offset by the impact of the Israel retains the dollar, which is not supposed to impact in '26 like it was in 2025. Eyal Cohen: So I agree. In summary, there was a charge of $1.2 million of goodwill in 25 million that we don't expect -- you're right. We don't expect it to recur in '26, okay? But on the other hand, there were some benefits in year '25 if that in the -- because of the weakness of the dollar, the operational expenses in year '25 will be higher by $600,000 than it was in year '25 because we opened the year at 26 with a very low currency rate of 3.1 million is per dollar as compared to something like 3.5 per door at the beginning of year '25. So we expect higher operational costs on by $600,000. And another thing that we recorded the year 25 financial income because of the weakness of the dollar of $800,000. And as long as the currency exchange rate of 26 will remain at 3.18%, we don't expect to record the same income. So the benefit in the currency exchanges in and offset by the goodwill impairment in year '25. So who you compare -- you can easily compare the years of '25 and '26, okay? Unknown Analyst: Okay. My other question is, it's a little bit difficult to break down if you're paying any taxes. And I know you referred to that you have a tax carryover build unrealized losses. So could you tell me what you expect your taxes are going to be like this year and next year? Eyal Cohen: Yes. We have a plan to -- the taxes are a little bit tricky because the taxes we're going to use to utilize all the carryforward taxes in both the parent company by the end of year '26, and all of it recorded as an asset in the balance sheet, but we see a level of tax assets in tax carryforward losses in the subsidiary of division that we want to utilize, and we are considering different kind of solution tax solution for that in order to utilize it. because so that all the profit of all the group will be offset by the carry taxes losses of the elevated division. So we don't expect to have any significant tax expenses in year '26. Unknown Analyst: Okay. And for your '27 is it a little bit too early? Or are you also saying that the taxes keep on carrying over into the next years? Eyal Cohen: Can you repeat, please, again? Unknown Analyst: For year '27 going forward, do you see that you're going to still have tax carryovers in your divisions? Or it's probably going to expire? Eyal Cohen: No, no, there is no expiry date for those losses. Unknown Analyst: I mean it was that sorry. Eyal Cohen: Okay. If you will utilize -- if you will execute the tax planning as we wish. I believe we won't have tax expenses in the coming -- in the several coming years. Unknown Analyst: Okay. And my last comment, when you cannot have to take us a question. you referred to in this call agrees with this. I think there is no better way to more buyback or to have the executive buy some of your own stock because I think it would benefit everybody. So this is just a comment. And I don't know if you agree with this, but that would be, I think, many people's minds. Eyal Cohen: Yes. I think because we have just $11 million, and we are a very small company -- we have to invest this money by acquiring company in order to support the growth of the company and not to do an artificial financial act to support the stock Personally, I don't believe in in buyback stock, it didn't impose itself according to what I have read in during all the years. And we are very small to activate such plan. companies in big sites that have hundreds of million on cash on hand, they can do it. They can allocate part of it just for public relations. We don't have the space for it. We have to -- we work very hard to gain this money. And we have a lot of opportunities for acquisitions. And I believe this is the best thing to do for the company for the long term. Regarding buying stocks by the officers of the company, I think I can tell you, I know what are the compensation package of those officers. I think they cannot afford to do buyback. They are not -- they don't have a compensation -- huge compensation that they can allocate it. The part of their compensation, its options instead of cash bonus. And I think it's a sign of support from the officer that they believe in the company. Unknown Analyst: I have a question. It's James -- can in New York. You were talking about India, and I was a little unclear. You said that if I understood it, there were revenues in '23, '24 to '25 in and you're expecting India to grow. But can you quantify how much of your revenue came from India in '23, '24 and '25. Eyal Cohen: Several million dollars. It's around $3 million on average during that year -- in those years. And we expect to -- following the trends in the market and following our investment in India to grow significantly during -- gradually during the years. Any further questions? Okay. So thank you all for your thoughtful questions today. They reflect exactly the kind of engaged dialogue we value with our investors. Let me close with the final thought, year '25 was a milestone for both record revenues, record net income and record cash on the balance sheet. We enter 2026 with a strong foundation, a clear strategic road map and a team that has demonstrated its liability to execute. We are committed to delivering long-term value for our shareholders. And I look forward to continuing that dialogue with you. Thank you again for your participation, and please feel free to reach out at any time. Have a great day. Thank you.
Operator: Good morning, everyone. Thank you for standing by. Thank you. Faten Freiha: Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's call. While our original plan was to review McCormick's first quarter fiscal 2026 earnings results, today's discussion will focus on our announced combination with Unilever Foods and the strategic rationale for the transaction. Please note that this call is being recorded. The press release and accompanying slide presentation related to today's announcement along with the materials for our first quarter fiscal 2026 results are available on our Investor Relations website, ir.mccormick.com. With me this morning are Brendan Foley, Chairman, President and CEO of McCormick, and Fernando Hernandez, CEO of Unilever; and Marcos Gabriel, Executive Vice President and CFO at McCormick. In our comments, certain percentages are rounded. Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statements on Slide 2 for more information. I will now turn the discussion over to Brendan. Brendan Foley: Thank you all for joining our call. Marcos and I are pleased to have Fernando join us this morning as well. Today marks a major milestone for McCormick. We are bringing together 2 leading organizations, McCormick and Unilever Foods, to create a strong, scaled and growth-oriented company that will be flavor-focused and exceptionally well positioned to succeed in today's dynamic environment. We have always seen the logic of this combination. We're excited by the opportunity to deliver end-to-end flavor experiences to even more people around the world, bringing the taste that inspire, connect and brings joy to kitchens and tables everywhere. Before we go further, I want to quickly provide an update on McCormick's first quarter 2026 results. For the quarter, we delivered strong growth in sales, adjusted operating income and adjusted earnings per share, supported by our McCormick de Mexico acquisition and organic growth across both Consumer and Flavor Solutions. In a dynamic environment, we drove margin expansion through strong top line, acquisition accretion and disciplined cost management. While our remarks and other materials from our results can be found on our IR website, as Faten noted, I want to underscore that consistent and strong core financial performance from both McCormick and Unilever Foods is foundational as you think about today's announcement. Now turning back to today's announcement, starting on Slide 5. McCormick and Unilever Foods are strategically and culturally aligned organizations. We each bring iconic brands in attractive categories spanning herbs, spices, seasonings, [indiscernible], condiments and sauces. Bringing these portfolios together creates an opportunity to execute multiple growth levers, such as expanded distribution, accelerated innovation, brand premiumization and a scaled dual-engine Food Service platform. At the same time, we see significant clearly actionable cost synergies layered on to an already strong structural margin profile, creating capacity for continued [indiscernible] and attractive shareholder returns. Beyond strategy, our organizations share a common mindset, a passion for flavor, a belief in the power of people and relentless focus on quality and innovation and strong investment behind our brands. Turning to Slide 6. The pillars of the combined organization [indiscernible] like distinct and complementary strengths across geographies, channels and categories. Together, we create a focused global favor powerhouse, scaled, resilient and uniquely concentrated on flavor. Our balanced geographic and channel footprint enhances durability across economic cycles and market conditions. The breadth of the combined company, diversifies our growth across emerging and developed markets and retail and commercial channels. In addition, this combination meaningfully expands McCormick's presence in structurally advantaged categories aligned with enduring consumer trends, more flavorful, convenient and focus on health and wellness. We will continue to flavor calories while others compete for them, giving us a strong tailwind and aligning us to favorable consumption and growth trends. All of this results in a best-in-class margin profile that supports sustained industry-leading reinvestment behind brands from global leaders like McCormick, NOR, Hellman's and French's to high-growth potential brands like Frank's RedHot, Cholula and MAI, along with strong regional favorites where we see exciting potential. Moving to Slide 7. We see a clear path to unlock incremental growth, grounded in the complementary strengths of our geographic footprints and go-to-market capabilities. Unilever Foods brands can benefit from McCormick's focus and strength of retail execution in the North America flavor aisle. At the same time, McCormick is positioned to expand more meaningfully in high-growth emerging markets by leveraging Unilever's established scale, deep local infrastructure and proven route to market. In Food Service, the strategic pick is particularly strong. McCormick's front of house brand equity and tabletop presence combined with Unilever Foods, deep back of house experience and operator relationships. Together, we create more complete end-to-end solutions for customers, strengthening relevance and deepening partnerships. Innovation is a shared strength. Both organizations have proven expertise in flavor development and format expansion across consumption occasions, complemented by Unilever's robust culinary capabilities and chef-to-chef engagement model. Before I expand on these growth opportunities, I will turn it over to Fernando for his perspective. Fernando Fernández: Thank you, Brendan. We are very enthusiastic about this combination, and about our partnership with McCormick. We are confident it delivers a compelling outcome for all stakeholders. As Unilever over the past several years, we sharpened our strategic focus, we have reshaped our portfolio to our high-growth categories and strengthen our operational foundation. This transaction is a natural extension of our strategy leading to value creation, while giving our shareholders meaningful participation in the upside of the scaled global flavor-focused [indiscernible] with a strong growth and margin profile. Importantly, this is a transaction anchored in a strategic and cultural fit. Both organizations operating attractive categories, our brands, innovation and execution matter. Both bring disciplined capital allocation, a strong cash generation and a consistent track record of volume-driven growth and both are driven by performance of intercultural with the commitment to quality and customer partnership. We believe the combination strengthens the competitive position of the business enhances its growth prospects and create a more focused platform to lead in flavor globally. With that, I hand it back to Brendan. Brendan Foley: Thank you, Fernando. Moving to Slide 9. I'd like to begin by reinforcing why Flavor is a structurally advantaged category. When you think about food, we strongly believe Flavor is the best place to be. It is the #1 purchase driver across dishes, trends and occasions. It transcends age, culture, dietary preferences and income levels, making it both resilient and highly relevant in a dynamic consumer environment. Importantly, Flavor is fully aligned with today's health and wellness priorities as consumers increasingly focus on cooking-at-home, adding more protein and produce and pursuing healthier lifestyles, Flavor plays a critical role in elevating those choices. Younger consumers, particularly Gen Z, are notable contributors to these trends. Taken together, these favorable flavor tailwinds position us well to drive sustainable growth as a combined company. The highly complementary nature of this combination gives us multiple ways to capitalize on these tailwinds. The clear tangible and many growth levers we see across this combination create real excitement for all of us here. Let me highlight our four priority areas of focus on Slide 10. Maximizing our reach by leveraging expanded distribution in a highly complementary portfolio across markets, unlocking incremental growth by scaling high-growth potential brands across new geographies, channels and consumer occasions, integrating McCormick's Flavor Solutions and Unilever's Food Solutions enhances our dual-engine model with a scaled globally distributed platform with strong brand equity among chefs and operators, accelerating innovation at scale by leveraging our shared R&D and technology, lead the future of flavor and stay ahead of evolving consumer preferences. These areas of focus are actionable growth levers for the combined company. Moving to Slide 11. Together, we have an end-to-end flavor proposition, from cooking to condiments with brands that have minimal overlap and maximal adjacency. Our iconic globally recognized brands, Knorr and McCormick will enable us to be part of more cooking occasions across more markets. At the same time, our Condiments portfolio, including hot sauces, mustard and mayonnaise, allow us to be present in even more kitchens and on more table tops meaning consumers growing needs for healthy flavorful meals. Moving to Slide 12. Beyond adjacency, the combination also accelerates the opportunity for high-growth potential brands. The brands on the slide as well as the number of brands in our portfolio enjoy high consumer loyalty, connection to consumer trends and global appeal, particularly with young consumers. For example, we have the leading share in hot sauce in the U.S. with Cholula and Frank's. We have begun expanding in EMEA where we have seen great success in highly competitive markets. For example, Cholula in France, and through Unilever's capabilities, we'll be able to accelerate expansion, not just in EMEA, but also in Latin America and Asia Pacific. With Unilever's Food's strong presence in these regions, these brands will have substantial opportunities to expand their distribution and reach new consumers. Another unique opportunity is MAI. An almost 280-year-old French brand deeply connected to French culinary tradition as a French -- as a prestige mustard and mayonnaise brand. We see opportunities to scale its presence across a number of new large markets, similar to what we have done with Cholula. This is just one example of many that we see across the portfolio. In addition to retail expansion, Slide 13 highlights the power of our combined Food Service platform. Together, we will strengthen the scale business-to-business leader with approximately $6 billion in pro forma annual sales, positioning us among the largest global food service players. Unilever's Food Solutions brings global presence with deep back-of-house capabilities and culinary expertise and breadth that meaningfully expands McCormick's reach across multiple food service operators. Complementing that strength, McCormick offers a powerful branded front-of-house presence and an extensive partnership network, particularly across independent noncommercial and chain operators. This creates significant cross-selling opportunities. We see clear potential to elevate key Unilever Foods brands while utilizing our partnerships to drive awareness and trial. In turn, this visibility will reinforce retail demand and brand equity, creating a virtuous cycle across channels. Supporting all of these growth opportunities is innovation. Slide 14 outlines how we will leverage our combined technology and R&D capabilities, an essential strategic pillar and long-term competitive advantage. Together, we bring leading capabilities in R&D and flavor science, underpinned by deep consumer insight, culinary expertise and advanced technology platforms. By combining our resources, we meaningfully expand our capacity to innovate, accelerate speed to market, and drive differentiated solutions across retail and food service. Our capabilities are highly complementary. We bring our leadership in seasonings and heat and our expertise in natural ingredients. Unilever bringing [indiscernible] technology, which enhances texture and their ability to leverage protein as a flavor. All of this positions us to support customers to deliver on consumers' evolving dietary needs as well as accelerate innovation across the portfolio. By combining our technology, culinary and scientific expertise, we are building a differentiated flavor innovation engine designed to sustain growth and reinforce category leadership over the long term. As Fernando noted, McCormick is the natural home for Unilever Foods brands. We have long thought about this combination, and we'll bring it to lessons learned from our own M&A journey, which has been deliberate and strategic. As you can see on Slide 15, we focus on strengthening our leadership in heritage herbs and spices, expanding internationally, building scale in condiments and sauces and growing our business-to-business flavor solutions platform. Each transaction has aligned with our long-term vision and disciplined capital allocation strategy. And this combination with Unilever is no different. While this transaction is larger than prior deals, the core drivers of success are the ones we are familiar with. This will be my top priority, and we are approaching with confidence -- we are approaching it with confidence and humility. We have already begun integration planning in partnership with the Unilever team. Let me share some of the details on Slide 16. We are building a detailed integration plan well ahead of close, positioning us to execute efficiently and with strong governance, dedicated leaders from both companies have clear responsibilities, supported by experienced external integration partners. Unilever brings significant carve-out expertise and remains financially invested, including 2 years of Board representation, ensuring alignment. Business continuity is central to our approach with comprehensive TSA support across key functions. In addition, we have tremendous respect for the talent at Unilever Foods, and they are integral to the success of this integration and long-term value creation. We are defining the target operating model early and executing market-by-market to balance speed with precision. Synergy targets are aligned back by a structured delivery road map and a detailed IT transition plan is already in motion to ensure secure and seamless integration. At the same time, we are proactively shaping the commercial agenda to unlock the growth potential of this portfolio from the outset. We know what works. Welcoming extraordinary talent from Unilever Foods, retaining key capabilities and applying proven playbooks to scale brands and accelerate innovation. This disciplined integration paired with intentional growth acceleration, a combination designed to deliver value while maintaining operational continuity from day one. Before turning it over to Marcos, let me highlight why this transaction makes so much sense right now on Slide 17. We have long seen the benefits of the overwhelming strategic fit between the two businesses. Both businesses are in a strong and growing position, benefiting from structural tailwinds. Together, we will create a company that is stronger, more resilient and ready to deliver on its full potential in a dynamic environment. With that, I will turn it over to Marcos to discuss the combined company's financial profile. Marcos Gabriel: Thank you, Brendan. This transaction represents a significant milestone for both companies. Together, we're creating a global flavor leader with expanded scale and capabilities, positioning attractive high-growth categories and supported by a strong and compelling financial profile. Let's begin on Slide 19 with an overview of the transaction structure, which was also outlined in our press release. This combination has been thoughtfully designed to create long-term value for each set of shareholders. The transaction is structured as a Reverse Morris Trust as we are issuing a fixed number of McCormick shares as consideration for Unilever Foods upon closing. This issuance is expected to result in pro forma ownership of the combined company's equity of 65% for Unilever and its shareholders and 35% for McCormick shareholders. Unilever will also receive $15.7 billion in cash, subject to customary closing conditions. This is the optimal combination of debt and equity, that allows McCormick shareholders to realize significant value from the transaction, supported by the borrowing capacity of the combined company, which is expected to generate strong operating cash flows. The transaction implies an enterprise value for Unilever Food of approximately $44.8 billion and approximately $21 billion for McCormick representing a multiple of approximately 13.8x calendar year 2025 EBITDA for both companies based on a 1-month volume-weighted average share price. From a governance and leadership standpoint, Brandon and I will continue in our current roles, ensuring continuity of strategy and execution. McCormick will remain globally headquartered in Hunt Valley, Maryland, reinforcing our commitment to our heritage while building a scaled global flavor leader. In addition, the combined company's international headquarters will be in the Netherlands, where a substantial presence will be retained in areas like R&D, among others. Now moving to the financial profile of the combined company on Slide 20. On a pro forma 2025 basis, annual net sales are $20 billion supported by volume-driven growth and a best-in-class operating margins of 21%. Building from this foundation, we see clear opportunities to further enhance the profile through meaningful revenue and cost synergies. We plan to reinvest incremental revenue and cost synergies back into the business to accelerate growth. Specifically, approximately $100 million will be reinvested into our brands through increased marketing to support and innovation, fueling sustained volume growth and strengthening our competitive position. In addition, we anticipate $600 million in annual run rate cost synergies, representing approximately 8% of McCormick's 2025 pro forma sales, including McCormick de Mexico. The synergy expectations are compelling given the limited overlap and existing efficiency levels of both organizations and reinforce our confidence in the value creation potential of this combination. Importantly, synergy delivery will be supported by a proven capabilities in partnership with the Unilever team. Our comprehensive continuous improvement program, or CCI, has consistently delivered cost discipline, productivity gains and operational efficiency across the organization. By applying this established framework to the combined business, we're well positioned to execute with rigor and translate scale into sustainable margin expansion and long-term value creation. Turning to Slide 21. We outlined the key areas where we see clear opportunities to unlock cost savings across the combined company. Through a comprehensive diligence process, leveraging cross-functional teams from both organizations we have identified actionable savings across procurement, media, manufacturing, logistics and SG&A. This resulted in a balanced set of opportunities across cost of goods and SG&A. We expect to realize the $600 million in synergies by year 3 with approximately 2/3 captured by the end of year 2, reflecting a disciplined and phased integration plans. Turning to Slide 22. When you combine the strength and momentum of both stand-alone businesses with the impact of these revenue and cost synergies, the result is a structurally advantaged best-in-class financial profile. This is about focus on scale and profitable growth. The combination is expected to deliver meaningful accretion in the first full year across sales growth, adjusted operating margin and adjusted earnings per share. By year 3, as synergies are realized, we expect sustainable organic sales growth of 3% to 5%, supported by deliberate reinvestment in our brands and an enhanced innovation engine. At the same time, operating margins are expected to expand to approximately 23% to 25%, reflecting structural efficiencies, procurement scale, supply chain optimization and SG&A leverage. Together, this creates a higher growth, higher-margin platform with stronger cash generation, position the combined company for durable long-term value creation and sustained profitability. Moving to Slide 23. The combined company will maintain a solid and resilient balance sheet, underpinned by strong, consistent operating cash flow and a disciplined capital allocation framework. This foundation supports meaningful de-leveraging while enabling McCormick's long-standing practice of returning capital to shareholders through dividends for the combined company. Both McCormick and Unilever have long-standing commitments to shareholder returns and historically have divided payout ratio of approximately 60%. We expect the combined company to maintain a dividend consistent with this history. The strengthening the balance sheet is a clear priority we expect net leverage to be at or below 4x at closing and plan to reduce it to approximately 3x within 2 years, supported by robust cash generation and disciplined execution. Throughout this period, we expect to maintain our strong investment profile and preserve the financial flexibility that has long differentiated McCormick. With that, I'll turn the call back to Brendan. Brendan Foley: Thank you, Marcos. Before I wrap up, Fernando and I would like to summarize the benefits of this deal for our respective shareholders. Strategically, this combination meaningfully expands our portfolio with iconic, high-growth potential and local favorite brands, strengthens our presence in attractive geographies and enhances our scale with customers around the world. McCormick becomes a preeminent global flavor powerhouse, advancing our vision to be a global leader in flavor. Financially, the combination is compelling for our shareholders. We expect it to be accretive to McCormick growth, adjusted operating margin and adjusted earnings in just the first full year with continued long-term growth and upside to our financial performance. We expect to maintain a strong balance sheet supported by disciplined capital allocation and clear de-leveraging priorities, and our commitment of returning cash to shareholders through dividends remain unchanged. Ultimately, McCormick shareholders gain access to a larger, more diversified business with faster growth, a stronger margin profile and continued commitment to shareholder returns. Fernando Fernández: For United shareholders, this is about unlocking scrap value, giving shareholders exposure to a pure-play home and personal care company and to the upside in the global flavor leader. Brendan Foley: Thank you, Fernando. To wrap up on Slide 25, we hope that you take away from our call today is the following. This combination is strength plus strength, with two highly complementary flavor leaders coming together. Together, we are creating a scaled global flavor focused company with leading brands in attractive advantaged categories. We see multiple levers to accelerate growth, while leveraging the power of leading iconic brands, high-growth potential brands and local fabrics. At the same time, we have plans to deliver clear achievable cost synergies and building on best-in-class finance building on a best-in-class financial profile with meaningful accretion, strong margins and a compelling return profile, supporting our continued investments in growth. We recognize that the integration is crucial and recognized -- and recognize the work ahead. We are prepared to execute, supported by [indiscernible] integration plan, positioning us to execute efficiently and with strong governance. And through it all, McCormick will be McCormick, grounded in 137 years of leadership and guided by a passion for flavor. