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Operator: Greetings. Welcome to the Electrovaya Q4 Year-End 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Gibson, CFO. You may begin. John Gibson: Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q4 and full year 2025 financial results. Today's call is being hosted by Dr. Raj Das Gupta, CEO of Electrovaya; and myself, John Gibson, CFO. Today, Electrovaya issued a press release concerning its business highlights and financial results for the year ended September 30, 2025. If you would like a copy of the release, you can access it on our website. If you want to view our financial statements, management discussion and analysis and annual information form, you can access those documents on the SEDAR+ website at www.sedarplus.ca or on the SEC EDGAR website at sec.gov/edgar. As with previous calls, our comments today are subject to the normal provisions related to forward-looking information. We will provide information relating to our current views regarding market trends, including their size and potential for growth and our competitive position within our target markets. Although we believe that expectations reflected in such forward-looking statements are reasonable, they do obviously involve risks and uncertainties, and actual results may differ materially from those expressed or implied in such statements. Additional information about factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the company's press release announcing the Q4 fiscal 2025 results and the most recent annual information form and management discussion and analysis under Risks and Uncertainties as well as in other public disclosure documents filed with Canadian and U.S. security regulatory authorities. Also, please note that all numbers discussed on this call are in U.S. dollars unless otherwise noted. And now I'd like to turn the call over to Raj. Rajshekar Gupta: Thank you, John, and good evening, everyone. It is a pleasure to speak with you today as we review our fourth quarter and full fiscal 2025 results. Fiscal 2025 has been the most significant year in my tenure as CEO of Electrovaya. It marked a clear financial and strategic inflection point for the company, characterized by strong profitable growth, major balance sheet improvements and continued execution of our long-term technology road map. Let me highlight a few key milestones. We grew revenue by over 40% year-over-year and achieved the first full year of profitability in Electrovaya's history. This is a structural improvement driven by operational scale, product mix and disciplined execution, not a onetime event. We further strengthened our financial firepower with a new $25 million facility from Bank of Montreal, replacing our former high-cost private lender. We closed a $51 million direct loan from EXIM under the Make More in America program and have begun drawing funds as we build out our Jamestown lithium-ion cell manufacturing facility. As a nice surprise, we were honored to receive EXIM's Deal of the Year Award. Last year's winner was BETA Technologies, so we are in good company. We expanded our institutional investor base and improved liquidity with approximately $40 million in gross proceeds from two equity issuances over the last 12 months, which supports our long-term growth trajectory and positions us well as we continue scaling. Beyond these financial achievements, we made major strides in advancing our technology platform entering new applications and positioning Electrovaya at the forefront of the lithium-ion battery industry. Surpassing $20 million in quarterly revenue was another important milestone. And notably, we achieved this without straining our operational resources. This reinforces the scalability of our business model and supports our view that Electrovaya is now entering a sustained period of profitable growth. Given the number of new investors who have joined the Electrovaya story this year, I'd like to revisit our technology vision and road map. Electrovaya is at its core, a battery technology company. Our Infinity lithium-ion battery platform delivers industry-leading longevity, safety and increasingly high-performance attributes that are becoming essential across mission-critical applications. Earlier systems deployed at Walmart in 2018 have already outlasted the vehicles they power and continue operating. Our respected U.S. testing lab recently informed us that our cells are tracking towards approximately 15,000 cycles, providing rare real-world evidence of multi-decade performance. On safety, our ceramic-separator technology continues to maintain a perfect safety record. With lithium-ion-related recalls affecting electric vehicles, buses, consumer electronics and energy storage installations worldwide, we believe our safety profile is a unique competitive advantage and one that is gaining increasing market visibility. As a subsequent event to the fiscal year in November, we completed a $28 million equity raise. Funds from this round are partially planned to be utilized to support our future technology road map, reinforcing that Electrovaya is not only scaling profitably today, but also actively investing in our future. Some aspects of our road map include rapid charging cell development project, including both cell and system level architecture targeting sub-5-minute charging capabilities for select applications such as robotics and autonomous systems. Next-generation separator technologies aimed at further improving safety, high-temperature stability as well as domestic manufacturing of this key technology. Solid-state battery development, where we continue to make progress and expect to leverage our existing ceramic focused intellectual property and know-how to provide a strong foundation. We are investing in our Electrovaya lab site to enable production of larger cells that can be sampled to potential strategic partners. These initiatives underscore that Electrovaya is executing a dual mandate, deliver profitable high-growth revenue today while advancing the technologies that will define the next decade of the lithium-ion battery industry. Turning to our commercial progress. Our core material handling vertical continues to be a strong and durable foundation. We now have over 10,000 systems deployed globally, supporting 24/7 operations for some of the world's largest companies. This year, we deployed a record number of units with the largest drivers of demand being a few Fortune 500 and Fortune 100 companies, especially in the retail sector. Demand indications from our largest end customers point to continued growth into fiscal 2026. With this foundation solidly in place and expanding at sustainable levels, we are scaling into multiple additional mission-critical verticals. The first is robotics. This is one of the most exciting long-term opportunities we have. Autonomous systems require exceptional longevity, reliability and rapid charging, all areas where our technology excels. We have received initial orders and expect to scale deliveries beginning in the second quarter of fiscal 2026. Another vertical that we are bullish on is airport ground equipment, or GSE. We showcased our first GSE products