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Andrew Lazar: Maybe to start off, McCormick's track record on M&A and integration, as you mentioned, is admirable. But obviously, this one is just many, many times larger and the industry's track record with larger deals, it's pretty mixed. What gives you the comfort in taking such a big swing on this one? And really, what are you doing maybe differently on this one from an integration standpoint, just given the sheer scale. Brendan Foley: Well, thanks for the question, Andrew. And we're ready to take on the integration at this level of scale, and we recognize, though, more importantly, what we're taking on. First, there are a couple of important steps to have to complete before close. So we need to do regulatory filings to prepare for a shareholder vote, but also Unilever's needs to separate its Food business from the overall Unilever organization. So those are certain things that have to happen in advance, obviously, during this period of time. We are arranging our playbooks to make sure that we have the right integration approach. And I would just maybe break it down in three broad areas. I mean, the first starts with a best-in-class external partner to help guide this. And so we already have that type of a firm on board to really help us think through the best way to approach integration. Now we've done that in the past. It's been very successful, and it's kind of kept us really, I think, executing against our expectations on that. And as you know, in all the integrations very recently, we tend to over-deliver on our objectives there. But we also have a year or more to thoughtfully develop a disciplined plan. And that's really an important period of time, obviously, to make sure that we get this right. And during that period of time, there are dedicated leadership that will be on this, but it's also a combination of not only McCormick leaders being a part of this, but also Unilever leaders too, because they're also committed to this being a successful integration. We're also planning brand acceleration at the same time against that agenda to deliver the growth potential. And so there are examples where we've done this, obviously, is French's and Frank's, but I would even look to [indiscernible], where we take -- we modify the integration approach based on business. We don't execute necessarily a standard [indiscernible] on every one of them because each business is different. They present different opportunities. And sometimes there are different ways of working in how you go to market. We certainly found that with [indiscernible]. And so we very -- took a very deliberate approach on that one. And then you can see the success that we've had. So I think part of what we -- I think the magic in terms of how we look at this thing is not approaching everything as a nail and a hammer. We really make sure that we have the right approach, I think, to each individual situation. And I think region by region, this will probably play out that way. Then we do have to execute a thoughtful separation. It will be supported by TSA agreements, and we have a very experienced partner in Unilever are doing this. Unilever employees are remaining with the business. And that's an important, I think, concept to think about, which is there might be many regions which simply McCormick doesn't operate. So you can imagine the Unilever employee base and talent really becomes part of that business. So there's sort of minimal disruption in that context. And so we're able to still run the business very effectively. Overall, I would just say we're really admitted and we have an invested partner in integration. We have dedicated leadership, best-in-class advisers, ample time to plan. And this is going to be our approach in going into this. Andrew Lazar: And then maybe second, just quickly. Unilever Food EBIT margins are already in the sort of the low 20s level. Not many food companies have been able to reach, let alone sustain. And I understand much of this is due to the two scaled brands that are part of that portfolio. But I guess, are you comfortable that the brands have been appropriately invested in such that margins like these are, in fact, sustainable and maybe Fernando can comment on it as well. Brendan Foley: Let me open it up and then I'll ask Fernando to add some context there. When you look at both of our companies, you see robust support for the brands from a standpoint of brand support and innovation. we've definitely -- I think that's where we are very much aligned in terms of how we think about how to drive growth against this portfolio. And it's not only that we're going to be -- we still have sort of a strong baseline that we're walking into this with, but we're going to add to it. Fernando Fernández: Thank you, Brendan. We have been investing around 10% in brand marketing investment behind our Food business. So it's probably one of the best supportive business in the industry, and of course, ensuring the benefit of [indiscernible] case, north EUR 5.5 billion, 10 months, EUR 2.5 billion. So very, very size [indiscernible]. Gross margin in the mid- to high 40s. So all these has built the [indiscernible] of circles. And really, we have here a very, very well supported ramp for a very long period of time. So [indiscernible] thesis [indiscernible] of the features that we share with McCormick and we are [indiscernible] how to rebrand and a real belief in investing [indiscernible] our best assets. Marcos Gabriel: And I would add to what Fernando just said is that as we said in my prepared remarks, we are going to continue to invest going forward, particularly the synergies, cost and sales synergies, we are going to invest back in the business I mentioned about $100 million incremental targets that we have, that's going to be used to be invested back in the business. So that momentum will continue going forward. Operator: Our next question comes from the line of Steve Powers of Deutsche Bank. Stephen Robert Powers: Brendan and maybe this -- maybe Fernando, you can weigh in here, too. I guess my understanding is that Unilever Food and HPC operations are pretty well integrated in certain markets around the world. And so as part of the integration plan Brendan you mentioned TSA agreements, I guess could you speak at a high level to the scope anticipated duration of those agreements? And maybe also the costs associated over time with McCormick standing up its own operations? Brendan Foley: Yes. I think from a TSA agreement standpoint, it's probably going to be -- not in more than just one form overall. So when you think about from an IT system perspective and separation there and unhooking part of the business and then rehooking it with us, so there's sort of TSA considerations overall in that. But then also when you think about sort of our TSA agreements as we hand over and we sort of have that first year integration line together as a company, we're going to have TSA agreements there, too. Fernando, you want to add to that? Fernando Fernández: Yes. Well, as you know, since 2022, Unilever has moved into an organizational model in which we have separated our 4 key business groups. And they run fundamentally as a stand-alone organization. The reason for that at that time was to really ensure that we were building the capabilities required to compete with peer play in each of these industries, but at the same time, even have the flexibility to main separations of this magnitude or the previous we have done, in acting acting in a kind of relatively short time frame and with significant disruption. So our Foods business is in more than 80% on external organization, with their own manufacturing setup, their own distribution set up, their own route-to-market, salesforce. So we really believe that we can support business with significant -- without significant disruption here in the time frame that we have established. Stephen Robert Powers: Great. And then, Marcus, if I understand the deal structure correctly, it looks like you're going to be financing the transaction with new financing and new debt versus absorbing any debt from Unilever. I guess maybe if you can just talk to the drivers there. Are there restrictions from Unilever signing its existing debt or just the rationale of going to the market new? Marcos Gabriel: No. The rationale is really a combination of stock and cash deal. It's an RMT. Think about it as an RMT like transaction, in which we are providing a fixed number of McCormick shares as consideration for the Unilever Foods business, and they will own 65% Unilever and its shareholders. And McCormick will retain McCormick -- McCormick's shareholders will retain the 35% which is the remaining piece, and then in addition, we are providing $15.7 billion of cash to Unilever as part of this deal. And that takes us to a 4x leverage at cost. And what we feel very comfortable about is that the margin profile of this business will -- it's very strong. And we will be able to lever very rapidly from 4x to 3x in about 2 years. So it was part of the overall consideration of this transaction. It puts us the company or the transaction at 13.8x EBITDA multiple, which is [indiscernible] with McCormick. So it was the overall consideration being equity and cash as part of this transaction. Operator: Our next question comes from the line of Tom Palmer with JPMorgan. Thomas Palmer: You noted the combined organic sales growth last year of 2.4% in the view of 3% to 5% longer term. At CAGNY, Brendan, you gave some reasons why you anticipate sales re-acceleration over the next couple of years? Maybe we could kind of do a smaller exercise for the combined company, in particular, thinking through how much of that acceleration is more industry conditions versus maybe more self-help type initiatives? Brendan Foley: Sure. Thanks, Tom, for the question. When combined, you have to think about the fact that we're 1/3 of the equation right now and the Unilever Foods business is 2/3 of the equation. And as we bring these businesses together, we do see stronger growth in that -- in the range that we had on the slide there 3% to 5%. These are businesses both that have been delivering volume-driven growth pretty consistently over the last several years. So we start with confidence in the base business, and so when we take a look at broadly at that growth overall, we see the 2 businesses kind of combined together, growing in that 2% to 3% range. As we think about towards that year 3, as we outlaid on that slide, we see incremental growth coming from those businesses together. And so that is more about self-help than it is about the sort of the industry getting better with itself. This is really, I think, the maybe the core of your question is we think this combination drives the opportunity to drive a stronger growth profile together, and that's why we sort of laid it out that way, the way we talked about it there, comparing sort of our commentary to CAGNY. I can go on further on growth, but I thought I'd stop there, Tom, just to make sure if I've answered the core of your question? Thomas Palmer: Yes, you did. And just a follow-up on the Mayonnaise side. You do have McCormick de Mexico now consolidated Unilever obviously has a very large Mayonnaise business. Just wanted to ask on the overlap and if there might be any limitations to consider in combining these? Brendan Foley: Yes. It's -- right now, it's too early to speculate on that type of a thing. And we just look forward to working with the regulatory authorities on making sure that we review this transaction, and we'll be able to talk about that at a later date. Operator: Our next question comes from the line of Alexia Howard with Bernstein. Alexia Howard: Can I start off with -- you talked about the deal being meaningfully accretive to earnings and I think earnings per share was mentioned from the outset. Are you able to put a number or an order of magnitude around that? And what source of that accretion might be? Marcos Gabriel: Well, at this moment, we are not putting a number there. I mean it is meaningfully accretive in year 1 post-close across all lines of the P&L, including obviously, EPS. And as we get close to the close, we'll be able to provide more information, specific information as we continue to learn about the business. But it is a very substantial margin profile that this business has. We talked about growth just now. Gross margin is very healthy, and we'll be investing back in the business as we have done in the past, both organizations and driving operating profit from 21% currently to a range of 23% to 25% with the synergies of $600 million flowing through to the bottom line. So it's a very meaningful accretion across the P&L. But we will give more information about the exact as we get near the close. Alexia Howard: Okay. And then just looking around the world, where do you see the revenue synergies being most significant? I imagine Brazil might be a place where the McCormick brand could be strengthened simply because of the strength of the Mayonnaise brands from Unilever over there. But there other parts of the world where the revenue synergies could be significant. Brendan Foley: Yes. I'm going to make a couple of comments here and ask Fernando also to provide his perspective. I see it as not necessarily dedicated to like one or two different regions. I would say it's really across many different -- so if you think about North America, Latin America, EMEA and Asia Pacific, in each region, we see opportunities overall. If you think about in the Asia Pacific region, there are a number of markets that Unilever is in, that we're not in, as an example, or in markets that we're both in, we see opportunities obviously to drive even stronger growth in a market like [indiscernible] for example. When you jump over to EMEA, we see opportunities to really -- there are a number of markets where McCormick doesn't have presence. And so we see opportunities and revenue synergies there. If you jump over to North America, we see opportunities really, I think, to even strengthen the performance of both brand portfolios. Latin America is, I think, one of those opportunity areas when you think about Brazil, I think you're right. It's -- and so we don't have McCormick presence there. While we have a really strong presence in Mexico or parts of Central America, I think the Southern Cone is an area that Unilever has quite a bit of strength, and so we see synergy opportunities there. Fernando Fernández: Yes. I feel on top of the shared strength of the [indiscernible] portfolio, I believe that McCormick brings an incredible product range and new river greens an incredible distribution globally. And when you can leverage these two things, you have huge opportunities. I agree Asia, Latin America and obvious geographic opportunities. I would like to highlight also the opportunities in Food Service. McCormick is a leader in the top of the table, let's call it, and in back of house, Unilever Food Service brings a lot of [indiscernible] we think, particularly in Chinese cuisine that is a growing trend. So big opportunities are both in retail and in Food Service. I would say, also in expanding the range in our core brands, making some of the [indiscernible] growth runs -- shine and of course, expanding the food service opportunity of these [indiscernible]. Operator: Our next question comes from the line of Peter Galbo with Bank of America. Peter Galbo: Just one quick clarification. I believe the Unilever India subsidiary had talked about maybe not including the Food business in the transaction. So maybe you could just clarify for us, will the transaction include India Foods or is that kind of excluded from current thinking? Brendan Foley: Yes. To be certain, the transaction does not include India Foods. Peter Galbo: Okay. Perfect. And I know Fernando just gave a bit of an overview on kind of some of the Food Service opportunities. For Brendan, it would be helpful, I think, to hear from you just to expand on where you see -- is it bringing more of the Unilever assets into front of house and foodservice. Is it more Unilever helps McCormick get more into back of house, just where you see kind of the revenue synergies on the foodservice side? Brendan Foley: Thanks for question, Peter, on Food Service. Food Service is an exciting area. Let's talk front-of-house first. When I think about the brand portfolio for Unilever, the opportunity, as we see it right now and Fernando and I have talked about it, is really about the Hellman's brand, really having more front-of-house presence. And so that is a good opportunity, I think, for this combined portfolio as we think about that. And so we see that continued growing presence that we have on tabletop and front-of-house and even on menu, we've had a lot of success getting and partnering with operators, particularly sort of the regional chain type operators on getting on menu with our brands. And so we see that as an opportunity. The Knorr brand is a very strong back-of-house. And I think that let's kind of maybe transit from just a U.S. perspective around this. You have to really have a global perspective because I think the strength of Unilever's Food Service presence is definitely very strong globally. And so we see McCormick opportunity in that because we have a lot of strength here in North America as an example, but we have an opportunity to accelerate our growth in Food Service at a global level. And so that's another area where we see synergy and opportunity to drive growth. Back-of-house, the McCormick brand name is back there, obviously, with spices and seasonings, as is the Knorr brand. But the Knorr chef-to-chef or Unilever, rather chef-to-chef coverage model and having really sort of strong relationships with the person making the menu decisions back-of-house is a coverage model that is quite significant. And so we see that as an opportunity, obviously, to bring in sort of more of the McCormick type of expertise in cooking, which is not an overlap with Knorr. And so I think that, that's another area of opportunity. So I would oversimplify. I think global is an area think front-of-house opportunities for Unilever brands but also think back of house, sort of the coverage model there is an important way to establish penetration and strength within the Food Service channel. Operator: Our next question comes from the line of Robert Moskow with TD Cowen. Robert Moskow: I think this is a question for both management teams, but it's going to take a year for this transaction to close theoretically. Fernando, maybe you could talk about what you learned in the process of separating ice cream, how you were able to keep people on that team focused on executing their operating plan? And I guess the same question for the McCormick team. Fernando Fernández: Well, thank you, Robert. Yes, we have a recent experience of separating ice cream, that was a big business. It's an $8 billion business, not a small business and establishing that company in 57 countries. I feel -- in this case, we have the advantage of separating foods and integrating that into an established organization like McCormick, that simplifies things a bit. In our case, we have had a team of experts with a lot of capabilities. That team is now at the service of McCormick to make this separation happen and to support in the integration also. I believe we learned a lot with previous experiences like [indiscernible] spreads in which the separation didn't take into account really sorting of the [indiscernible] costs in ice cream, we did that much better, and we have the opportunity at the same time of accelerating our growth performance, delivering the [indiscernible] of ice cream and increasing our margins. So of course, it takes a lot of leadership from the front, and this doesn't happen without planning without good external support. Brendan has put that in place already. And of course, in our side, we will provide all the necessary support. There will be transitional service agreements in place for around 2 years also in different areas like IT, distribution in order to ensure that this is a smooth transition, and there is no disruption in the case of our Food business transfer to McCormick. Brendan Foley: Rob, I think from a McCormick perspective, there are maybe two perspectives I'd love to share. The first is being able to continue to driving the business performance right now. We have a really strong team. And so as we put dedicated leadership and teams on this on this work. We also have been a great talented organization for those people to step up and really continue leading the business. And so we see our ability to do that is being very strong and high and -- and obviously, we feel like we have a very disciplined approach to this in the past because we have done integrations, although the scale is different, and we acknowledge that. But I think that the element of that is really going to come through in this planning and making sure that we are very, very specific and precise in terms of how we make sure that we continue really strong support against the current business while we also take on -- was a pretty important initiative. There was a question earlier in the call, which I'm not sure I fully answered as I kind of reflect back on my reply, and that was what's different about this than the other ones? And I think what's really different here, and I really want -- hopefully, everyone to appreciate this is when you look at traditional sort of an acquisition of transaction, you've got a company taking over something else. And that company's employees sort of then go over and take over the business, so to speak. This is very different. This is a combination of two companies already with the support and the discipline and the knowledge of running the business, coming together to execute this integration. And so I think that element of Unilever being a partner in this is not a temporary point. It's a sustainable point. When we think about that employee, those employees, a part of that organization becoming part of McCormick. And so we see a lot of strength in that. And that's a lot of -- if you had to compare on a principle, what may feel different in this, I think that would be one of the key points I would call out. Operator: Our next question comes from the line of Max Gumport with BNP Paribas. Max Andrew Gumport: Thanks for the question. You've quantified synergies and discussed some of the considerations with regard to the separation, such as TSA agreement. But I'm wondering if there's been any considerations for dis-synergies that could arise from the separation and if so, and the initial quantitation of those dis-synergies and also how they might split across the ever RemainCo and the Foods business? Fernando Fernández: I can answer this. We don't see any revenue dis-synergies here. We don't see in the case of Unilever, basically, as I mentioned before, these are a stand-alone business. Our Food business has on self [indiscernible] their own manufacturing, their own operations and logistics. So basically, we don't see any fundamentals of dis-synergies in our side. Max Andrew Gumport: Great. Very helpful. And then, Brendan, Marcos, with regard to the multiple, the 13.8x EBITDA multiple, can you just talk a bit more about the the conversations that went into determining what was the right multiple to pay? It seems like there is some focus on not paying more than more than McCormick 13.8x that you also quoted. But just any color or consideration that went in determining the right multiple, it would be appreciated. Marcos Gabriel: Yes, Max. I would say that both businesses are great businesses and Unilever Food is a fantastic addition as you think about these two companies coming together. So the way that we were assessing this deal was, in our parity in terms of the multiple between the 2 companies, in [indiscernible] brings a lot not only the scale but healthy margins and McCormick, as you know, is very differentiated as well in terms of volume growth over the last few years and our margin profile as well, we play in an advantaged category. So when you put those two companies together, we felt like the parity multiple would be adequate, in terms of this transaction. So that's kind of the high level of rationale for being at the same 13.8x. Operator: Our final question this morning comes from the line of Scott Marks with Jefferies. Scott Marks: The first one I just wanted to touch on, understand all the synergy potential and the overlap between some of the portfolio, but just wondering if you can kind of help us understand if the current backdrop in the food world or in the staples world in general, has kind of changed your time line for this or giving you any sense of urgency to get this done? Or if it has had any impact anyway. Brendan Foley: Yes. I think obviously, there's a lot going on in the world right now. So that's important to kind of keep in mind. But I think we've always viewed Unilever Foods as a great strategic fit. So we're in this moment where you can pick another year, something is going to be going on. But it still comes back to is this really strategically a strong fit and does it make sense? And when an opportunity presents itself like this, we think that it then becomes the right time. This transaction is about long-term potential of the combination, and where we see multiple levels of growth in established and emerging markets and across channels and brands. So I think I would also then really kind of emphasize the long-term nature of our thinking and our planning has to really sort of drive your thought process on something like this. We're certainly aware of the near-term pressures facing not just the food industry, let's say, but broadly, you think about the conflict in the Middle East and the broader CPG space. So each of us are taking steps to manage our business accordingly. However, we continue to believe in just the long-term fundamentals that really underpin the confidence in this combination, such as structural flavor tailwinds and emerging growth opportunity. And so in the meantime, sort of call it within the short term right now, we're both laser-focused on managing our businesses to deliver our plans. I think that's the best context I could give you because obviously, there is a lot of headlines in the news. Scott Marks: Understood. Appreciate that. And then maybe just last one. Given everything going on in the Middle East, just wondering how some of those dynamics impact your thinking on this, whether it's in terms of realizing some of those synergies or getting this deal complete or any other dynamics that could be impacted by what's happening across the world. Brendan Foley: No. I can't call out a specific element of that, that caused us to think about this differently or faster or slower. I'd just go back to my long-term commentary, and our thought process on that. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Freiha for any final comments. Faten Freiha: Thank you so much. Thank you, everyone, for joining our call today. If you have any further questions regarding today's information, please feel free to reach out to me, and this concludes our conference call for this morning. Thank you. Operator: Thank you. Ladies and gentlemen, you may disconnect your lines. Thank you for your participation.
Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Fourth Quarter 2025 Earnings Call. [Operator Instructions]. Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of March 31, 2026, and Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued March 31, 2026. If you do not have a copy of today's press release, you may obtain 1 by visiting the Investor Relations page on the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, Chief Executive Officer and President of J.Jill. You may begin. Mary Coyne: Good morning, everyone, and thank you for joining us today. 2025 marks the beginning of a strategic evolution for J.Jill. We embarked on a period of testing and learning in order to build a strong foundation for our business by expanding our customer file through product evolution, enhancing the customer journey and improving the way we work as an organization. While we delivered fourth quarter results that exceeded the updated guidance we provided in January, the period reinforced why this evolution is essential. We had an early assortment that did not resonate as hoped. We came up against earlier and deeper competitive holiday promotions. And we watch our direct customer continue to migrate towards the promotional end of the spectrum, taking value and discount rather than engaging at full price. Against this backdrop, our teams remained agile and reacted in season to ensure we ended the period with inventories in a clean position. As we enter 2026, we are taking the steps to transition and position the business for long-term growth. To achieve our objectives, we must expand our customer files. This requires patience and precision. We're expanding into new categories and modernizing our aesthetics to appeal to a broader customer base. but doing so in a way that helps holds the quality, fit and values that our loyal customers expect and trust from J.Jill. That's why our test-and-learn methodology is so critical. It allows us to validate new concepts with both new and existing customers before scaling, ensuring we're building sustainable growth rather than simply pursuing short-term gains. As we move through 2026 and beyond, you'll see us continue this balanced approach. And we believe the investments and strategic shifts we are making, will position us well to achieve our objectives. This evolution will take time, and we should not expect the path to be linear. But we are committed to maintaining a disciplined operating model, carefully managing expenses and leveraging our strong financial position and strengthen balance sheet as we pursue this course. None of this transformation would be possible without a best-in-class team. A combination of strong internal leaders with deep knowledge of J.Jill, and outside leaders bringing relevant experience and new perspectives. Throughout 2025, we've made deliberate decisions to strengthen our leadership bench by recruiting proven talent with deep expertise in brand transformation. We brought Courtney O'Connor onboard in July as Chief Merchandising Officer to support our product evolution. And [ VIVREDKey ] in November as the company's first-ever Chief Growth Officer to lead our e-commerce and AI initiatives. As we grow, we will continue investing in talent that complements our existing strengths and supports new capabilities. Turning now to our 3 key strategic pillars. First, evolving the product. In 2025, we analyzed our assortment and identified areas in which we needed to streamline remove redundancy and evolve to capture a greater share of our customers' wardrobe. We began testing categories and concepts to expand the relevance of our product assortments. In Q4, for example, we successfully tested small capsules in areas where we saw potential but wanted to validate customer response before making larger commitments. We also piloted a localized merchandising strategy, adjusting our assortment to better reflect the lifestyle needs of specific markets. What became clear through those tests is that when we gave our customer the newness she wanted, she responded even in a highly challenging promotional environment. These learnings shaped how we approach our 2026 assortment and are informing our broader merchandising strategy going forward. As a reminder, our summer 2026 assortment, which will be introduced in Q2, we'll capture the first influence from our strengthened merchant and design team. and we expect continued improvements in assortment as we move throughout the year. There will be more newness with silhouettes and fabrics as well as the beginning stages of expansion into areas of accessories such as bags and belts. Our goal is to continue to provide our loyal customer the quality and value she knows and loves us for, while introducing relevant and compelling products focused on the new customers who we aim to attract. Our second pillar is enhancing the customer journey. This past fall, we began to look at our marketing strategy differently and how we think about customer acquisition and engagement. Historically, our marketing spend has been disproportionately focused on our existing customer base. And while customer retention remains important, we know this approach was limiting our ability to expand our customer file and drive the kind of growth we're targeting. In 2026 and beyond, we plan to continue to rebalance our marketing investments to address the top of the funnel, building broader brand awareness and capturing new customers who may not yet be familiar with J.Jill. We believe these awareness building initiatives will help us reach a larger, more diverse audience. Our third pillar is operational improvements. Throughout 2025, we focused on strengthening our operational capabilities and leveraging new technologies that we expect to support future growth. We successfully implemented our new OMS system, providing us with a more modern platform, and created the Chief Growth Officer role to fully maximize e-commerce NII to help drive long-term success. As an organization, we are embracing the capabilities and efficiencies that AI can enable. With every potential use case, we ask ourselves: Will it increase revenue, will it increase efficiency and will it drive speed to market. As we begin 2026, we are introducing several new tools across the organization and have kicked off a significant project, the implementation of a new merchandise planning and allocation tool from Anaplan. We plan to leverage this predictive AI powered forecasting model to optimize how we plan and allocate inventory across the business. Thanks to the hard work of our team, we are on track late in the second half of 2026 with meaningful benefits expected to begin in 2027 and we will continue to improve as the system learns and we scale it to drive better demand forecasting, smarter allocation by location. As we look forward to 2026, we are confident in our strategic direction while being realistic about the current consumer environment, the impacts of tariffs and the work ahead. While the quarter has seen a challenging start largely driven by continued price sensitivity, particularly in our direct channel, we are encouraged by the performance in our stores supported by trained associates, providing personalized guidance and tactile experiences that excite both existing and new customers around the brand's product evolution. Importantly, we are taking key learnings from these first few weeks of the year to inform our go-forward plan, all of which is reflected in our outlook, which Mark will review. In closing, we're viewing 2026 as a period of deliberate accelerated change to expand our customer file while maintaining our operational discipline. We remain committed to our methodical test-and-learn approach, building on validated successes around new initiatives before scaling investments. I am confident that this measured approach, combined with our strong balance sheet and operational rigor, will position us to achieve our objectives and deliver long-term shareholder value. And with that, I'll turn it over to Mark. Mark Webb: Thank you, Mary Ellen, and good morning, everyone. As Mary Ellen outlined, 2025 marked the beginning of a strategic evolution for J.Jill, a deliberate period of evaluation, testing and learning, that began to build the foundation for expanding our customer file. As we enter 2026, we are deploying these learnings which, while we expect will take some time to fully take hold, we are confident we'll position the business well for long-term sustainable growth. Before discussing our 2026 outlook, let me provide context on fiscal 2025, which demonstrated the resilience of our operating model even as we began this evolution and despite significant external headwinds. We generated $23.2 million in free cash flow in the year, maintained a solid gross margin rate of 68.7% despite incurring approximately $7.5 million of incremental net tariff costs, we opened 4 net new stores, successfully upgraded our order management system and delivered adjusted EBITDA of $84.3 million on sales of $596.5 million cash interest expense. We repurchased $10.4 million or about 638,000 shares of J.Jill stock and paid approximately $5 million in ordinary dividends demonstrating our ongoing commitment of returning cash to shareholders and supporting total shareholder return. These results reflect the operational discipline and agility of our organization in navigating a complex environment. The tariff policy enacted in April created unprecedented operational complexity and we experienced a slowdown in our customers' shopping behavior throughout the year, contributing to a 3% decline in comparable sales for the year. I want to thank our vendor partners for their support amidst these challenges and recognize and thank our cross-functional teams for their agility and resilience adapting their work and processes in response to the changing business requirements. Many of the same team members manage the successful March 2025 cutover to our new OMS system, a major modernization of our technology foundation. As we move into 2026, we are planning for a year of strategic investment and measured transition. We're building the foundation for sustainable, profitable growth by expanding our customer file modernizing our product offering and further strengthening our operational capabilities. This requires deliberate investments that will pressure near-term profitability, but position us for stronger performance in 2027 and beyond. Our financial approach doesn't change. We're being disciplined about where we invest, measuring returns carefully and maintaining financial flexibility to adjust as we learn. Our strong balance sheet and cash position provide flexibility to execute this strategic evolution while continuing to return capital to shareholders. With that context, let me walk through our fourth quarter performance and then provide our outlook for fiscal 2026. Total company sales for the quarter were $138.4 million down 3.1% compared to Q4 of 2024. Total company comparable sales for the fourth quarter decreased 4.8%, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024, driven by soft traffic and conversion, which were partially offset by stronger average unit retails and average transaction values in the quarter. Net new stores contributed approximately $2 million in revenue. Direct sales as a percentage of total sales were 53.5% in the quarter, compared to the fourth quarter of fiscal 2024, direct sales were up 2.6%, driven by markdown sales, which benefited from ship-from-store capabilities. Q4 total company gross profit was $87.3 million compared to $94.8 million last year. Q4 gross margin was 63.1%, down 320 basis points versus Q4 2024, driven by approximately $4.5 million of net tariff costs incurred during the quarter and deeper year-over-year discounting amidst a very competitive promotional environment. These headwinds were partially offset by favorable freight costs this year compared to last. SG&A expenses for the quarter were about $87 million compared to $89.3 million last year as increased selling expense and G&A overhead were more than offset by lower marketing management incentive, nonrecurring costs and stock-based compensation. Adjusted EBITDA was $7.2 million in the quarter compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4, down about $500,000 compared to last year, driven by the term loan refinance completed in December. Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share compared to earnings of $0.32 per share in Q4 2024. Average weighted diluted share count in Q4 this year of 15.3 million shares reflected the impact of repurchasing 637,700 shares in fiscal 2025. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations. Turning to cash. We ended the quarter and full year with $41 million of cash. For fiscal 2025, we generated $42.1 million of cash from operations and $23.2 million of free cash flow, defined as cash from operations less capital expenditures. We refinanced our $75 million term loan in December extending the term through December of 2030 and saving [indiscernible] approximately $10.4 million of share funded from cash on hand. As of January 31, 2026, a there was $14.1 million of availability remaining under the stock repurchase authorization that expires in December 2026. Looking at inventory. At the end of the fourth quarter, total inventory, excluding the impact of tariffs was about flat compared to the end of fourth quarter last year, including approximately $9 million related to net tariff costs reported inventory at end of Q4 was up 14% compared to end of Q4 inventory last year. Capital expenditures for the quarter were $10.1 million. Total capital expenditures for full year 2025 were $18.9 million focused on new store openings and the OMS project. With respect to store count, we opened 7 stores in the fourth quarter with no closures. We ended the year with 256 stores, a net increase of 4 for the year as 9 new store openings were offset by 5 closures. Turning to our expectations for fiscal 2026. As mentioned, we expect 2026 will be a year of deliberate investment. Our guidance reflects this along with the continued uncertainty in the consumer and geopolitical environment, the turbulent trade policy landscape and the expectation that it will take some time for new customers to respond to our evolving product assortments. As Mary Ellen mentioned, and as is reflected in our first quarter guidance, we have seen a softer start to Q1. We expect this performance to gradually improve in second quarter as the new assortment hit in their entirety [indiscernible] incurred and for products landed before for February 28, 2026, will expense through the P&L during the first half of 2026. As a reminder, these tariffs were an average rate of approximately 20% and net of vendor offsets are expected to result in about $5 million of added cost of goods sold in the first quarter compared to 0 tariffs incurred in Q1 2025. Going forward, we are now assuming 10% tariffs on goods received after February 28 through the end of the first quarter and 15% on goods received for the rest of the year. Given these rates we expect the second quarter to incur approximately $4 million of incremental net tariff costs compared to less than $1 million incurred last year in Q2 and Q3 and Q4 to incur approximately $3 million of net tariff costs each compared to $2.5 million and $4.5 million in Q3 and Q4 last year, respectively. Total tariff load net of vendor offsets in 2026 will be about $15 million compared to about $7.5 million incurred in 2025. Our assumptions related to tariff rates are all subject to any additional changes the U.S. may enact to global trade policies. Further, our guidance does not assume receipt of any refunds of tariffs paid to date. For the first quarter of fiscal 2026, we expect sales to be down approximately 5% to 7% compared to last year, with total company comp sales down approximately 7% to 9%. We expect adjusted EBITDA to be in the range of $15 million to $17 million, reflecting approximately $5 million of tariff pressure. For Q1, we expect gross margin to be down about 400 basis points compared to Q1 2025 as the annualized impacts of tariffs is incurred and product and marketing strategies are still evolving. While the quarter is off to a challenging start, as discussed, we are seeing relatively better performance quarter-to-date in our retail channel. For full year fiscal 2026, we expect sales to be down 2% to about flat compared to last year. Total company comp sales to be in the range of down 3% to down 1% and adjusted EBITDA of $70 million to $75 million. This guidance assumes full year gross margins down about 50 basis points compared to 2025 and as we expect headwinds related to tariffs in the first half to be partially offset by better full-price selling, lower promotions and lower year-over-year tariffs beginning in Q4. Regarding inventory, we will continue to take a prudent approach to inventory investments given the relative uncertainty we have discussed with unit purchases positioned down in the mid-single digits. Regarding store count, we continue to see opportunity to expand, but remain disciplined in our approach amidst our brand evolution. We are pleased with the performance of new stores opened to date and expect to grow net store count by about 5 stores by the end of fiscal 2026 of our planned openings, approximately half are in reentry markets. We expect reentry stores to ramp very quickly given the customer reception and brand awareness that exists in these markets, while new markets are experiencing a longer ramp period. We expect openings in new markets to experience about a 3- to 5-year ramp to maturity. New stores represent an attractive investment opportunity and we are excited to continue to expand our footprint at a disciplined pace. With respect to total capital expenditures, we expect to spend about $25 million in fiscal 2026 with investments focused on new stores and a new merch planning and allocation system that is projected to be completed toward the end of 2026. Regarding free cash flow, we expect free cash flow for fiscal 2026 of about $20 million. And finally, with respect to cash distributions we announced today that our Board of Directors approved a $0.09 dividend, reflecting a $0.01 or 12.5% increase in our ordinary dividend payable April 28 to shareholders of record as of April 14, and we have $14 million remaining on our fair repurchase program, which is authorized through December 2026. It is important to note that given the timing of year-end and Q4 earnings announcements, our Q1 repurchase window tends to be shorter than other windows during the year. In summary, we believe we are making the adjustments necessary to position the business for sustainable growth. We are confident the modernization and evolution of our product and marketing efforts will enhance and broaden the appeal and awareness of our incredible brand. And we believe the investments we are making in our front-end MP&A platforms will position us well and provide benefits into fiscal 2027 and beyond, all while continuing with our commitment to distribute excess cash to shareholders through our ordinary dividend program and share repurchases. Thank you. I will now hand it back to the operator for questions. Operator: [Operator Instructions]. Your first question comes from the line of Jonna Kim of TD Cowen. Jungwon Kim: Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? Would love any color there? And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day. Mary Coyne: Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1 had a challenging start was a midst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers. But we do believe that the macro environment had an impact in this quarter for sure. With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by product drop that is coming in the 10 days before. Operator: Your next question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: A lot of work underway. As you think about the product assortment and the test and learn that is put in place, what is changing bottoms, tops, sweaters, style, look, print patterns, what is changing? And what do you expect to see and when will the new full assortment be there? And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward? And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs. Mary Coyne: Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe. We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years. accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life. We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have, we are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, -- we love this customer segment. She's loyal. She's responsive. She is -- has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience. Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience. Mark Webb: Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. what we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera. What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates maybe up a tiny bit that we would have factored in that I mentioned in Q4 was the first quarter in a while where we actually had great -- small freight savings. And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward. Mary Coyne: Yes. And I just want to circle back for 1 minute, Dana and just reiterate, while we know we have a great customer, we also are now the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward. Operator: Your next question comes from the line of Corey Tarlowe of Jefferies. Corey Tarlowe: Great. Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date? Mark Webb: Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter it was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November. I think we messaged some of that in some of our inter-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter. And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall. -- and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter. Corey Tarlowe: Understood. And I think you mentioned a new merchandise planning system. I know that there have been other initiatives that you've undertaken, whether it was the OMS project or other items. Can you talk a little bit about the benefits of this what the costs are and then how we should think about other incremental projects that are coming in, in this year, which I think you called it an investment year? Mary Coyne: I mean, Corey, I'll start just by saying we are so excited about the MP&A project through out of plan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right step at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative. Mark Webb: Yes. And Corey, the one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned. With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted projects than an OMS project would be an LMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct -- the direct business, et cetera. So that's kind of what's behind the expectation of it being and investment here with respect to capital. And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward. and then obviously, payroll and some of the investments we've made in talent. Operator: Your next question comes from the line of Dylan Carden of William Blair. Unknown Analyst: This is Ann bingo on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement? Mary Coyne: So I'll start you for the question. as we're entering 2026, we are in a period of evolution, and we are testing and learning every day -- what I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4 we will see learnings from our marketing initiatives that we're attaching where we are rebalancing spend where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't. Mark Webb: Sorry, I was just going to add with respect to the Q4, as Marion mentioned, the product, obviously, it's -- we're still pre the new assortments in -- and we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts. -- that Q4 would then turn to a small tailwind. So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well. Unknown Analyst: Understood. And then on pricing, do you guys see additional opportunity for targeted price increases in 2026? Is this reflected in the current guide? Or does the current consumer environment or a more cautious approach? Mary Coyne: We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price. Operator: And your next question comes from the line of Janine Stichter of BTIG. Unknown Analyst: You've got Eaton Sage on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date? Mary Coyne: Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule we saw success in expanded categories in outerwear, we saw the start of accessories, which has really moved into Q1 as a success story. -- and we tested some price points, particularly in sweaters with Casimir and soft success. As we moved into Q1, a we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our 2 product evolution. -- where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there. Operator: With no further questions, that concludes our Q&A session and also concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Now, and then I will start at the top. Thank you. Great. Good day, and thank you for standing by. Welcome to the FactSet Research Systems Inc. second quarter earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead. Kevin Toomey: Thank you, and good morning, everyone. Welcome to FactSet Research Systems Inc.'s second quarter fiscal 2026 earnings call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions. The call is scheduled to last one hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on slide two. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-Ks and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today, both of which can be found on our website at investors.factset.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Viswanathan, Chief Executive Officer, Helen Shan, Chief Financial Officer, and Goran Skoko, Chief Revenue Officer. I will now turn the discussion over to Sanoke Viswanathan. Sanoke Viswanathan: Thank you, Kevin, and good morning, everyone. Thank you for joining us. ASV growth accelerated in Q2 for the fourth consecutive quarter, 6.7%, to $2.45 billion. It accelerated across all geographies and has grown year over year in each of retention, expansion, and new business. Adjusted operating margin was 35% and reflects the investments we are making this year. Adjusted diluted EPS was $4.46, up 4% year over year. These results confirm that FactSet Research Systems Inc.'s foundational strengths are increasingly valuable in an AI-intensive environment: our connected data, embedded workflows, best-in-class service, and broad distribution. Customer wins from this quarter illustrate the breadth and depth of our data and product capabilities. First, following the multiyear renewal of our relationship with a major global investment bank, we expanded into their international corporate bank. This was driven by the depth and differentiation of our deep sector content. Similarly, our private capital data assets were central to our new mandate with a leading Australian private equity fund. These wins show dealmakers continue to value our differentiated data. Second, one of our largest international wealth clients selected our proposal generation solution as an extension of their existing use of FactSet Research Systems Inc. for portfolio monitoring. A major Canadian wealth manager adopted our real-time exchange data feed product. These expansions showcase demand for our products that span the whole investment lifecycle, including portfolio construction, ongoing oversight, and end-client engagement. Third, Capital Group expanded their use of our Portware trading platform, which also achieved several new wins with other large asset managers. In addition, our new order management solution, LiquidityBook, is gaining significant traction with hedge funds and other institutional buy-side clients. Based on our strong first half performance, we are raising our ASV, revenue, and EPS outlook ranges for fiscal 2026. This reflects sustained momentum across all client types and geographies. We are maintaining our guidance range for operating margin as we continue to balance investments and productivity improvements. Last quarter, I outlined three priorities: driving commercial excellence, delivering productivity improvements, and solidifying our long-term strategy for sustainable growth. We have made strong progress on all three. We are bolstering the health of our client franchise, making our core operations more efficient, and redeploying our resources to fund strategic investments to drive further growth and structural investments to deliver better operating leverage in the medium term. First, on commercial excellence, we are rolling out new pricing and packaging, are infusing AI throughout the sales life cycle, and have realigned sales and customer success incentives. With disciplined pricing and packaging, our revenue base is becoming more durable. Our direct seat-based exposure now represents less than 20% because of appropriate minimums and bundling into enterprise agreements. In Q2, the majority of our renewed ASV was in the form of enterprise agreements or contracts that are more than three years duration. On average, these renewals extended in length by more than 30%. Our focus on client health has led to a five-point Net Promoter Score improvement just this quarter amongst our investment banking users. This is helping drive ASV retention and expansion. Our overall ASV retention continued at over 95% in Q2. 86% of our top 200 clients use five or more of our solutions, up from 78% three years ago. In Q2, Data Solutions grew by double digits across all firm types, including the highest expansion we have seen since 2023. Today, 48 of our top 50 clients are using at least three of our AI solutions, with several more in trials. In Q2, new business growth accelerated. Our marketing leads increased 11% year over year. And with stronger lead scoring and more targeted outreach, win rates for these opportunities improved by 29% year over year. Corporates and private capital wins were particularly strong, with double-digit growth in both. First half productivity initiatives have already captured more than half of the 100 basis points of productivity improvement we targeted for the year. We have made real changes in technology, data operations, and client support, our largest three operating cost centers. We have consolidated all FactSet Research Systems Inc. technology under our newly appointed CTO and are converging on standard tools and platforms to deliver efficiency. For example, our internal development platform that standardizes tooling and software deployment will allow engineers to spend more time on product development. AI coding assistance now author nearly one fifth of our successful code commits and free up a quarter of our engineers' capacity in those teams. This includes over 90% reduction in efforts spent on business-as-usual activities like software upgrades and patching. Some teams have radically reduced time to market for new product development by fully automating the delivery life cycle and collapsing a month-long cycle to one day. We see ample scope to scale this transformation. In data operations, we are seeing rapid transformation as we drive down unit cost and time to value and expand our content universe. Our Rubik's private company classification project to deepen coverage from four to six levels is a great example. We have quadrupled classification capacity year over year while keeping costs flat, capturing scale economies in our business. This quarter, we have deployed four distinct AI tools across different parts of our data operations, generating 25%+ reduction in manual curation on average. We are expanding this systematically across all our data, while maintaining high quality standards. The text-to-formula agent that we launched in October 2025 has fundamentally changed how we handle client inquiries. Our help desk experiences double-digit monthly growth in formula support requests. But the volumes handled by our client service representatives have now started to decline as the agent absorbs an increasingly large share of these inquiries each month. This allows our support colleagues to focus on higher-level activities, such as custom client implementations, advanced analytics support for fixed income and quant workflows, and outbound engagement to expand our reach. We are lowering the variable cost of serving each client while increasing our capacity to engage and retain our highest-value accounts. Beyond these three areas, we are systematically identifying further cost savings across the business. These include streamlining procurement and lead-to-cash processes, consolidating legacy software contracts, and optimizing our third-party data agreements. These productivity gains will make us a structurally more efficient company, flattening the cost curve as we scale and freeing up resources for high-return opportunities. We have made substantial progress on developing our medium- to long-term strategy. I will share it in detail, along with the business plan, at an investor event after the end of this fiscal year. Let me reiterate that we are well positioned to be a winner in an AI-intensive world and to deliver attractive ongoing financial returns. To give you some insights now, a key element of our strategy is to be a leading data and workflow infrastructure provider for AI-enabled institutional finance. What we are seeing so far is clear. As clients move AI into production, they are pulling FactSet Research Systems Inc. deeper into their operations, not replacing us. Our foundational strengths include connected data and embedded workflows, and these make us more valuable to clients as they implement AI in their environments. We are wired into our clients' operations so the relationship deepens with every transaction. Five key factors make our data differentiated and trusted, and thereby integral to financial institution clients that have zero error tolerance. Data depth and coverage. We collect and refine data sourced directly from over 300 stock exchanges, millions of public and private company websites, thousands of data partners, and clients themselves. For example, broker research. FactSet Research Systems Inc. holds the commercial and legal rights to access these proprietary datasets and licensed content. Data cohesiveness. We seamlessly integrate the data from one time period to another to provide holistic company time-series data from annual, quarterly, and preliminary reports going back over 40 years. Data comparability. We provide data that is comparable within and across industries with considerations to different accounting standards, market and company specific presentations, reporting practices, and regulatory requirements. Data traceability. Clients can view the data source of each data point through document tracebacks. This creates data transparency, credibility, and reliability. Data quality. We apply quality checks to data, and apply in-tool checks at every step of our collection pipelines. We have automated logical validation rules augmented by audits conducted by humans. After all this, we conduct product checks by our experts to ensure our data products are fit for use in each of our end markets. Over the past three years, we have tripled our data assets while maintaining these high quality standards. But it is not just data alone. It is how deeply we integrate FactSet Research Systems Inc. data with client data and deliver value that is how we support the sophisticated decisions our clients make every day. FactSet Research Systems Inc.'s Office add-ins are woven into clients' daily research and reporting, and the custom models they have built on our data have grown by 17% just this quarter. Our buy-side analyst clients store over two million research notes in our database, and this has been growing at over 35% per year for the last three years. Investment committees use this research to make decisions. Compliance teams run regulatory checks against our outputs. And the longitudinal analyses stored and reported from our analytics book of record are essential to communicating the definitive source of portfolio performance and the characteristics of millions of funds managing trillions in assets. The number of institutional portfolios integrated into FactSet Research Systems Inc. grew by 20% in the last year, to almost 8,000,000. Let me use a value-at-risk calculation for a multi-asset class portfolio to illustrate the mission-critical nature of our embedded workflows. When a portfolio manager looks at a value-at-risk number, they scrutinize the output of tens of thousands of simulations across hundreds of risk factors driven by millions of data points: position attributes, historical return series, yield curves, volatility surfaces, correlations, and many, many more. All of which must be correct, consistently sourced, and temporally aligned. If even a single data node is wrong, the entire risk calculation silently misstates the riskiness of a portfolio. This is not a theoretical concern. It is a daily operational reality for every institutional investor managing risk at scale. The data checks we conduct across our multi-asset class portfolio analytics suite alone have grown by 29% in just the last year, underscoring the importance of our robust infrastructure. AI accelerates aggregation and finds patterns in the data, but it cannot substitute our trusted, reconciled, data production and modeling infrastructure that underpins these risk, valuation, and compliance workflows. Our AI strategy will leverage these foundational strengths and build more integrated solutions at all levels of the emerging AI stack. Partnerships for growth are an important component of our strategy. For example, partnerships with Snowflake and Databricks enable clients to seamlessly combine FactSet Research Systems Inc. data with their own sources and operate AI-driven workflows in the secure cloud environments they already use. We are also actively partnering with Anthropic, OpenAI, and other leading frontier labs to ensure that FactSet Research Systems Inc. datasets are readily available in their marketplaces to facilitate rapid development of new AI solutions. And we are infusing agentic capabilities across our workstation so that users can operate more effectively inside our governed, trusted workflows. Our newly announced partnership with Finster will accelerate our agentic platform for banking, meeting the growing demands of our dealmaker clients. We have strong traction and are seeing rapid adoption and use of our solutions as AI workloads take root at our clients. One illustration: our MCP Server that is built on a robust ecosystem of content APIs was launched in December and already has over 120 clients actively engaged. API call volume is steadily growing as well, with March volumes at three times the February level. We expect this success to be replicated across our AI solutions in all layers of the stack. As AI continues to reshape financial institutions, FactSet Research Systems Inc. is becoming more central to clients' mission-critical workflows. We are in the early innings of sector-level technological change and are building on our current foundational strengths to continue creating value for our clients in the future. Let me close by thanking every FactSet Research Systems Inc. team member for their continued focus and commitment to delivering for our clients. We are winning competitive mandates and expanding relationships from a position of strength. Now I will hand over to Helen Shan to discuss our Q2 performance and updated guidance in more detail. Helen Shan: Thank you, Sanoke Viswanathan. Great to be here with everyone today. The second quarter, organic ASV accelerated to 6.7%, an increase of $38 million. Growth was balanced across all regions and fueled by three key drivers: strong client expansion, new business wins, and higher pricing capture from our annual price increase in The Americas. Let us walk through our performance by region. In The Americas, organic ASV grew 7%, up from 6% in Q1. Asset management continued to be a bright spot with growth driven by both trading and middle-office solutions. Dealmakers contributed with competitive displacements in banking and uplift from successful renewals in sell-side research. An increase in new business logos was powered by hedge funds and corporates. A competitive managed services win in EMEA, organic ASV grew 4%, in line with Q1. Higher demand for Data Solutions in wealth, and a large banking renewal that included PitchCreator and our new MCP solution, drove the positive results. These wins helped offset softness with asset owners, partly due to pension reform in The Netherlands. In Asia Pacific, organic ASV accelerated to 10%, up from 8% last quarter. Improved demand from asset managers and hedge funds for middle-office and trading solutions, coupled with stronger banking retention, drove the region's performance. Now turning to our results by firm type. On the institutional buy side, we delivered 5% organic ASV growth, up from 4% last quarter. This reacceleration was driven in part by higher trading volumes fueled by additional Portware installations, increased data demand by hedge funds, and continued strength in managed services linked to our performance solutions. In wealth, organic ASV maintained a 10% growth rate, despite the challenging year-over-year comparison given our landmark UBS win a year ago. This performance was driven by higher demand for our wealth platform as we further integrate into clients' daily work with our proposal generation and adviser dashboard solutions. In dealmakers, organic ASV grew 8%, up from 6% in Q1. Competitive displacements and successful enterprise renewals added momentum in banking. Our investments in deep sector, aftermarket research, and banker productivity solutions position FactSet Research Systems Inc. as the trusted enterprise partner. Both corporates and private capital accelerated to double-digit growth this quarter, with new business and competitive wins fueled by demand for our data. The organic growth in market infrastructure accelerated to 8%, up from 7% in Q1, with robust sales in real-time data and higher retention. In addition, strong issuance activity supported the positive results for CUSIP. We continue to expand our client and user base. In Q2, we added 98 net new clients, bringing our total to 9,101, led by corporates and wealth. Our user base increased to over 241,000, with additions largely in wealth and dealmakers, reflecting a 10% annual growth rate. Lastly, we continue to have solid retention rates at 91% for clients and above 95% for ASV. These results reflect the mission-critical nature of our business as the world's leading financial institutions continue to trust FactSet Research Systems Inc. Turning now to our financial results. Second quarter revenues grew 7.1% year over year to $611 million, or 6.8% organically, excluding impact from foreign exchange and M&A. Adjusted earnings per share was $4.46, up 4% year over year, driven by higher revenue and a lower share count, partially offset by a higher tax rate. Adjusted operating margin came in at 35% for the quarter, as compared to 36.2% in Q1 and 37.3% a year ago. In line with our plan, this reflects the timing of strategic investments, driven by three main factors. First, higher people expense due to year-over-year compensation adjustments and full impact from merit increases. Second, accelerated technology spend on cloud infrastructure and AI tools, and third, higher professional fees from increased project work in the quarter. The midpoint of our full-year margin guidance reflects expected investment pacing through the second half in technology infrastructure, professional services, and product development. AI is playing a dual role, enhancing client value through new capabilities while driving productivity gains. We remain committed to long-term growth, maintaining our track record of capital discipline. As highlighted last quarter, we are investing to differentiate our data, deepen client workflows, and modernize our platforms, with approximately two thirds directed towards growth initiatives and one third on enhancing our internal infrastructure. Funding will come from productivity improvements and disciplined cost management. With the first half now complete, let me connect our investments to the early outcomes we are seeing. Our investments in data expansion are delivering. We now offer our core datasets through MCP Servers, giving clients flexibility to access our data in their preferred environments. Workstation users are benefiting from optimized real-time data delivery, driving both efficiency and cost effectiveness for clients. And we are meeting client demand by integrating premier research firms like JPMorgan, Barclays, and Kepler directly into our platform. These are expanding our addressable market and enhancing the value we deliver to clients. Our workflow investments are receiving market validation, expanded our long-standing Schroders relationship to provide a managed service to enable greater scale. As highlighted earlier, Capital Group selected us as their trading platform because of our hyperscalable platform and high-volume capabilities. And the year post acquisition, demand for a LiquidityBook order management system and FactSet Research Systems Inc. Plus and cross-sell expansion. Erwin Investor Relations solution is driving meaningful new logo growth. These all showcase our ability to scale from point solutions to enterprise-wide partnerships. On the structural side, we are executing across four priorities. First, modernizing our tech stack and cybersecurity to strengthen platform resiliency as we integrate agentic capabilities into the workstation. Second, deploying AI to scale our content operations as mentioned by Sanoke Viswanathan earlier. Third, strengthening our brand with our Fluent in Finance campaign that is generating strong top-of-funnel growth. Lastly, freeing up engineering capacity with AI, enabling us to accelerate new projects with existing talent. We expect these benefits to accelerate through next fiscal year and beyond. We are also on track to capture our intended in-year expense savings by automating manual processes through AI, optimizing cloud usage, and streamlining our portfolio through product life cycle rationalization. For example, we have been able to reduce the cost of vectorizing client data by 80% while delivering faster and more accurate results. Of our planned 100 basis points in savings, we have already secured more than half and remain on track to deliver the full benefit in H2. This improving operational efficiency combined with consistent free cash flow generation gives us flexibility to deploy our capital. Our framework prioritizes organic investments followed by strategic M&A, returning excess capital to shareholders. Our balance sheet remains strong with gross debt leverage at 1.4x, providing capacity across all three priorities. At current valuation levels, we see our buyback program as a compelling use of capital. In Q2, we repurchased approximately 652,000 shares for $163 million and year to date deployed over $300 million to repurchase shares at attractive prices. To put this into context, in the past two quarters alone, our accelerated pace of buybacks has resulted in a 3% reduction in total shares outstanding. At quarter end, we had approximately $700 million remaining under our upsized $1 billion authorization. Based on our strong first half performance and improved visibility, we are raising our fiscal 2026 guidance. ASV growth is now expected at $130 million to $160 million, representing approximately 5.4% to 6.7% growth, an increase of $20 million at the midpoint. We are targeting GAAP revenue at $2,150 million to $2,470 million, representing an increase of $25 million at the midpoint. We are maintaining our guidance ranges for GAAP operating margin and adjusted operating margin, accounting for the potential higher performance-based compensation given the strong commercial outlook. The effective tax rate remains unchanged. Our guidance range for GAAP EPS is now $14.85 to $15.35, an increase of $0.20 at the midpoint. For adjusted EPS, our range is now $17.25 to $17.75, representing an increase of $0.25 at the midpoint. This revised outlook reflects improved visibility in client demand, accelerating commercial momentum, and realized benefits from our productivity initiatives. Our priorities are clear: deliver innovation, deepen client relationships, and invest with discipline. With that, I will turn it back to the operator for questions. Operator: Thank you. As a reminder, to ask a question, please press star 11. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question. Please standby while we compile the Q&A roster. We will now open for questions. Our first question comes from the line of Kelsey Xu with Autonomous Research. Your line is now open. Kelsey Xu: Hi, good morning. Thanks for taking my question. If you transition all of your workstation ASV into Data Solutions ASV and apply usage-based pricing on top of that, what would that look like? Because I think end users are using FactSet Research Systems Inc. Workstation to get access to your data anyway, just curious how you think about the business model in the quote unquote, wholesale world. Especially as data consumption is expected to increase meaningfully. How important is it for FactSet Research Systems Inc. that it continues to own the user interface product, especially for research analysts? Thanks a lot. Sanoke Viswanathan: Thank you, Kelsey. I appreciate the question, and it is an important question for not just us, for the whole industry. We, at the moment, are seeing strong growth across all our channels. So we are seeing continued growth in our workstation, which Helen already talked about. We are also seeing tremendous growth in our Data Solutions both through data feeds, APIs, and increasingly through our newest channel, which is the MCP Server, which allows for opening up of new TAMs inside our clients'. So we are seeing user persona shifting from just the traditional users who continue on the workstation to also include technology teams, data science teams, and the broad enterprise user across our clients, which happen to be very large financial institutions for the most part. So we are seeing actually a real compounding of this at the moment. Your question is a speculative question about the future, where, you know, all these channels disappear and we are just in the data business. The way we are working through that, at early stages in this evolution of the market, is we are developing our strategy by working jointly with our customers to effectively look carefully at our pricing and packaging, and we are striking enterprise contracts with them that gives both them and us a lot of flexibility in how to continue to deliver value to them in the future. So what, and you have seen the results. We have had great success in this quarter alone in restructuring some of our contracts, and we are seeing a real extension of almost 30% or over 30% in our enterprise contracts. And also, a significant share of our contracts are now enterprise agreements or, you know, agreements that are really long term in nature. So with that, we give ourselves and our clients flexibility to consume our data in any number of ways: through the workstation, through data feeds, through MCP, and frankly, any new channels that open up in the new context. We are very optimistic about the future of this multichannel mix business, if you will. Because remember, the core of all of this is our data, which is highly valuable in whatever context our clients consume it. And, you know, we have given you quite a lot of evidence of how important it is for us to deliver strong, high-quality, concorded data. And, Goran, do you want to add anything to that? Goran Skoko: Yeah. Kelsey, you know, the concept of utilizing our content or components of FactSet Research Systems Inc. is not new to us. You know, over the past seven, eight years, we have been talking about open approach and servicing clients where they are, meeting them where they really need our solutions. So in terms of owning that interface or really enriching the interface so the clients can properly, you know, complete their workflow has been our approach for years. In terms of, as Sanoke Viswanathan touched on, enterprise level agreements, and as we, in which we are entering with more and more clients into, and consumption laid on top of that, which we think will more than compensate to any type of attrition on the workstation side going forward. Helen Shan: Thank you. Operator: Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Your line is now open. Ashish Sabadra: Hi, thanks for taking my question. Really strong momentum in the business. My question was focused on the sales pipeline, demand environment as well as sales cycle, particularly in the context of these geopolitical, evolving geopolitical concerns. Any color that you can provide on that front? Thanks. Sanoke Viswanathan: Sure, Ashish. We are seeing broad-based demand and a really strong pipeline through the rest of the year. We are seeing improved retention, continued expansion, and also really strong new business growth. So it is across the board. What is driving our sales cycle now is we are seeing asset managers consuming a lot of our Data Solutions. As you know, we have been making investments in real-time data, pricing and reference data, and private capital data. All of this is resonating and it is driving a significant interest in our buy side. Middle-office solutions are, again, resonating very well with the managed services overlay. That is particularly getting even more exciting in an AI-intensive world where we can add agentic workflows on top of that. And our trading solutions are growing strongly as well. So broadly, I would say the sales cycle has not changed. The macro conditions are not affecting us. We see traction across all of our client groups. What I can say is when it comes to AI solutions, the sales cycle is considerably faster. Clients are eager and enthusiastic to try out new solutions. And you might have seen we even announced yesterday a new partnership with Finster on our banking agentic platform. Again, we are being very client-demand driven, and we see tremendous demand and enthusiasm from clients to try these solutions. And our MCP solution, which we launched just in December, again, to reiterate, has been our fastest-growing solution in the market. Operator: Thank you. Our next question comes from the line of Manav Patnaik with Barclays Capital. Manav Patnaik: Thank you. Good morning. I just wanted to focus on, I think you mentioned your middle office and trading solutions growing really strong as well. And I noticed in the prepared remarks, that came up a lot in terms of the accelerated growth. So I was just hoping you could double click on that, maybe just help us appreciate, you know, how big those two solutions are, and maybe what are the keys to the, you know, key sub solutions, I guess, within those that are selling really well nowadays? Sanoke Viswanathan: Thank you, Manav. Yes. This is our, you know, one of the crown jewels in our business, which is we are deeply, deeply entrenched in providing some of the critical support to large buy-side clients. It starts with sort of the essential ingredients of what we do in portfolio analytics, which is performance analytics, attribution, and risk management. And these are mission-critical processes for our clients. And in, you know, as we said in our prepared remarks, millions of funds depend on the immutable data that is stored and distributed from our analytics book of record, which delivers these quality, high-grade analytics year after year after year over the last several decades. And so it is a very important part of the core investment operations of our client. The parts of that that are particularly growing in, you know, especially in this quarter, and we see this trend continue, is clients continuing to shift into multi-asset class portfolios and starting to really demand a total portfolio view that mixes private and public positions, normalizes risk across these asset classes, and looks at what-if scenarios cutting across, you know, different types of risk analyses that you run on all of those portfolios. Events like the, you know, in recent markets around private credit and the like, only increase the relevance of these risk analyses and make our business even more sticky to our clients. We are seeing strong progress in our managed services that help clients operate these large platforms, transform their data, ensure that it is deeply integrated into our systems, and the output of it is reported downstream into multiple different sources, whether it is compliance teams that are doing regulatory checks, end clients that are demanding progress on performance, and also investment committees who are using all of that research and analytics to make asset allocation, both strategic and dynamic asset allocation, decisions. Manav Patnaik: Thank you. Operator: Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open. Shlomo Rosenbaum: Hi. Thank you very much for taking my question. Excuse me, Sanoke Viswanathan. Can you talk a little bit about what has changed so much in the last couple of quarters? We were seeing kind of the company's organic growth slowing down, kind of meandering. You came in a few quarters ago. Usually, we do not see a real acceleration with the change that happens instituted by the top within just two quarters. And I was wondering if you can kind of point to a few critical parts about what seems to be clicking, what is there because, you know, maybe you have some incentives that really realign things? Or what are things that were going on beforehand that seemed to have hit their stride? So we can just kinda get in a sense as to, you know, the picture of the reacceleration of the revenue growth and what might be the runway for that going forward. Sanoke Viswanathan: Thank you. It is a very important question, and something that we, you know, we spend a lot of time on. And we believe that we are just at the start of this inflection. There is a number of things that are landing well for us. I will start by saying that prior to my showing up, the company had started making very targeted and focused investments in the right areas that are areas where we see huge headroom for growth. I will start with data. Data is the foundational strength of the company. We have certainly had, you know, many decades of success in building our datasets and continuing to build the kind of client franchise that we have today. And yet there are, you know, big parts of the data environment that, you know, we are still early in the game. And we have the smallest market share amongst our competitors, and we see huge headroom for growth. A great example is real-time data. So real-time data, we now have capabilities that are competitive and comparable to our larger competitors. An investment that has been made over the years and accelerated in the last couple of years. And that has allowed us to win very significant clients. For example, one of the largest global asset managers is a client of ours. They went live about a year ago. And we, you know, displaced hundreds of different internal solutions, and we developed and delivered a world-class market data solution, real time with delayed data distributed across the entire asset management estate of this client. So that is one example of something that is clicking. That is a marquee win in the space. And just off the back of that, we are seeing huge traction across the buy side and the sell side. Real-time data. I will just rattle off a few other investments like that that we have been making that are all clicking now. So clearly, our AI investments are working. We are, you know, we are doing well across these various layers of the AI stack, AI-ready data, the MCP Server, our agentic platforms, and our AI solutions that are infused inside the workstation, that, like we said, 48 of our top 50 clients use at least three of our AI solutions, and I expect that number to be quite a bit higher in future quarters. Third, our investments in content beyond real time, which are really relevant for dealmakers and wealth managers—so pricing and reference data, as well as the data in private capital or private company-related data—and other datasets, obviously, our historical, you know, hallmark has been supply chain data, reviewer data, etcetera. These are all coming together nicely and opening up lots of new opportunities for us. And when I look at the penetration of Data Solutions distributed beyond the workstation amongst our client base, we still have huge room to just continue to increase cross-sell within our existing client base. So, I mean, certainly, our efforts at commercial excellence, to your point, Shlomo, in the last couple of quarters are helping. We see a terrific energy in our sales and customer success teams. And that is, of course, adding value to our retention and expansion. But even more, it is all of these targeted investments that have been made over the last few quarters starting to click, and I see a lot of runway ahead of us. Helen, do you want to add any more? Helen Shan: Yeah. Maybe one thing just to add, Shlomo, because you are absolutely right. Things take a little bit of time to get leverage. But I think back to what Sanoke Viswanathan was saying, the core of what we are is really important. Our open platform is perfect in this new environment as we are talking about AI, which is why AI is a tailwind for us. And that is why you are seeing double-digit growth in data across all the various firm types, whether it is banking or wealth or on the buy side. So I think that is a really important point that our investments we made have helped both retention and then why new business is growing as well. Shlomo Rosenbaum: Thank you. Operator: Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open. Jason Haas: Hey, good morning and thanks for taking my question. I wanted to focus on the expense side of things. I am curious if there has been any change into how you are thinking about expenses through the year. I think previously you had said that the investment plans were more second half weighted. So I was curious if that is the case. And then maybe, like, more big picture, I appreciate you are making investments in the business, and it is clearly showing up in better ASV growth. Are you planning to, I guess, moderate some of the pace of investments or the expense growth so you can start leveraging expenses next fiscal year? Do you want to kinda keep pushing there and drive the ASV higher? Thank you. Sanoke Viswanathan: Thanks, Jason. As you can tell, we are very pleased with the execution we have seen in the first half of the year. And the guidance range for what we have given on operating margin is a reflection of the fact that we see all of these opportunities to make high-ROI investments, both in growth as well as structurally to improve the company's success going forward. And you are right. I mean, we do expect a heavier investment second half. At the same time, we are being very disciplined and, you know, we will moderate spend based on what we see in terms of ROI, the opportunities we see to invest. So we are keenly focused on our earnings. Our intent is to grow earnings going into next year and beyond. Right? So our investments are going to be very tailored to highest-ROI investment opportunities. And we think we can achieve both because we are seeing all of these promising productivity improvement opportunities. We gave a flavor for those earlier in our presentation, and I believe we are still at the very, very early stages of capturing productivity gains. And as those accelerate, they will serve as a nice offset to these investments, and we will be able to deliver operating leverage as well. Operator: Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open. Andrew Nicholas: Hi, good morning. Appreciate you taking my question. Appreciate all the color again this quarter on your strategic priorities and the foundational strengths, and I thought slide eight was particularly helpful in terms of the uniqueness and value of the data. But I am curious, just as you think about where FactSet Research Systems Inc. sits in the ecosystem relative to newer competitors or even the model providers, maybe address what you think are some of the disadvantages you have from being a legacy provider? And to what extent are those disadvantages addressable, whether it is the organic investment or partnerships or M&A? I just understand all the reasons why people will stick with you or clients are sticking with you or investing more in your product. Just curious what you are defensive to in investing in as a result. Thank you. Sanoke Viswanathan: Sure. We have a number of advantages, and I think you have registered those. I think those are exciting, and we see lots of runway to grow with those advantages. What you will also see is that where we see complementarity, we have been actually one of the players that has been most forward-leaning in partnerships across the ecosystem. It starts first and foremost, again, with data. So we have always had really strong, in-depth, multiyear commercial and technical partnerships with a number of other content providers. They are increasingly looking to us, given our technology prowess, to aggregate more of their data and to deliver more of the data through new channels that we are able to open up for them. So that is number one. We work with content providers across the stack, and that is an important part of our traditional strategy, and we will continue to accelerate that. Number two, to your point about new capabilities from AI natives and hyperscalers, as you would have noticed, we have a strong partnership with Anthropic. We are one of the prominent financial services connect on the cloud marketplace. And I must say it is our fastest-growing marketing channel. I think of it as a marketing channel because the business model is very synergistic. We make gains when clients connect through Claude into our datasets, consume more and more of our data, and our contracting is directly with our clients. And Anthropic does well when that happens because those agents that the clients may be deploying use more and more tokens, and that is good for Anthropic. So I am just using that example to illustrate why our partnership model is a win-win here. To Helen's point before, we have always been an open architecture company. And it is really coming into its own in this AI environment. So those are a couple of examples. I do not view these as disadvantages as much as market opportunities that are opening up that our business model is uniquely positioned to take advantage of. Helen Shan: For broad solutions, many of the AI-native firms can be very good in their point solution. But for clients who want something that is integrated, and they do not want to have multiple solutions, we are really best positioned to be able to deliver that. Andrew Nicholas: Thank you. Operator: Our next question comes from the line of David Motemaden with Evercore ISI. Your line is now open. David Motemaden: Hey, thanks. Good morning. Sanoke Viswanathan, you had mentioned a few areas of further cost savings across the business. Yeah. I think we are streamlining procurement, legacy software, optimizing third-party data agreements. Could you just talk about what sort of the runway is on those? And, you know, how we should think about that creating, you know, margin opportunities as we head into, you know, next year? It sounds like you guys are making good progress this year, but I am more thinking in the fiscal 2027. Thank you. Sanoke Viswanathan: Sure. What we have indicated today is that we have already captured over 50% of the 100 basis points of productivity improvements that we targeted for this year. And while we gave you examples of the early impact that we are seeing from the application of AI in engineering, in data operations, and customer success, I must say those are early days, and in fact, I see tremendous scope for growth of the AI-based opportunities. What you see in the value capture to date is more along the lines of what you are describing, which is procurement, legacy software consolidation, data contract optimizations. Effectively, just looking across the company and making sure that we are, you know, leaving no rock unturned, ensuring that we are being efficient about our usage of third-party services, and just running a better company. So we are getting all of that done, which can be done faster. And these AI programs are just taking root. We see a lot of opportunity to expand the scope going into next year. And as I said, our focus is going to be very much on improving earnings going into 2027 and beyond. And we will balance these productivity gains with the continued high-ROI investments we want to make in the future growth opportunities. Operator: Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open. George Tong: Hi, thanks. Good morning. You talked about introducing new pricing and product packaging initiatives. Can you elaborate on this a bit more? What year-over-year price performance was in the U.S.? Sanoke Viswanathan: Sure. I will start with the conceptual effort, what we are doing across pricing and packaging. Helen is going to give a little bit more color on the specific progress of price improvements we have seen. I would start by saying we have a very strong shelf of really good products. Customers really love our products. We have gotten great feedback. Our NPS scores are very high. And despite that, we are continuing to invest in growing NPS across different segments. This gives us strong pricing power. So when we look across our estate and we look at how we are packaging and bundling our products, we are doing a thorough review. And where appropriate, we are making changes. We are rebundling. And we are restructuring these enterprise agreements with different client types. And as I said earlier, to give them and us flexibility, so we can evolve into this new world where it will be a combination of seats. It will be a combination of data delivery and it will be a combination of consumption. Right? So it will be all of that, and we are ensuring that we are retaining the flexibility and clients are retaining the flexibility. With that, I am going to hand over to Helen to describe how that pricing power translated in this quarter. Helen Shan: Yeah. No. Thank you, Sanoke Viswanathan. As we do every year, the annual price increase in The Americas actually contributed more this year than last year, so it is up slightly. Which reflects really that our pricing strategy is grounded in the value that we deliver. So clients are valuing the product. It is supported by the price realization that we are seeing, and it is, quite frankly, clients are accepting the increases due to the value and the workflow integration we are providing. Now that is driven in part through the fact that we have a larger ASV base. We have had improved retention increases as well. And as noted, the shift to enterprise also contains some contractual escalators. So we have been very pleased with how we have been able to continue to leverage and build on capturing price this year. George Tong: Thank you. Operator: Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open. Jeff Silber: In noticing some of the statistics that you released on client count and user count, it seems that users per client seem to be escalating at a greater rate. Is there something driving that? Is that a mix shift maybe towards wealth, or is there anything else going on there? Sanoke Viswanathan: Yeah. I think the, I mean, I would caution us in, you know, I would say reading too much into our client count. As you know, we have 9,000+ clients. And there is always a long tail of clients in our sorts of businesses. So we had a very good quarter. We added a significant number of new clients. At the same time, we also significantly expanded our presence in our top clients, in our top 100, our top 200, which drive significant chunks of our business. So I would not draw too much into the client count itself. What I would say is it is important to understand that corporates, wealth managers, private equity, and these sort of client segments drive a lot of new client expansion. Because remember, we have a huge, huge penetration with the largest global banks, largest global asset managers, and the largest global wealth managers. So the tail, by definition, is smaller firms around the world. And that is certainly what is driving our client count. With user count, wealth management is a significant driver because we have, as we win large wealth managers, we win a large number of advisers. And that adds to the user count as well. So I just want to caution you not to read too much into those numbers because they tend to be the long tail. Operator: Thank you. As a reminder, to ask a question at—Our next question comes from the line of Scott Wurtzel with Wolfe Research. Your line is now open. Scott Wurtzel: Hey. Good morning, and thank you for taking my question. I am just wondering if you guys can talk about the pace or degree of AI product adoption in the wealth channel. I am just trying to kind of understand, given that wealth is still, I think, ongoing this digitization journey, if, you know, this could be a potential longer tail opportunity? Thanks. Sanoke Viswanathan: Yeah. I think you read that right, Scott. You know, wealth is, you know, a more heterogeneous environment for us amongst our end markets. We have large firms. We have midsized firms. We have RIAs. There is a whole range. International private banks and international wealth managers have their own dynamics. So we are seeing a gradual pickup in AI adoption in wealth. It is certainly behind what we have seen in the sell side, in the buy side, but we see it picking up, and I expect it to be an important growth driver as we go into the next few quarters. I do not know, Goran, if you want to add anything to that and— Goran Skoko: You know, some of the AI solutions that we see adoption involve are around prospecting. So we have some of our largest clients adopting our intelligent prospecting and monitoring solution that is something that drives new business for our clients. We are rolling out some of our AI solutions with two of our largest clients currently. So the adoption is increasing, but I would agree with Sanoke Viswanathan. It is trailing investment banking and other areas of the business. Operator: Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. Your line is now open. Craig Huber: Thank you. Just wanted to just touch on here this AI concern out there. There is obviously a lot of concern as AI evolves here over time, that the white collar workforce takes pressure, fewer needs for human beings to run operations and stuff. When you drill down on that, if that does play out here, and say you have a 10% or 15% pullback in the number of white-collar workforce at the buy side, sell side, talk to us, if you would, please, about the vulnerability for your pricing, revenues you can gain here in that sort of environment. Obviously, you are trying to move more and more enterprise-wide pricing as you have been doing that for many, many years. But how vulnerable are you do you feel, you and your peers, if that does play out there? Thank you. Sanoke Viswanathan: Yeah. Thanks, Craig. What I would start by saying is to imagine a scenario where you have that kind of headcount reduction in our end markets, we have to then appreciate that the agentic workflows have become such high grade and high quality that they are able to really displace the humans who do those jobs today. So that is an assumption that we would have to make. If that were to be right, I would say those agents are going to need very, very high-quality inputs in order to be able to execute the job that we expect those agents to do at that point. I shared the example of the value-at-risk calculation, and that is one of those ways in which we think our data, our connected data, and the embedding that we have in these workflows just becomes exponentially more valuable in a world where agents are becoming the primary call on that data. So we believe that, you know, we are very well positioned to capture the upside in that kind of scenario. And it will all come down to the optimization of pricing between the seats that those humans may have adopted versus the data consumption that the agents will have in the future. And this is exactly the point I was making earlier, which is we are working very closely with our clients. And I can tell you there is huge appetite and conviction among our clients to partner with us on rewriting these contracts to create flexibility for themselves and for us, and we see us capturing an ability to continue to hold our pricing power and to capture the upside from that transition if and when it happens. Operator: Thank you. I would now like to turn the call back over to Sanoke Viswanathan for closing remarks. Sanoke Viswanathan: Thank you, operator. Thank you, everybody, for joining the call today. We continue to execute with discipline. Accelerating ASV growth, strengthening commercial performance, and measurable productivity gains position us well for 2026 and beyond. In May, we will welcome clients to FactSet Research Systems Inc. Focus, where they will experience firsthand the innovation we are delivering across our platform. Operator, this concludes today's call. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning. My name is Warren, and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX Corporation First Quarter Fiscal 2026 Earnings Call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Nate Friedel, Head of Investor Relations at TD SYNNEX Corporation. Nate, you may begin. Nate Friedel: Thank you. Good morning, everyone, and thank you for joining us for today's call. Joining me on today's call are Patrick Zammit, our CEO, and David Jordan, our CFO. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-Ks we filed today, in the risk factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our Investor Relations website ir.tdsynnex.com. This conference call is the property of TD SYNNEX Corporation and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick. Patrick Zammit: Thank you, Nate, and good morning, everyone. Thank you for joining us today. We are very pleased with how we started fiscal year 2026. In the first quarter, we delivered record non-GAAP gross billings and non-GAAP earnings per share while continuing to expand profitability and build on the execution and momentum established over the past year. Our results reflect strong performance across both our distribution and Hive businesses, as well as the continued alignment between our strategy and the needs of our partners. Together, this reinforces the strength of our operating model and our ability to create long-term value for our shareholders. Before turning to our operating results in more detail, I want to start by discussing my rationale for updating our reportable segments. These changes better reflect how I manage the business and allocate capital and resources. Going forward, we will primarily discuss our performance and strategies through two businesses: Distribution, comprised of our three regional distribution segments, and Hive. Each business has a distinct value proposition and operating model, with clear drivers of growth, profitability, and returns. We believe this structure provides clearer insight into how our businesses perform and how we create long-term shareholder value. With that context, I will start with our Distribution business. Within Distribution, we delivered a strong start to the year, with excellent results across all geographies and key technology categories. Performance was supported by continued customer investment in infrastructure, software, and security, as well as notable strength in infrastructure and PCs as we help partners navigate an inflationary cost environment and a dynamic supply chain. Leveraging our global reach, diversified sourcing, and close vendor partnerships, we are helping our customers manage supply chain constraints, navigate pricing, improve availability, reduce uncertainty, and plan deployments with greater confidence while helping vendors efficiently extend their reach and activate demand across markets. Our accelerated growth was accompanied by expanding gross and operating margins driven by favorable geography and product mix and disciplined cost management. These results underscore the strength and value proposition of our global Distribution business, delivering attractive returns today while positioning us to capture opportunity tomorrow. Last quarter, we outlined four strategic pillars that define how we compete, create value across our portfolio, and differentiate ourselves in the channel, and these continue to shape where we invest and how we execute moving forward. These pillars are omnichannel engagement, specialized go-to-market, best-in-class enablement, and expanding our brand visibility. I will highlight a couple of examples of how we are bringing this to life. Starting with omnichannel engagement, we are making it easier for customers to engage with TD SYNNEX Corporation in the ways that best fit their workflows. This approach is powered by our partner-first platform and suite of digital services that integrate billions of customer, vendor, and end-user data points to drive demand at scale, supporting continued growth within our SMB customer market globally. Our capabilities are translating into tangible results. By embedding predictive AI directly into our onboarding and go-to-market motions, we are meaningfully increasing the number of customers onboarding new vendor portfolios each quarter, helping vendors expand their reach within our ecosystem and accelerating profit-generating activity across the ecosystem. Our agenting AI systems are now supporting customers and internal teams across complex workflows, from multi-vendor solutions aggregation to intelligent quoting and cross-sell recommendations, helping shorten deal cycles and improve attach rates. Paired with our relationship-driven model, this allows us to scale expertise and engagement globally without compromising the high-touch experience that differentiates TD SYNNEX Corporation. This quarter, our progress was reinforced by achieving Microsoft Frontier Distributor designation across all of our regions globally, a recognition of excellence in support, security, channel enablement, platform innovation, and technical delivery. This designation highlights our ability to bring technologies to market in a consistent, scalable way across regions and digital platforms, marketplaces, and high-touch engagement models, and to do so consistently as customers move from AI experimentation to deployment. Building on that foundation, our specialized go-to-market strategy continues to deliver tangible results, particularly in security. Earlier this month, TD SYNNEX Corporation was named Palo Alto Networks fiscal year 2025 Distributor of the Year in North America, recognizing our ability to drive above-market growth while expanding customer participation and accelerating new customer acquisition. Importantly, this recognition reflects the value of our specialized distribution model. By combining deep market expertise by technology and customer segment with our global reach, we enable vendors to reach new customers, activate customers more effectively, and drive growth beyond what they can achieve on their own. Capabilities such as inventory management, seamless customer transitions, pre- and post-sales support, and higher levels of automation enable our vendors and customers to scale with speed and consistency, reinforcing the long-term benefits of leveraging the distribution channel. Now turning to Hive. We delivered an impressive quarter, driven by continued demand for cloud- and AI-enabled data center infrastructure across our hyperscale customers. Growth was broad-based across our programs and customer base. Our integrated engineering, manufacturing, and supply chain capabilities enabled efficient deployment of sophisticated rack-level solutions at scale, which translated into meaningful year-over-year operating income growth. These results reinforce Hive’s strategic opportunities within this fast-growing market. Building on this momentum, Hive is focused on evolving its strategy over time toward more complete system-level solutions across traditional compute, accelerated compute, networking, and storage offerings. Through targeted investments, engineering and manufacturing capabilities are helping customers simplify design, accelerate deployment, and reduce total cost of ownership. These ongoing investments have attracted a growing pipeline of opportunities, including signing programs with two new hyperscale customers in 2026, which we expect to contribute to results in future quarters. We have already started to ramp our third U.S.-based hyperscaler, and with these two wins, we now have at least one program secured with each of the top five U.S.-based hyperscalers. To close, we remain very confident in the long-term value creation opportunities across both Distribution and Hive. The addressable markets we serve are continuing to expand, and we believe our differentiated value proposition and strategy position us to capture a growing share of that opportunity while delivering attractive returns for shareholders. Now I will pass it to David to go over the financial performance and outlook in more detail. David? David Jordan: Thanks, Patrick, and good morning, everyone. We are pleased to report a strong start to our fiscal year with first-quarter results that exceeded our expectations across all key metrics. Walking through the numbers, our non-GAAP gross billings for the first quarter were $25.8 billion, increasing 24% year over year, or 20% year over year in constant currency, and exceeded the high end of our guidance range, driven by accelerated growth in both Distribution and Hive. Non-GAAP operating income was $590 million, an increase of 48% year over year, or 44% year over year in constant currency. Non-GAAP earnings per share were $4.73, an increase of 69% year over year, and above the high end of our guidance range. GAAP operating income was $489 million, an increase of 61% year over year, or 57% year over year in constant currency. GAAP earnings per share were $4.04, an increase of 104% year over year, and also above the high end of our guidance range. Together, these results demonstrate our ability to convert strong top-line growth into operating leverage and meaningful shareholder value. Turning to quarterly performance for each of our businesses, Distribution generated non-GAAP gross billings of $22.0 billion, increasing 17% year over year and exceeding our expectations, driven by broad-based strength across both product categories and geographies. Endpoint Solutions increased 14% year over year, supported by ongoing PC refresh activity and strong demand for premium devices. Advanced Solutions increased 19% year over year, driven by continued strength in infrastructure, security, and software. Distribution non-GAAP operating income was $431 million, increasing 42% year over year, and non-GAAP operating margin as a percentage of gross billings was 2%, an improvement of 34 basis points year over year. Overall, we estimate the Distribution gross margins benefited by approximately 10 to 15 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. In addition, we estimate that approximately 2 percentage points of year-over-year gross billings growth were attributed to higher average selling prices and modest pull-forward activity, as we partnered with OEMs to pass through higher memory and component cost. Moving to Hive, Hive generated non-GAAP gross billings of $3.8 billion, increasing 95% year over year and exceeded expectations, driven by broad-based strength across both manufacturing and supply chain services. Manufacturing and assembly increased in the mid-70% year over year on a gross billings basis, driven by demand increases from all major customers in each of the major programs we support. Supply chain services grew in excess of 100% year over year on a gross billings basis, driven by increased demand for components supporting our customers' AI infrastructure deployments. Margins in this business can vary quarter to quarter depending on mix. Hive non-GAAP operating income was $159 million, increasing 66% year over year, and non-GAAP operating income margin as a percentage of gross billings was 4.2%, decreasing 72 basis points year over year, primarily driven by mix as discussed earlier. We are in a period of accelerated growth; however, we continue to remain disciplined in our cost management approach. Our teams are focused on driving operating leverage while ensuring we make investments that position both Distribution and Hive for sustained long-term growth. Shifting to cash flow and capital allocation, free cash flow usage for the quarter was approximately $929 million, consistent with our first quarter in the prior fiscal year. Over the trailing twelve months, we have generated $1.2 billion of free cash flow and returned $723 million to shareholders, demonstrating the strength of our model and our disciplined approach to capital allocation. As the business grows, we are focused on ensuring we maximize net-income-to-free-cash-flow conversion on an annualized basis. Return on equity is also a key financial priority for us, and beginning this quarter, we are highlighting return on equity as a key metric that we are focused on improving over time. During the first quarter, we returned $118 million through share repurchases and dividends. Net working capital ended the quarter at $4.2 billion, with a gross cash conversion cycle of 16 days, an improvement of 4 days year over year, reflecting our continued focus on strong cash conversion and efficient working capital management. We ended the quarter with $1.6 billion of cash and cash equivalents, and our leverage ratio finished at 1.5x, modestly below our medium-term framework, providing ample flexibility to invest in the business while continuing to return meaningful cash to shareholders. In addition, our Board of Directors approved a cash dividend of $0.48 per common share, payable on 04/29/2026 to shareholders of record as of the close of business on 04/15/2026. Turning to our outlook for 2026, we expect non-GAAP gross billings of approximately $25.1 billion, plus or minus $500 million, representing a year-over-year increase of approximately 16% at the midpoint; a gross-to-net adjustment of approximately 34%; revenue of approximately $16.5 billion, plus or minus $400 million; non-GAAP net income of approximately $322 million, plus or minus $20 million; non-GAAP diluted earnings per share of approximately $4.00, plus or minus $0.25, based on approximately 79.8 million diluted shares outstanding, representing a year-over-year increase of approximately 34% at the midpoint; and share repurchases to increase from the amount purchased in our first quarter. To close, we are encouraged by our start to the year and believe we are well-positioned to execute on the opportunities in front of us. Our global reach, differentiated capabilities, and expanding portfolio position us to perform well across IT market cycles and deliver long-term value to shareholders. With that, I will turn it over to the operator. Operator? Operator: We will now begin the question-and-answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to requeue with additional questions. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Paige with RBC Capital Markets. Your line is open. Please go ahead. David Paige: Hi, good morning, and thank you for taking my question. Congrats on the really great results here. I was wondering if we could just double tap into the Hive solution growth. Billings were up 95%, so I was curious if that was concentrated in your two main customers or was it more broad-based across the five hyperscaler programs? And then just as a quick follow-up, I think you mentioned two new customers coming on board, one maybe in 2026. But I guess, could you just size that opportunity relative to your other two large customers? Thank you. Patrick Zammit: Okay. Good morning, David. Thanks for the question. We are very pleased with the performance this quarter in Distribution and, of course, Hive. Yes, the growth came from the two main customers. As I mentioned, the diversification has started, but the ramp-up of the programs we won is going to take a little bit of time. We believe that we are going to see the impacts of the ramp-up more towards the end of fiscal year 2026 and in 2027. David Paige: That is great. Thank you. Maybe if I could stick one more in. I know the first quarter seems a seasonally weaker free cash flow quarter, but cash conversion did get better. So I was just wondering what all-in or inventory build you were seeing in PCs might need to benefit from higher ASPs. But just, I guess, puts and takes on how you are seeing the PC demand market evolve throughout the year. Thank you. David Jordan: Good morning, David. When you think about working capital and cash flow for Q1, there are a couple of dynamics. You rightfully pointed out that on a gross cash days basis year over year, we made significant improvements. With that being said, we also made sure in our first quarter that we had the right amount of inventory. We recognized that some products are on allocation and could potentially be short in supply, and so we went long on inventory to try and make sure we had adequate supply to support all of our customers on the Distribution side. On the Hive side, we are continuing to make investments in working capital as that business continues to grow. But overall, when you put the two together, we are quite pleased with the cash days that we were able to land given the growth rates in the business. Patrick Zammit: And on the PC side, we had a strong quarter on PCs. For Q2, we continue to be reasonably optimistic about the PC dynamic. A few thoughts. We continue across the world in all the regions, including Latin America and across the other regions, to be very focused on continuing to grow faster than the market when it comes to PCs, and we are seeing clear success there. I also want to mention that we are focused primarily on B2B when it comes to PC, and that is important because in the coming quarters, we are going to see a strong tailwind coming from the ASP increases. Obviously, it raises the question about the impact on elasticity on volumes. We foresee some reduction in units, but we think the reduction in units should be significantly less than in the consumer space. All in all, PCs should continue to be a good category for us in the coming quarters. David Paige: Thanks, Patrick. Thanks, David. Congrats again. Thanks. Operator: Your next question comes from the line of Adam Tindle with Raymond James. Your line is open. Please go ahead. Adam Tindle: Okay, thanks. Good morning. David, I just wanted to start, obviously, congrats on such a strong start to the year. As we think about the typical financial model for TD SYNNEX Corporation from an EPS progression standpoint, normally you kind of see sequential growth in earnings from here, but if we roll that out, we are going to be in the neighborhood of $18 or so of EPS for the year. I just do not want to get ahead of ourselves given the trajectory that you have been on. I guess the question would be maybe just helping to level set. I understand you are not seeking to give annual guidance, but maybe some color for us to think about our models, what might be similar or different this year from that normal EPS progression that we are used to, just so we can understand the models? And I have a follow-up after that. Thanks. David Jordan: Great question, and thanks for asking. For Q1 and Q2, we have provided guidance for Q2. We are not providing guidance beyond that. What I would share, which I think will help, is that for the moment, demand remains strong in our business. However, we are cautiously optimistic for the second half, and we will just remind people that the second half of last year for us was very strong. Thinking about the second half on a longer-term basis using the Investor Day framework that we laid out is a good place to start. It is true for the moment: Hive and our Distribution businesses are performing quite well. But given the broader macro environment, we are cautiously optimistic for the second half, and we do believe both businesses will grow. Adam Tindle: Okay, that is helpful. Patrick, just a follow-up. I am getting this question a lot, and it is related to core Distribution and the impact of inflation and memory costs and all those things to margins for the channel. There is a general fear from investors that the vendors will take margin away, and one of the big network vendors on their earnings call talked about changing contractual provisions with channel partners, and it kind of fired the gun on this fear. I thought this might be a good forum. I am looking at the Americas region results for Distribution, and there is clearly no evidence when I see gross and operating margin up meaningfully currently. But maybe just level set us on those comments that we are hearing from the vendors and what you are actually experiencing boots on the ground in the Distribution business? Patrick Zammit: Thanks for the question. Indeed, in Q1, there was no impact on margin. I would add that we built inventory at the end of last fiscal year to be able to smooth the introduction of price increases for our customers. We worked very closely with both the vendors and our customers in order for them to be in a position to anticipate some of the price increases and reflect them in their quotes. Across the board, we believe that the price increases will not impact our margin because of this close collaboration with vendors and customers. Adam Tindle: Thank you. Operator: Your next question comes from the line of Eric Woodring with Morgan Stanley. Your line is open. Please go ahead. Eric Woodring: Awesome. Thank you for taking my questions and congrats on a really strong quarter. More disclosures here. Patrick, I am unfortunately going to ask maybe a similar question that Adam just asked. My first-blush reaction to these results and guidance was it was almost too good to be true, right? Gross billings and revenue nearly 10% above the high end of your guide, growth accelerating across every technology category. Can you just help us understand how you ring-fence the risk around pull-forward? Because typically pull-forward and the ability to size that really is not clear until after the fact, and so when you talk about two points of benefit from ASPs and pull-forward, how do you come to that conclusion? What are you hearing from customers about their desire to accelerate purchases and whether that is a pricing dynamic or a supply dynamic? If you could maybe marry those two together, that would be super helpful. And then just a quick follow-up, please. Patrick Zammit: Good morning. Thanks a lot for the question. The approach we have taken is to look at seasonality in units. We compared, for example, sequentially between Q4 and Q1, how the units evolved for all our hardware categories and compared that with what we have seen in the past. That was the first indicator where we concluded that the seasonality was not skewed and was consistent with prior years. Second, we did a quick survey; we asked the teams to provide us some color, and we took it into account. Based on that, we believe that pull-forwards have been limited for Q1. The other thing I would add is to look at how fast the vendors are passing the increase of their component costs to the market, and today we have to deal with quote validity dates that are very short. The market had to react and adjust very rapidly. I think that has had an impact on some of the behaviors at the end users. At the moment, based on what we can see from our data and the feedback we receive from customers and the teams, that is the best we can share on pull-forwards. Eric Woodring: Okay, alright. Very fair. As my follow-up, Patrick, there is clear intent in breaking out Hive as a separate standalone. I am just curious: Today, Hive is 15% of gross billings; it is nearly 30% of operating income, at least in the last quarter. Is there a target that you have for either of those metrics if we think three years out—just the opportunity for growth and margin expansion at Hive? I am just curious, putting a longer-term hat on, how big do you think Hive can be for some of these key fundamental metrics? Thanks so much. Patrick Zammit: The reason we discussed Hive separately this year is that my management system is to empower my business unit owners and have a lot of autonomy, and it was justified to disclose Hive separately. We think it improves significantly the quality of the financial understanding of how results are being formed. When it comes to Hive, you should assume that Hive is going to continue to grow faster than Distribution. The margins—at the moment, we continue to invest in both engineering and manufacturing capabilities to cope with the rapid increase in demand—and the margins for the moment are relatively stable in that context. As we get more mature, investments will likely start reducing a little bit. For the foreseeable future, the margins you are seeing are reasonable. I should add that the operating expense for Hive is significantly lower than for Distribution structurally. The combination of that means the weight of Hive in the total business will continue to increase both on gross billings, revenue, and operating income. Eric Woodring: Awesome. Thank you. Best of luck. Operator: Your next question comes from the line of Joseph Cardoso with JPMorgan. Your line is open. Please go ahead. Joseph Cardoso: Hey, good morning. Congrats on the results, and thank you for the questions here. For my first one, I wanted to follow up on customer behavior relative to the Distribution business, but maybe less on pull-forwards and more on what you are seeing from customers placing orders much earlier relative to what they expect from deliveries as they navigate cost, and whether that is driving better visibility than you would typically see. And then I have a follow-up. Patrick Zammit: Backlog is increasing, so we are getting more visibility. Vendors have been very clear and explicit that price increases are going to continue over the year, driven in particular by both memory price increases and now also CPU price increases. Yes, we are getting more visibility. At the same time, end users have their budgets, and the timing of their budgets also has some influence on when they are going to place the orders. For the moment, we see very high activity in terms of quoting. We are trying to secure the prices as well as we can with some inventory to help our resellers serve their end users in the best possible way. Again, there is no indication of a major pull-forward at the moment when we look at our figures. It is not dramatic. Joseph Cardoso: Got it. Thank you, Patrick. Appreciate that color there. In light of the new Hive disclosures, which I think everyone is happy to see for sure, I wanted to touch on the strong variance between gross billings and revenue this quarter. It seems like a big change quarter over quarter, year over year, and I wanted to better understand whether that is being driven by the change in mix that you alluded to. As a second part of that question, how do you expect that to trend going forward? Given that you talked about new customers, any implications from a mix perspective we should think about as those start to onboard in the latter part of this year going into next year? Thank you. David Jordan: Joe, this is David. It is a good question, and I think you are thinking about it the right way. At a high level—and I am going to answer an additional question that you did not ask—when you look at Hive’s margins on a year-over-year basis, the decline was largely driven by mix. We put that in the transcript. The mix was related to some large GPU fulfillment deals that went through. A lot of those programs are recorded on a net basis, and so you have actually seen the opposite impact to margins on a net basis. For Hive, each one of the programs is set up slightly differently, and the gross versus net components can be different. That is why we have always looked at the business on a gross billings basis. Depending on how the mix will shift, you could have a higher margin on a net basis based on the relative weighting. We would likely expect as we move forward that some of these net programs are growing faster than the overall. Joseph Cardoso: Got it. Thank you, David. Appreciate the color, gentlemen. Operator: Your next question comes from the line of Catherine Murphy with Goldman Sachs. Your line is open. Please go ahead. Catherine Murphy: Thank you for the question. To ask another one on Hive, in the deck, you disclosed that supply chain services grew in excess of 100% year over year in the quarter. It would be helpful if you could talk more about the strength here. In the prepared remarks, you also noted a strategy pivot to selling more complete solutions in Hive. Is there any impact we should think about on the supply chain services business as it stands today? Thank you very much. Patrick Zammit: Good morning. Supply chain services is really a service we render to the customer. It is a relatively volatile business. The reason being that, taking into account the market environment, we may have more requests from our customers to support them in that space, buy inventory in advance, and store it. Clearly, there is a lot of demand at the moment driven by pricing volatility, and that explains why we had such growth in supply chain services. At the same time, you can see that our manufacturing activity is also growing extremely fast, and we believe faster than the market. I wanted to raise it here on the call. Catherine Murphy: Thank you very much. Patrick Zammit: I am sorry—and just to answer your second question, the growth through time. We are confident about the growth in manufacturing. It is more steady. You are talking about programs with better visibility. If the demand from the customer stays consistent, then we should continue to see stable growth in that space. Again, the supply chain segment is more volatile and really depends on the market environment. Here, I would be a little bit more cautious, and we will probably see more variations in the growth rates quarter by quarter, depending on the needs of the customers. Operator: Your next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Please go ahead. Keith Housum: Good morning, gentlemen. Appreciate it, and thanks for the additional color here. As we think about the quarter and looking forward, investors are struggling with trying to understand the magnitude of price increases and the impact of demand destruction. David, as you look at the second-quarter guidance, how much does that grow in terms of what you think the impact is from the increased prices? The second part of the question is, at what point do you think we start seeing demand destruction? Is it when you hit 15% or 20% price increases? We have already seen a lot more than that in some different product categories right now. David Jordan: I will start and frame up the Q2 guidance, and then, Patrick, you can comment on unit elasticity. When we built the guidance for Q2, we did a full bottoms-up roll-up from the teams. What I can tell you is for the moment, demand remains strong. This is true both in the Distribution business and in Hive. One thing to think about as you consider price increases and how that makes its way into our P&L: we have a lot of revenue that is back-to-back, meaning it is billed, put into a backlog, and it might take two, three, four, five months to ship. You are not going to see a massive hockey stick into our P&L immediately from price increases. But we do expect as we move through the quarters to have price increases become slightly more meaningful than they were in the first quarter. Patrick, if you can provide a little bit of color on how you think about units and demand as it relates to the latter part of the year. Patrick Zammit: Let me look at the four main hardware categories for us. First, PCs. The refresh is not over, and that continues to be a tailwind for us. The other aspect is that the weight of AI PCs continues to increase. One of the drivers is that you will have more and more AI applications running at the edge. Having an AI PC is going to become more important in companies. For general compute—general servers—there is a refresh cycle going through at the moment, so it should continue to be a tailwind. Similar to PC, we see an acceleration of the purchase of AI-enabled servers. End users have now defined their use cases. They are starting to build their AI factories, and that is driving demand in the market, which we are benefiting from. For storage, this quarter we had a very good quarter. We believe that data center modernization has been a topic but not really materializing in previous quarters. Maybe we are going to see more of it going forward. Lastly, networking—after two very difficult years, networking is back. It is growing single to double digit depending on the regions, and I am quite optimistic when it comes to the networking category. Keith Housum: What we are hearing from some of our contacts is some of the equipment that you are selling is seeing price increases well beyond 20% to 30%, sometimes 60%, 70%, 80%. It would seem natural that there has to be some demand destruction, and people just going to the refurb market or pushing things off entirely. Are you hearing this from customers yet, and what are your thoughts or any color you can provide on the remainder of the year? Patrick Zammit: Based on what we see, and it is reflected in our guidance, our assumptions have been reflected. We have not seen demand destruction yet in Q1. We continue to be confident for Q2. For the rest of the year, I will leave you with this: there may be some demand disruption. Everyone is waiting to see how good or how bad the elasticity will be on volume. I shared some of the tailwinds which could mitigate the impact. From a revenue standpoint, when you have such ASP increases, the net between potential decline in units and the ASP increase should impact positively the growth in revenue. Keith Housum: Okay. Thank you. Operator: Your next question comes from the line of David Vogt with UBS. Your line is open. Please go ahead. David Vogt: Great, thanks for taking the question. I have two also. Patrick, historically, Hive has been a more traditional compute and networking-centric business in terms of billings and revenue. Can you share with us how that is evolving as you onboard incremental hyperscaler customers? You talked about having at least one program at the top five. How is that mix changing going forward to a more accelerated compute and networking mix? I will give David my question as well. David, when we think about the price increases, I know everyone is talking about PCs, but we are seeing incredibly strong development for traditional CPU-based servers generally in the industry right now. Would love to get a sense for how you are thinking about that demand ex the price increases because we are seeing relatively strong demand or hard-to-get CPU-based products. I would love to get your perspective on that. Thanks. Patrick Zammit: Good morning. Historically, Hive demand is driven by general compute and networking. Some of the wins will be accelerated compute wins, and we are going to start seeing that in the mix in the coming quarters. Zooming out, when you look at the Hive strategy for many quarters now—and we are starting to see the benefits—we had two objectives: diversify the customer base and go after the four main technologies we can serve, namely general compute, accelerated compute, networking, and storage. We have made investments in both our engineering and manufacturing capabilities to be well-positioned to go after those opportunities. Expect in the coming quarters to see a diversification of the customer base and diversification of the program types. David Jordan: David, to provide a little color on your question around general compute: we have worked hand in hand with both vendors and customers to raise pricing on a variety of infrastructure products. As Patrick said, for the moment, demand remains quite strong. It is true in some of these categories the price increases are double digits. Our current thesis is that while there will be some elasticity around unit demand, the price increases will more than offset that. We will continue to give you updates, but for the moment, demand remains strong, and there is less elasticity around pricing than people would initially have thought. David Vogt: Alright. Thank you. Operator: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead. Ruplu Bhattacharya: Hi. Thank you for taking my question and thanks for all the details. Patrick, question on Hive. You mentioned that Hive has secured at least one program in the top five U.S. hyperscalers. Can you give us more details on what type of opportunities these are? Are they for full rack builds or for supply chain services? First, how should we think about CapEx for Hive? Do you have enough capacity to support these programs? Second, when I look at operating margin, it was 7.4% this quarter on a revenue basis. You said 4.2% on a billings basis. When we think about the AI server space and rack-building space, the industry itself is getting squeezed in terms of margins. Should we think that operating margin can take a dip initially as you ramp these new Hive programs, and what are you doing to offset some of that margin pressure? Thank you. Patrick Zammit: Thanks, Ruplu. I will answer the first question; David will take the second one. The programs we won are full racks, so it is really for the manufacturing segment. We also won some supply chain, but as I mentioned, the supply chain opportunities are more volatile. When we refer to those program wins, it is really for our manufacturing activity. Ruplu Bhattacharya: I was just going to follow up on that and ask about the CapEx question I had. Do you need capacity? Patrick Zammit: Obviously, we are constantly looking at our capacity requirements, and we are investing in increasing our capacity as we speak to be in a good position to serve our customers. Yes, CapEx is required. As you look at the amounts at stake, it is very reasonable. I want to insist on the fact that both Distribution and Hive continue to do a great job of reducing the cash days and improving working capital velocity. That is enabling us not only to finance the growth without any issues but also to finance investments in capital expenditure. No concerns from that point of view either. Ruplu Bhattacharya: Thanks. And then just on the margin side, David, do we expect any initial margin pressure from the ramp of these programs? How should we think about these margins going forward? Thanks for all the details. David Jordan: At a high level, when you think about Hive’s operating margins, we feel pretty good about where they are. It is true as you ramp new customers, especially in the early innings, there can be a slight headwind in operating margins as we make investments to get the programs up to speed. Each of these will ramp on a different timeline, and we will continue to provide updates. We feel very good about the current operating margins at Hive, the programs that they have, and how that will play out as we move forward. Let me clarify one thing for you, Ruplu. You mentioned accelerated compute. While we do have some accelerated compute programs, it is not the majority of our portfolio. Some of the margin pressure that you may have seen from others will not play out to the same degree in Hive just given the overall mix in the programs that we have. Ruplu Bhattacharya: Okay. That is helpful. Thanks, David. Operator: Your next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open. Please go ahead. Vincent Colicchio: Yes. Can you talk to the relative distribution strength in Europe? Do you have legs there, and has there been any change in sentiment given the geopolitical environment? Patrick Zammit: Good morning, Vince. Thanks for the question. The market in Europe in Distribution grew mid-single digits in Q1. The market forecast for the rest of the year is between low- to mid-single-digit growth for the rest of the year. When you look at our results, we are growing at double digits. Market conditions continue to be positive, but most importantly, in that market environment, the team continues to grow much faster than the market. We have an end-to-end portfolio. We are very well-positioned on every technology, and we are well-positioned in all the key markets in Europe. We have a strong pan-European presence. We are taking advantage of some countries growing a little bit faster than the average in Europe. For example, Poland is growing faster; Spain is growing faster. It is a favorable mix, and we are well-positioned in those countries. Net-net, it explains the double-digit growth and the fact that we are growing significantly faster than the market. We have done so now for several quarters, and I am confident for the quarters to come. Vincent Colicchio: My follow-up is on acquisitions. What are your thoughts in terms of what you are looking at currently, and have the valuations come in with the more overall public markets? Patrick Zammit: M&A is at the core of the strategy. For us, M&A is a way to accelerate the execution of our strategy by geography, by technology, or to acquire vendors we are missing in some countries. We are looking at several opportunities in basically all the regions. In terms of valuation, we are very strict. Our objective is that the price we would have to pay would have the right return within two years of the acquisition and after completion of the integration. That is our north star when it comes to M&A. With that in mind, we are working on the projects, sticking to our strong financial discipline, and we will see if some of the opportunities materialize in the coming quarters. Vincent Colicchio: Thank you. Operator: Your next question comes from the line of Ananda Baruah with Loop Capital. Your line is open. Please go ahead. Ananda Baruah: Thanks, good morning. Thanks for taking the question. A couple if I could—apologies for any background noise here. First, Patrick, a few months ago, you talked about starting to see data center modernization. What customer base are you seeing that across? I would guess hyperscale, but also in non-hyperscale? Where are you seeing it as well—solo on-prem, other? Would love to get some context there, and then I have a quick follow-up as well. Patrick Zammit: Obviously, I am talking on-prem. We see enterprise but also the higher end of the mid-segment. We saw very promising activities. I am a little bit cautious, because that was not what we had seen in prior quarters, but this quarter we saw very solid demand. Ananda Baruah: Super helpful. The follow-up is just on Hive mix. Longer term, you are getting more into GPU-based. Is it as simple as saying over time, the mix begins to shift to include more of that, or would you also see more storage and networking as well given the resource requirements of AI builds? Also, just to add real quick, could Arm—given their announcement last week and the revenue ramp that they are talking about with CPU servers—become a Distribution partner of the company as well? That is it for me. Thanks. Patrick Zammit: Let me start with Arm. When you have a vendor who is changing its strategy and is starting to produce its own products, we believe that distribution in particular is a fantastic partner to accelerate the go-to-market. Nothing to disclose today, but in principle, if there is an opportunity to partner, we will absolutely do it. Back to Hive, what is important is that our customers are looking for support across all four technologies: general compute, accelerated compute, storage, and networking. That is why it is important for us to have the capabilities and expertise to respond to their needs and requirements. We will have more accelerated compute wins in our portfolio, but I think that going forward, general compute, networking, and storage will represent the majority of our total business. Ananda Baruah: Helpful context. I really appreciate it. Thank you. Operator: There are no further questions at this time. I will now turn the call back to Patrick Zammit, CEO, for closing remarks. Patrick Zammit: Thank you for joining us today. I want to close by thanking our coworkers around the world for their hard work and dedication, and our customers and vendors for the trust they place in us. To everyone on the call, thank you for your continued interest in TD SYNNEX Corporation. Have a great day. Operator: That concludes today's conference call. You may now disconnect. Have a nice day.
Operator: Welcome to the earnings call of Aumann AG regarding the full year figures for 2025. The company's CEO, Sebastian Roll; and CFO, Jan-Henrik Pollitt, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, I'm handing over to you, Sebastian. Sebastian Roll: Good afternoon, everyone, and thank you for the kind introduction. I'm pleased to have you with us today. And for those I haven't met yet, my name is Sebastian Roll, and I'm the CEO of Aumann. So joining me in the call today is our CFO, Jan-Henrik Pollitt. So we really appreciate your time and your interest in Aumann. In the next few minutes, we will guide you through a brief overview of Aumann, the latest developments in our E-mobility and Next Automation business and of course, our financial performance in 2025, where we delivered strong results in a challenging market environment. So let's start with a quick look at our business model. So we design and build high-end fully automated production lines tailored precisely to the needs of our international customers. With decades of experience in automation, industry leaders around the world trust Aumann to deliver innovative solutions. One of our competitive advantages is staying ahead, especially in fast-growing markets, enabling us to quickly provide customized solutions. This is why the automotive market, especially the E-mobility sector remains so attractive to Aumann. In addition, the robotics and automation market is growing rapidly, driven by demographic change, labor shortages and cost pressure. These trends also drive our Next Automation segment, allowing us to use our automation expertise in many industries beyond automotive. So let's take a quick look at Aumann's solutions. So our portfolio ranges from modular solutions and complex process solutions to fully integrated large-scale production solutions. At the modular end, we provide standardized cell systems. They enable our customers to adapt quickly and cost efficiently to changing market demands. Building on this, Aumann designs production lines for more complex processes, including technologies such as winding, coating and testing. The aim is to implement special process steps in the most efficient way. Moreover, Aumann offers fully customized large-scale solutions built to maximum output while ensuring high quality. Thanks to Aumann's wide range of solutions, we can fully support different production strategies of our customers. So this slide here shows how Aumann became a technology leader in E-mobility. Starting from the traditional automotive business, E-mobility was identified as a growth market. Through targeted M&A, Aumann took the first step into E-motor technologies. Building on our know-how, we developed different solutions for the rotor, quickly followed by solutions for the stator and finally, full E-motor assembly. After the E-motor, we leveraged our expertise to develop large-scale production solutions for battery modules and packs. In addition, we introduced our own modular systems, for example, in inverter assembly, but also very useful in the field of Next Automation. Furthermore, we have expanded into converting technology, enabling us to offer, in addition, production solutions for electrode manufacturing. Aumann is a leading provider of turnkey solutions in E-mobility. This illustration here shows the drivetrain of a fully electric car and most of these components can be produced on Aumann production lines. From the outset, we have focused strongly on the E-drive unit. Even today, our customers still use different approaches to stator and rotor design. As a turnkey provider, we offer the latest production solutions for both. Beyond that, we have expanded our portfolio with modular production systems, for example, for electronic components such as sensors or, for example, such as inverters. This enables us to offer flexible and scalable solutions perfectly tailored to each customer's needs. Let me now turn to our battery portfolio. Here, Aumann benefits from its strong position in energy storage. We cover the full range from battery modules and packs to cell-to-X solutions. This expertise allows us to meet customer needs and develop new solutions for next-generation battery technologies. Let's look at the E-mobility market today and in the future. BEV, or battery electric vehicle sales continues to gain traction. In 2025, more than 13.7 million were sold worldwide. So this means a plus of 30% in comparison to 2024. China stays in the lead with 9 million units, but Europe follows with strong growth, reaching more than 2.2 million units with 26% increase compared to 2024, including Germany with an impressive 43% growth. The U.S. market, which currently shows the lowest volume in comparison, remains at least stable at 1.2 million units. By 2030, BEVs are expected to make up 40% of sales by 2035, even 2/3. So overall, rising BEV sales and a more stable geopolitical situation are expected to drive new investments in the near future. So let us now turn to our key commercial focus in 2025. As mentioned earlier, we are expanding beyond the automotive sector and focusing more on industries that need greater efficiency, higher productivity and less manual work. At the same time, rising labor costs and the shortage of skilled workers are accelerating the shift towards automation. In this context, we have moved, as you know, our Next Automation segment from an opportunistic to a strategic approach. This segment focuses on growth industries beyond automotive, such as defense, aerospace and life science. So let's take a closer look. In our Next Automation segment, we have defined 3 strategic growth areas. Aerospace, as you know, is gaining momentum. Demand in civil aviation is rising. Boeing and Airbus are forecasting more than 40,000 new aircraft over the next 20 years. Against this backdrop, Aumann is preparing its reentry into aviation, offering solutions to support production ramp-ups with initial orders already secured in early 2026. At the same time, defense budgets are boosting. Drones combines exactly what we do best: electric motor, battery packs and full system integration, including end-of-line testing just like in E-mobility, same technology, new applications. Therefore, we easily developed integrated drone assembly lines and secured our first orders in 2024 (sic) [ 2025 ]. Besides aerospace and defense, clean tech is also good. Here, Aumann has acquired a double-digit million order in energy infrastructure, delivering flexible assembly and test lines for medium voltage circuit breakers. Finally, life science. So this sector benefits from long-term trends such as an aging population, strong investment levels and attractive margins. In 2025, Aumann entered the pharma market with solutions for producing skin delivered patches and oral thin films. Now I would like to hand over to Jan. Jan-Henrik Pollitt: Yes. Thank you, Sebastian, and also a warm welcome from my side. I would now like to share with you the financial figures of the year 2025. Let me start with a brief overview. We entered the year aware that revenue would face a decline, primarily due to a softer order intake in 2024. At the same time, we remain fully committed to implementing every possible measure to protect our margins and sustain strong profitability. It is also important to highlight, particularly in the automotive sector, that investment behavior continues to be very cautious. This trend is visible across the full spectrum of OEMs and suppliers. Against this backdrop, in 2025, revenue reached EUR 204 million, 35% below the previous year. Profitability remained strong with a double-digit EBITDA margin of 13.8%. Order intake totaled EUR 147 million, down 26% year-over-year. Order backlog decreased from EUR 184 million to EUR 122 million at year-end 2025. And our balance sheet remains robust with a net cash of EUR 148 million. With this foundation, let us now dive into the details. Across segments, we achieved a revenue of EUR 204 million, representing a year-over-year decrease of 35%. The main driver of this decline was the E-mobility segment, where revenue decreased by 37%. Revenue in the Next Automation segment also declined from EUR 53.8 million to EUR 40.2 million, mainly because the prior year included a larger contribution from a major photovoltaic project. For 2025, we had initially expected revenue of approximately EUR 210 million to EUR 230 million. Based on early projections in January, this estimate was refined to EUR 205 million. With the audited figures now available, we ended the year 2025 at EUR 204 million, closely matching this guidance. Looking ahead, we will now turn to the profitability and earnings performance to provide a complete picture of the financial results. Despite the decline in revenue, our profitability remained robust, demonstrating the resilience of our business model. EBITDA came in at EUR 28.2 million, down 21% year-over-year. EBITDA margin increased from 11.5% to 13.8%. This reflects the strong execution, especially in our E-mobility segment. Key drivers of this solid performance include a high-quality and well-diversified order backlog, strict cost discipline across all projects, capacity adjustments aligned with the subdued market environment, and an above-expectation Q4 with some larger E-mobility orders completed ahead of plan. Based on these dynamics, we raised our initial EBITDA margin guidance of 8% to 10% in January to 14%. With the final margin at 13.8%, we outperformed last year by 2.3 percentage points, underlining the operational strength of our segments. With profitability well established, let's now turn to order intake. As already mentioned, the overall investment climate remains challenging. Our business relies on our customers' CapEx, and especially for large-scale projects, long-term forward-looking decisions are essential. Many industries, particularly automotive, are currently not making these kinds of commitments, which affect our markets. However, we are not standing still. Internally, we continue to optimize costs and adjust capacities. Externally, we are actively developing new sales opportunities and pursuing M&A leads. We see clear opportunities to grow, and we are confident these initiatives will deliver value. In 2025, total order intake declined 26% year-over-year to EUR 147.5 million. The Next Automation segment is showing strong progress. Order intake increased 54% year-over-year to EUR 56.5 million. Our sales pipeline is also growing, demonstrating the potential of the Next Automation initiatives to drive future revenue. As a result, total order backlog declined from EUR 184 million at year-end 2024 to EUR 122.2 million at year-end 2025. However, the Next Automation segment continues to gain momentum with its order backlog increasing 39% to EUR 47.9 million. While the overall backlog is below our desired level, both volume and quality of the backlog are solid. And we have, of course, continued to account for this backlog conservatively in our financial statements. Let me now move to the next slide and walk you through the segment figures, starting with the E-mobility segment. In the E-mobility segment, order intake of EUR 91 million is 44% and under the previous year due to the mentioned market conditions. As a result, order backlog decreased by 50% to EUR 74.3 million. At the same time, revenue decreased by 37% to EUR 163.8 million. EBITDA is declining at a slower rate than revenue by minus 21% to EUR 26.6 million, which means a strong margin of 16.2%. In the Next Automation segment, order intake increased year-over-year to EUR 56.5 million as the new positioning is opening new markets. End of 2025, order backlog amounted EUR 47.9 million. Revenue decreased 25% year-over-year to EUR 40.2 million. And the EBITDA margin increased by 2 percentage points to 12.8%, which leads to a total EBITDA of EUR 5.1 million. Before we take a closer look at the balance sheet, let me provide a brief overview of our group cash flow in 2025. Cash flow from operating activities reached EUR 38.4 million, reflecting the strong results for the year and the EUR 50 million reduction in working capital compared to 2024. Importantly, we returned EUR 23.3 million to our shareholders through dividends and the share buyback program, underlining our commitment to delivering value to investors. As a result, cash and cash equivalents, including securities, remain at a record high level of EUR 152.8 million. By the end of December 2025, our balance sheet continues to be in a good shape with an equity ratio of 66.7% and EUR 153 million cash, of which EUR 148 million are net cash. Our financial foundation will continue to allow us to respond flexibly to market opportunities, to drive the expansion of the Next Automation segment, both organically and through M&A activities, and to ensure further shareholder participation through share buybacks and dividends. Following the successful year 2025, we will propose a dividend payment of EUR 0.25 at the AGM, which is a further modest dividend increase compared to the previous years. And of course, we currently have an existing authorization to acquire treasury shares up to 10% of share capital. This provides the company with flexibility to act opportunistically in the market, and at the same time, it ensures that we can continue to participate our shareholders in the company's success. To conclude, we would like to provide our guidance for 2026. We expect a mixed, but well balanced development across our segments. E-mobility revenue is likely to decline due to a lower starting order backlog. In Next Automation, we see continued positive momentum. Overall, the group enters 2026 with an order backlog of EUR 122.2 million. We expect total revenue of around EUR 160 million with an EBITDA margin of 6% to 8%. Our diversified business model provides stability and supports a resilient and profitable year. Let me now hand over to Sebastian again. Sebastian Roll: Yes. Thanks, Jan. So let me briefly summarize. 2025 was a challenging year for Aumann. Revenue dropped to EUR 204 million as investments across the European automotive sector remained weak. So despite these headwinds, we delivered a strong operating performance. We reduced capacity, further increased the flexibility of our cost structure and achieved additional cost savings in project execution. As a result, we reached EUR 28 million EBITDA, achieving an EBITDA margin of 13.8%, a strong indication of improved efficiency and profitability despite lower volumes. Thanks to these, we proposed a dividend of EUR 0.25 per share, continuing to provide an attractive return to our shareholders. Looking ahead to 2026, we are facing a decline in revenues again. Nevertheless, we are targeting a profitable EBITDA margin of 6% to 8%. So also in 2026, as Jan mentioned, our financial position is strong with high liquidity. That clearly sets us apart from most of our competitors and gives us the freedom to shape 2026. Last year, Next Automation developed strongly. This confirms that our diversification is working. Our clear goal is to accelerate this growth, both organically and through M&A. So thank you very much for your attention. We are happy now to take your questions. Operator: [Operator Instructions] What will be recurring revenue after sales services next year and in year 2025? Jan-Henrik Pollitt: Yes. The recurring revenue from after sales and services is approximately 10%. What we see in investment reluctance phases like 2025 and maybe also in '26 that some customers have higher volumes of retrofits of production lines, and this could, as long as the general CapEx is low, give maybe an additional increase on the aftersales side. Operator: How do you view Aumann's competitive position in the European EV ecosystem? And to what extent our increasingly aggressive Chinese entrants reshaping pricing, technology and market share dynamics? Sebastian Roll: Maybe starting the question with the question of competition out of China. So I mean maybe in comparison to other sectors, so we are dealing with China competition, I would say, the last 10 years. So there's nothing new. I also would add that there are not any changes concerning the competition out of China. Our business model is to be the front runner for the first very important, let's say, 1 or 3 lines, especially start of production of new EV is very important, for example, like it was in the new class for BMW. And I mean, in this area, the customer still is buying, let's say, more or less confidence, and this is our business model. So for the fourth, fifth, sixth line, there might be competition out of China. But then normally in normal market conditions, we are already ahead in new projects. Operator: And could you please give us more details on M&A environment and activities in Americas, which can give us inorganic growth? Sebastian Roll: Yes. So M&A, as you know, is an important pillar of our strategy, that's for sure. That's not new. So as we said also in other calls before, so we switched a little bit the direction. So we are now looking especially for targets in the area of Next Automation. That's where we would like to expand our portfolio, and that's clear our target for 2026 to acquire a company in this area. Operator: And the next question is slightly similar. Could you please elaborate further on the target focus, the size, geography and technology? Sebastian Roll: Yes. So geographically, it is still, for sure, the United States. So that's something we would like to enter. Therefore, we need a hub which is close to our technology, maybe a little bit similar. Within the European area, we are more searching, as I said, for additional technology and for additional customer relationships within the Next Automation. So looking in, as we said before, aviation, defense or, for example, life science as well. Operator: And with our large M&A, your capital structure looks rather inefficient and the share price level low. Any further buybacks to be expected? Jan-Henrik Pollitt: So there is no current decision on further buybacks. But as we have shown in the presentation, we have authorization for another 10% buyback of our share capital and we will decide if necessary on that topic. Operator: What is the potential revenue that can be achieved with the current personnel and corporate structure? Jan-Henrik Pollitt: Yes. So we adjusted capacities during 2024 and 2025. We didn't adjust directly on the EUR 160 million revenue guidance, which we have for '26. We still have a bit more capacity in-house so that we can hope for the rebound in order intake and scale up fast again. So if we don't see a positive effect, then of course, we will also use 2026 to further adjust capacities. We will also have the one or other topic in '26 where we see a few adjustments necessary but not larger ones. And as soon as the market rebounds again, that we are able to do like EUR 160 million to maybe EUR 240 million, EUR 250 million revenues again. Operator: You already answered one of the next questions. Have you continued to reduce the number of employees year-to-date? Jan-Henrik Pollitt: Yes. As said, we had some smaller adjustments, not like bigger topics, but small adjustments here and there. So we continue to make some homework, but no big issues. Operator: And there are 2 questions left. Any new strategic industries, markets, or processes that Aumann is looking on? And can you say something about order intake in Q1 and the sales pipeline? Sebastian Roll: Yes. I think what we tried to show in the presentation in a little bit more detail to give to give some ideas in Next Automation. So Next Automation for us is important. For us, it was important, especially that we had this growing market or that we had really acquired one big project, but also some minor projects in the fourth quarter of 2025. So I think you have seen that I think in the middle of the year, we are roughly 20% higher in order intake in Next Automation. After the third quarter, it was roughly 35% higher. And now after the last quarter, overall, we are 55% higher. So that means that the sales pipeline, especially in Next Automation is rising. This takes a little bit of time step by step. But as I said, for us, really important was to have, for example, this big project within the infrastructure area, yes? So in our point of view, a really nice project in the infrastructure, but also in clean tech and also in aviation. So in all these areas, now we have the first projects. In infrastructure, we even have this big project. So this is important for us. And you have to have in mind that, unfortunately, this order intake in Next Automation takes more time than in E-mobility because, as I said, the industry is new. We have the customers that are new or the products are new. And this will take a little bit of time also in 2026. So we will not see the big recovery in the first quarter, but we will see step-by-step a very increasing Next Automation. Operator: Thank you very much. And with an eye on the time, we have the last questions. There are 3 questions in a row, and I will take them one by one. The first is, Aumann reports EUR 12.2 million in securities apparently in the form of bonds. What specific type of bonds are these? Jan-Henrik Pollitt: These are government bonds and corporate bonds, but each with good credit ratings. Operator: And can you provide any information regarding order intake in the first quarter of 2026 broken down by segment? Jan-Henrik Pollitt: Honestly speaking, not yet. Operator: We expect significant working capital effects in cash flow in 2026? Jan-Henrik Pollitt: Yes. We finished the last 2 or 3 years at relatively low working capital levels. So each year, we expected a little bit working capital increases, but managed to hold the working capital at that low level. For '26, from today's perspective, I would see some working capital increases maybe back to a level of 15% to 20% of revenue. Operator: And the last question, can Next Automation reach similar EBITDA margin levels at the currently higher ones of 16% E-mobility? Sebastian Roll: Yes, in general, of course. So we had this high EBITDA margins, especially in E-mobility in 2026 (sic) [ 2025 ]. As said, we finished a project better than expected, which boosted the EBITDA margin end of the year, especially in Q4. For 2026, both segments will be a little bit lower in margins due to the decline in revenue. But in general, we are trying to maintain a good and profitable margin level in both segments. And as we said in the other segments like -- or the other industries like aviation or life sciences, there are also good margins to reach and achieve. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of today's earnings call. Thank you very much for your interest in the Aumann AG. A big thank you also to you Sebastian and Jan-Henrik for your presentation and your time. Should you have any further questions, ladies and gentlemen, you are always very welcome to place them to Investor Relations. I wish you all a successful day around the world, and handing back over to Sebastian for some final remarks. Sebastian Roll: Yes, I hope that we have shown that Aumann will stay strong also in 2026, in unfortunately another challenging year for our industry, but we are focusing on what we can control. So that means internally, we are continuously optimizing our cost structure, we are building our sales opportunities in Next Automation. And for sure, we have an eye on M&A activities. So thank you very much for your interest.
Operator: Welcome, ladies and gentlemen, to the earnings call of Friedrich Vorwerk Group SA regarding the full year figures of 2025. The company's CEO, Torben Kleinfeldt; and CFO, Tim Hameister, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, Torben, the stage is yours. Torben Kleinfeldt: Yes. Thank you very much, and also a warm welcome from my side. Welcome to the Friedrich Vorwerk Earnings Call 2025. I will, for everybody who is not in detail familiar with Friedrich Vorwerk, run you very quickly through the main topics of our company and then give you a short market update about the latest developments in our main markets. Then I will hand over to Tim for, of course, the financial figures, which are key to this meeting here. And then I will give you a business update about our current projects we are running at the moment, at least the large ones. So yes, Friedrich Vorwerk has been active since founding in 1962. So with more than 60 years of experience in the business of engineering and constructing energy infrastructure here in Germany, mainly. We can look back at numerous very successful projects in our highly attractive main market, which is natural gas transition, electricity transition, clean hydrogen transition, and of course, adjacent opportunities where we sum up our activities in district heating, CO2 treatment and transport and treatment of biomethane. Today, we are operating from 14 locations within the north, mainly in the north of Germany with more than 2,200 well-trained employees. And yes, due to the energy transition, which is still going on here in Germany, we can look back at a very strong order intake already also in 2025. So we were able to acquire projects in a total volume of almost EUR 1 billion in 2025, which is an increase of 27% compared to the figures of the year 2024. Yes, where do these order intake come from? Main customers here in our 3 markets are, of course, the large TSOs operating the energy transport grids, not only in Germany, but also in the middle of Europe. So it could be in terms of electricity transition companies called TenneT and Amprion in looking at the market in clean hydrogen transition and natural gas transition, we have customers like Open Grid Europe, Gasunie and others. But of course, you can also find petrochemical companies and cable manufacturers within our customers. Yes. So what's the latest market update. First, I want to focus on the development of -- since German government has agreed with the EU Commission to set up new power plants in Germany. These very flexible power plants are necessary to support the production of renewable energy, mainly driven by wind and solar farms. And at times, you don't have wind and solar available. You need to have an energy source, which can be ramped up very quickly. So Germany is planning to install roughly 10 gigawatts of capacity in terms of gas-driven power plants. And that, of course, is an opportunity also for Friedrich Vorwerk Group, both in pipeline construction to run new natural gas pipelines and later on also hydrogen pipelines towards these gas-fired power stations. But also, we have a division in our plant construction department, which can supply the necessary fuel gas systems to supply those turbines delivered by companies like Siemens, GE or others. Other latest developments since we have all heard that the hydrogen economy has been struggling a bit over the last month. German Parliament has passed a so-called Hydrogen Acceleration Act. Main part of that is, of course, to install the so-called core grid for hydrogen transport in Germany, which could be the nucleus to develop the hydrogen industry in Germany because it will cut off costs for transport of hydrogen when the core grid is available and consumers and also producers of hydrogen can be easily connected to this grid. But also they want to secure and make investments in hydrogen production here locally in Germany easier and more reliable for the investors. And of course, all our other businesses like natural gas transition is also still ongoing since new LNG terminals are still developed on the coast of Germany. So the Bundesnetzagentur has just published the first draft of the new grid development plan, combining the investments in natural gas grid development and hydrogen grid development. And this plan looks out to the year 2035 with still investments in the natural gas grid of roughly EUR 3 billion. And they also found out that probably developing the core grid for hydrogen will be more costly than predicted 2 years ago. So the revised plan for setting up the hydrogen core grid roughly sketches out investments of EUR 25 billion instead of EUR 20 billion, which was estimated before. So also here, in the market of natural gas and hydrogen, huge potential for our company's group. And therefore, I would like to hand over to Tim for last year's financial figures. Tim Hameister: Thanks a lot, Torben. And also a warm welcome, everyone, from my side to today's earnings call. Overall, 2025 was a fantastic year for Friedrich Vorwerk. We achieved record-breaking results across all KPIs, successfully completed 2 acquisitions, secured numerous new major projects. And last but not least, we launched our proprietary welding robot in collaboration with our subsidiary, 5C Tech. Therefore, I'm very pleased to now present these strong results in detail. In terms of revenue, we've steadily increased over the course of the financial year and delivered a fantastic final quarter, which despite the seasonal nature of the business, nearly matched the strong performance of Q3. Overall, we benefited from favorable weather conditions in fiscal year 2025, not only in Q4, but especially in the first quarter when we were able to resume work after a short winter break on many projects as early as mid-January. This point, I would also like to briefly note that the first quarter does not always benefit from good weather conditions. This year, for example, in 2026, we've seen a harsher winter again after a long time with plenty of ice and snow, particularly in Northern Germany, resulting in a question of production stoppages even in February. However, depending on weather conditions in the next quarters that are more relevant in terms of revenue and earnings, we expect to be able to offset at least parts of this effect over the course of the year. For the full year 2025, we generated revenue of EUR 704 million, representing a remarkable 41% increase over the previous year. This was primarily due to our continued success in recruiting new employees, which led to a 15% increase in the average number of employees as well as an increase in productive hours per employee, higher equipment utilization and, of course, some pricing effects. The electricity segment's share of revenue has contributed -- has continued to rise, now standing at 52%, making it the primary driver of growth in 2025. While this is largely attributable to A-Nord, we are simultaneously working on several medium-sized projects in this segment, such as BorWin6, the Baltrum HDD project and several converter stations as well. 2/3 of the current order backlog is attributable to this segment. So continued growth is expected here. At the same time, we anticipate a significant growth momentum from the Clean Hydrogen segment as larger subprojects on the hydrogen core grid are also expected to be put out to tender in the foreseeable future. Furthermore, we expect additional growth in the adjacent opportunity segments in 2027 and the following years due to the German government special fund. The development of profitability was particularly impressive in the fourth quarter with an EBITDA margin of almost 29% and EBIT margin of almost 25%, even taking into account the dilutive effect of the cost plus fee contract in our major A-Nord project. In addition to the favorable weather conditions already mentioned in Q4, our success in claim negotiations, which typically take place in the fourth quarter was a key factor in the exceptionally high margin, along with higher earnings from joint ventures, which increased by nearly EUR 10 million compared to the same quarter of previous year. Accordingly, we also concluded the 2025 financial year as a whole, thanks to our high-quality order backlog and a flawless project execution were successful. We increased the EBITDA margin by 7 percentage points from 16.2% to 23.2% and more than doubled EBIT from EUR 59 million to EUR 137 million. Despite the tremendous 40% growth, we still managed to further reduce trade working capital, which along with the higher profitability, played a significant role in improving the net cash position. As a result, we were able to increase net cash by more than EUR 100 million compared to previous year, bringing it to EUR 262 million at year's end. It should be noted, however, that the trade working capital is always at its lowest level at the end of the year and rises as the construction season progresses. These swings between summer and winter can amount up to EUR 80 million or even EUR 90 million. With regards to capital allocation, our top priority remains investing in organic growth, specifically in the purchase of new pipe layers, drilling rigs, cranes and excavators and of course, our welding robots. We've budgeted approximately EUR 50 million for this in 2026. Furthermore, we will certainly be open to pursuing a larger M&A deal again provided we find the right target and of course, at a reasonable price. And finally, we would like to share the company's success with shareholders in form of a significantly higher dividend payout, consisting of EUR 0.70 base dividend and a EUR 0.40 special dividend. Let's now take a look at the development of order intake. In addition to the conventional order intake figure, we've already introduced a new KPI last year, the total project volume acquired. This new KPI also includes a proportionate project volume from the joint ventures in which Vorwerk is involved. And therefore, in our opinion, provides a more transparent view of the actual order situation regardless of the structure of the contract. The total project volume acquired rose by 29% to EUR 991 million in 2025, while conventional order intake at EUR 538 million is around 20% below previous year. The main reasons for this are, on the one hand, a shift in the order structure towards more joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book, combined with a limited capacity of our resources. The order backlog, which corresponds to the conventional order intake figure declined, therefore, slightly to EUR 1 billion for the reasons stated before. We've learned from several investors that the communication regarding order intake and the contract structure is not yet clear enough. Therefore, we are currently working on reporting an order backlog KPI that includes our share of joint venture projects as well, starting with the Q1 report. And I expect that this additional metric will provide a transparent picture for all shareholders by then at the latest. Yes, and then based on our consistently high-quality order backlog, we expect our growth trajectory to continue in 2026 with revenues in the range of EUR 730 million to EUR 780 million. It should be noted that following 2 years of very high employee growth, we intend to slow down the expansion of our workforce somewhat in 2026 to give the organization and the administrative functions the opportunity to grow at the same pace while simultaneously focusing our recruiting efforts on attracting senior construction and project managers. At the same time, revenue growth is somewhat slower in 2026 due to the higher proportion of joint ventures. And this change in the project mix also means that we are now forecasting absolute EBITDA instead of EBITDA margin, specifically in the range of EUR 160 million to EUR 180 million for 2026 as this number is unaffected by the order structure. This guidance also takes into account the slightly softer Q1 2026 due to the adverse weather conditions. With that, I'd like to hand back to Torben for the business update. Torben Kleinfeldt: Yes, Tim, thank you very much. And of course, we did pick for this meeting our most outstanding projects at the moment. Please remember that during the year, we are operating on more than 500 smaller, midsized and also large projects. So we can, in this meeting, only give you a glance of the most outstanding projects. And I would like to start with the natural gas business here. It's a project we've already been working on last year. It's the so-called EWA pipeline, which is a 48-inch pipeline running from the caverns of Etzel towards compressor station of Wardenburg. This pipeline will continue in size of 40-inch towards the station of Drohne, which is more to the Rhine-Ruhr area, so in the south of the area. We have already finished the construction on EWA last year with a pressure test and the handover to the customer. So there's already gas on this pipeline. And the WAD pipeline is construction progress at the moment. We have already started in January with the first wells on site using our new welding robot, PX2 developed by our subsidiary, 5C Tech. We have completed roughly 400 wells on the project this year. And again, with very, very low mistakes in the wells. So it's -- the repair rate is definitely under 2%, which is very good in terms of fully automatic welding. Yes, changing actually over to the next natural gas pipeline project, which is, at the moment, our still largest project executed in a joint venture between the Habau Group and the Friedrich Vorwerk Group, compromises of 2 pipelines. First, the ETL 182 with a diameter of 56-inch and the ETL 179.200, which is a 36-inch pipeline. Altogether, a mid-3-digit million euro project and both pipelines are being executed by the same joint venture combination. As you can see in the picture below, we have already started some civil works to erect the pipe yards that has been done already in 2025, and we have already received most of the project pipes, which are purchased by our customer Gasunie. And we've actually started in the latest weeks to make preparations for the first loading procedures, so for the tunnel crossings and for the horizontal directional drilling, operations are already in place and will be executed in due course of this year. And then maybe next slide, we are not only active in pipeline cable laying, but our plant division construction is also very busy with a new project at a gas metering station called Groß Koris. This is the main metering and supply station for the company, ONTRAS. Here, we have a project to renew the full installation at Groß Koris with a volume of mid-2 million-digit range. And we have to deliver the full scope of engineering and also construction activities and will then commission the new plant as is foreseen at the moment in 2028. And the system will already be constructed in a hydrogen-ready way. So later on, once the usage of natural gas in the system is over, it can be easily converted to use for clean hydrogen and meter and also regulate the hydrogen being transferred in the grid. Next project is also a hydrogen project, which we have already been working for 1.5 years. This is the so-called HH-WIN project. So the city of Hamburg is trying to set up a hydrogen grid in the Port of Hamburg. Key figures here is an electrolyzer plant, which is located at the former power -- electrical power station of Moorburg, where about 100 megawatts equality of hydrogen is being produced and then fed into the Habau Grid, so the HH-WIN grid. And Friedrich Vorwerk has already executed 3 lots of this newly established hydrogen grid. And we have been recently awarded with 2 new lots to set up this hydrogen grid. The first lot involves actually a micro tunnel of almost 200 meters where we later on install the piping DN 300 for the transfer of hydrogen. And the following lot compromises of roughly 1,500 meters of new build hydrogen pipeline. But besides those existing projects where we've already started execution, we are, of course, still busy in our estimation department working on new estimates for new projects. Just to give you a small idea what could be coming up over the next years. In terms of pure natural gas transition, we are at the moment, working on estimation for the so-called Spessart-Odenwald-Leitung, which is also DN 1000 pipeline, about 115 kilometers long for Terranets and also other projects coming up from Open Grid Europe, setting up the core grid for hydrogen here in Germany. And also for Gasunie, new projects like ETL 187, which is directly in conjunction with the current project ETL 182, is at the moment in tendering phase and execution and commissioning would then be in '27, '28. But also still very attractive is the electrical market, where we are now facing the so-called second wave of large-scale electricity highways, projects like NordOstLink Section 2, SuedOstLink and SuedOstLink+ are being tendered out over probably end of this year and beginning of next year. And these projects will be commissioned in the mid-2034s -- in the mid-2030s. So also here, a huge potential also after 2030 for our company's group. And under adjacent opportunities, we were able to already win lot of the Rheinwater transport pipeline. This is a very large diameter pipeline, 2.2 meters in diameter that will later on transfer water from the river Rhine to flood the coal mines of RWE. And at the moment, we are working on the next lot to establish this water transfer pipeline. And also a very new business to our company, the transport of CO2 is ongoing. So the first tender we have received is the CO2 link from Lagerdorf, where Holcim is operating a cement factory towards the port of Brunsbuttel is on the table at the moment. Commissioning is foreseen for 2029 and tendering phase ongoing and probably construction phase will be '28 to '29. So this, of course, can only be done if we can establish to grow our headcount and our number of employees where we were very successful last year. So today, we can look at a workforce of more than 2,200 employees. Of course, the labor market within Germany, especially due to the low capacity in building construction, we were able to employ a lot of new blue-collar workers we could integrate in our projects. And probably during this year, we will definitely have a focus on growing our engineering staff and our overhead staff on the construction site. So challenge will be also to look for well-educated project managers and construction managers to manage all the blue-collar employees we were able to attract over the last month. Yes, that's it from our side. We are happy to receive your questions either by phone or by chatbot, and happy to answer them. Operator: [Operator Instructions] And the first hand is up from Lasse Stueben. Lasse Stueben: I wanted to ask just on the Q1. Is there any more color you can give roughly in terms of what we should expect in a year-on-year comparison just to avoid any sort of nasty surprises. The second question would be, what should we expect for headcount growth broadly in '26? And then the third question is, you mentioned sort of slowing down headcount growth, but then you also said that you would be willing to do a larger M&A or potentially do a larger M&A transaction. So how do we kind of square those 2 kind of comments? Because I guess a larger M&A deal would also involve many new employees. So just any color there would be great. Tim Hameister: Well, we've seen compared to the year before, some weeks of weather-related production stoppages in February, combined with the growth of the headcount could be possible to see a rather flat Q1 in 2026 in terms of revenue growth. And as I said, which could potentially partly be offset by stronger quarters in Q2 and Q3 as the overall share of Q1 on the full year revenue isn't that relevant. Regarding the headcount growth, when we talk about slowing down recruiting efforts, this is only in terms of organic growth, meaning directly hiring people, not including any M&A. From organic growth side, we expect to grow headcount by 5% to 8% in 2026 and any M&A would be add-on, on that. And of course, usually, we also acquire project managers and the respective engineering and administrative functions when doing a larger M&A deal. Operator: And additionally and slightly regarding question in the chat. Friedrich Vorwerk is guiding for a slightly lower margin in 2026 compared to a strong 2025, midpoint of 2026 guidance at 22.5% versus 23.1% in 2025 despite continued revenue growth. Could you provide a margin bridge for 2026 versus 2025 and outline the key driving factors? Tim Hameister: Well, we've always communicated that we see the margin potential in the mid- to long term at our company between 20% and 22%. However, in particularly strong years as in 2025, it's also possible to achieve an even better margin, more than 23% due to basically a flawless project execution, good weather conditions and so on. But on the long run, we feel pretty confident with 21%, 22%. Operator: And the follow-up from the person. Could you please provide more details on the Nord-A project, specifically regarding the recent delays and their potential impact on bonus malus payments. Additionally, is there any bonus or malus effect already factored into the 2026 guidance? Tim Hameister: Yes. As we already communicated last year, A-Nord project is expected to be slightly delayed with completion now anticipated in summer 2027 instead of end of 2026 due to missing permits. We are still in discussions regarding adjustments to the bonus-related milestones. And these discussions have been ongoing for some time. We do not yet have a definite outcome on these discussions, but we remain still confident and hope to sign their respective contract amendment in the course of the second quarter 2026. And based on this information, at least a portion of the contract liability we've already included into the books since and accrued over the project duration. Part of that could be reversed once this amendment is signed in the second quarter. However, we did not factor in any positive impacts from that amendment as it is not signed yet. Operator: And for now, we have no further questions. Ladies and gentlemen, I will hold the room for another moment in case someone might be typing right now. And there is a hand up from Lasse Stueben, again. Lasse Stueben: Great. Just a follow-up on sort of -- you mentioned kind of the JV share of projects is obviously going up. Should we expect that kind of level of the JV income you saw in '25 to be roughly the same in 2026? Or how should we think about that? Tim Hameister: All the new JVs we entered into last year, we expect to -- that the net earnings of the JVs will even increase compared to 2025. Operator: And another hand up from Leon Muhlenbruch. Leon Muhlenbruch: I have a quick question regarding to the current geopolitical situation. With the energy crisis already on the way and inflation likely to rise similarly to 2022, which had a significant impact on Friedrich Vorwerk, how are you prepared for such a scenario? Torben Kleinfeldt: Well, first of all, we were able to have a better negotiation position in most of the contracts that are in the order backlog at the moment. So most of the contracts have included price escalation clauses. So we can -- on the most bigger projects, we can forward the price escalations to our customers, although, of course, not to 100% because they are mainly bound to indexes which are more general, for example, the steel index or the crude oil index, which is not always 100% equivalent to the products we are actually using in our projects. But in the end, we can at least -- we are at least in a way better position this year than in 2022. Also in 2022, most impact was from a plant construction project where we had to bring a lot of material to the project. If we look at the current large-scale projects we are operating on, it's mainly the pipeline projects where the bare pipe is supplied by our customers. So we are mainly supplying equipment and personnel, so services, which are, at the moment, not that much affected as back in 2022. Operator: Another hand up from [ Lueder Schumacher ]. Unknown Analyst: I've got a few questions on margins. One is, are there any kind of older projects which have lower margins in them that which are running out and should be supportive to the group margin outlook once they do? And what about the margins implied in the order intake? Can we assume that they should be at a premium to the margins you've seen in 2025? Or should it more be in the region of the long-term potential of 20% to 22% you've been hinting at? Tim Hameister: Well, there are currently no such legacy projects in the current order backlog, although we still have the dilutive effect from our major project A-Nord, which will run until summer 2027, where the base margin is definitely lower than the group average. Apart from that, there are no legacy projects with low margins. And well, I mean, we have already seen such strong margins in 2025. We do not expect that we can further increase this margin profile. And therefore, rather to suggest that you can assume the long-term potential at around 21%, 22% for the next years. Unknown Analyst: In your order intake you had in 2025, we should already assume this? Or is this still at the margins you've seen in '25? Tim Hameister: Well, the margin profile calculated in those projects is roughly on the same level as we've seen the year before. However, on the one hand side is the calculated margin. On the other hand side, is the actual project execution on the fields. And this has also a major impact on the earnings in the end. Operator: And we're moving on to 2 questions in our chat. Are you planning any buybacks? What are the key impacts for the Iran war for you? And what are you doing to hedge against it? For example, natural gas inflation, diesel? Tim Hameister: At the moment, there are no plans for any share buybacks. We've decided to instead increase the dividend and to also pay out the special dividend of EUR 0.40 per share. Adding on the answer from Torben regarding Iran, the major impact for us at the moment is, of course, the higher cost for fuel, especially diesel. To give you some color on that, the total cost of diesel last year was around EUR 12 million. So it's not the largest position in our P&L statement. And we've, of course, already hedged some of the amounts needed already before the war in Iran. So there will be, of course, some effect, but not a significant one. Torben Kleinfeldt: But on the other hand, the crisis also has a positive impact on the market because at the moment, customers are really pushing the projects and trying to get more LNG receiving capacity in Germany, which then, of course, also means constructing new pipelines and constructing new plants, which is then also good on the market side for us. Operator: Can you discuss your appetite to revisit medium- to long-term guidance? And what milestones would trigger an upgrade? Tim Hameister: Well, that's definitely a thing to consider this year as we are pretty well on track on the older mid- to long-term outlook. So maybe we can expect to see a new outlook in the second half of this year. Operator: Ladies and gentlemen, we still have a minute for your questions left. And if there should be no further ones, you can always get in contact with Investor Relations. And this is it. With no further questions, we come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorwerk Group SE. A big thank you also to you, Torben and Tim, for your presentation and your time. I wish you a successful day around the world and giving the last words to Torben again. Torben Kleinfeldt: Yes. Thank you very much for listening. I think especially this year, we can look at some very, very interesting projects we can execute for our customers. And please stay with us and hear the latest news from our projects in the future. Have a good time around the world. Bye-bye. Tim Hameister: Bye.