in Las Vegas in September and several units are now in trials with a major U.S. airline. Safety and durability are key differentiators here, and we expect meaningful contributions in revenue beginning in 2026. In the long run, I expect stationary energy storage systems or ESS, to become a key element of our business. Our Infinity ESS platform launched this September is receiving strong early interest for applications such as data centers, backup power and rapid charging infrastructure. Pilot deployments are expected in 2026 with commercial scale beginning in 2027. I believe we provide a solution that fits an underserved part of the strategic industry, namely solutions that provide high power density with reliable safe performance, metrics that are critical for backup power and data centers, especially. Importantly, domestic cell production from Jamestown will qualify for full U.S. investment tax credits, enhancing both the competitiveness of our product and potential margins for our offering. Defense applications are also a strategic target for Electrovaya. We continue to see growing interest from defense customers, particularly in sea and land-based unmanned systems. We expect deeper collaboration with two global defense firms in the coming year with whom we've already had initial development work in progress. Finally, we are also targeting recurring revenue opportunities. We have historically highlighted the potential for recurring revenue through Energy-as-a-Service models, software and telemetry platforms, aftermarket and maintenance contracts. As our installed base grows and as we deploy systems into new verticals such as robotics, GSE and energy storage, we expect recurring revenue to become a more meaningful contributor to the long-term profitability and cash flow stability of the company. Turning to Jamestown. Construction is progressing well. The first components of the dry room arrived last week with additional major infrastructure build over the coming months. Jamestown is central to our strategy. It supports supply chain resilience, domestic content requirements, margin expansion and qualification U.S. manufacturing incentives like 45X and investment tax credits. Before I hand it back to John, I want to reiterate that our approach to capital allocation remains disciplined and focused. We will continue investing in profitable growth opportunities in high-impact R&D that strengthens our technology leadership and in preserving a strong and flexible balance sheet. Our goal is long-term sustainable value creation. With that, I'll now turn the call over to John for a detailed review of our financial results. John Gibson: Thanks, Raj. Electrovaya closed the year with our strongest quarter ever, capping off a very successful year for the company. Fourth quarter performance improved significantly both year-over-year and sequentially to Q3. During our Q3 call, we mentioned that we were steadily strengthening the financial foundation to drive scalable and sustainable growth. We demonstrated in this quarter that we can further improve throughput and productivity while maintaining margins and managing cost, providing us the platform to build on our growth to date and expand into new market verticals. Revenue for the quarter ended September 30, 2025, was $20.5 million compared to $11.6 million in the prior year. Revenue for the 12 months ended September 30, 2025, was $63.8 million compared to $44.6 million in the prior year, growth of 77% for the quarter and 43% for the full year. Gross margins for the quarter was 31%, an increase of 530 basis points over the prior year. Full year gross margin was 30.9% compared to 30.7% in the prior year. As is the case with previous quarters, the gross margin is primarily driven by product mix. And in a time of uncertainty around supply chains, increasing prices and tariffs, we kept costs under control and drove efficiency through increased production. This will continue to be a focus through 2026, especially as we expand into additional verticals. As we continue to increase our production volumes, we're able to push for better pricing from our key suppliers. And management believes the company is well positioned to maintain strong margins as we continue through 2026. Operating profit increased significantly for both quarter and full year. The operating profit for Q4 was $2.4 million compared to $0.7 million in the prior year. Operating profit for the 12 months ended September was $5.5 million compared to just $0.7 million in the prior year, an increase of 685% year-over-year. The company generated a net profit of $2 million for Q4, a significant increase over the net loss of $0.1 million in the prior year. Furthermore, the company generated a net profit for the 12 months ended September of $3.4 million compared to a net loss of $1.5 million in the prior year. We were able to achieve our net profit during Q2 and Q3 of 2025 and maintaining that for the full year is a significant step forward for the company. We also achieved this feat with just under $1 million of a loss on the fair value calculation of a derivative liability and nonrecurring costs relating to warrants that were exercised during the year. Despite this, we ended the year with an earnings per share figure of $0.09. We believe we can continue this trend of profitability into fiscal 2026 and beyond. Our adjusted EBITDA was $3.4 million for Q4 of 2025 compared to $1.5 million in the prior year, an increase of $1.9 million or 126%. Adjusted EBITDA for the 12-month figure being $8.8 million for 2025 and $4.1 million for the prior year, an increase of $4.7 million or 115%. Adjusted EBITDA as a percentage of revenue was 16% for the quarter and 14% for the full year. The company generated positive cash flow from operating activities of $1.7 million after accounting for net changes in working capital. The company ended the fiscal year with positive net working capital of $38.8 million compared to $0.8 million in the prior year, a current ratio of 4.82 compared to 1.03, a significant improvement, which demonstrates the continued improved financial and operating performance of the company and management is committed to continue this positive trend. At September 30, total debt was $20.7 million compared to $16.2 million in the prior year. This debt includes both working capital and the debt from the EXIM facility. Working capital debt was $17.7 million at the end of the fiscal year, an increase of $1.4 million over the prior year. We had also drawn $4.4 million from the EXIM loan as of September 30. In addition to the cash on hand of $7 million at the end of September, the company had availability within its bank facility of over $7 million. Subsequent to the end of the quarter, the company raised gross proceeds of $28 million from an equity issuance. This cash inflow, coupled with the turning of accounts receivable has put us in a position where we have a very high cash balance and the lowest debt balance in the company's recent history. As of today's date, we have available liquidity of over $40 million. We believe we have adequate liquidity to support our anticipated growth as we move into fiscal 2026. With respect to the Jamestown financing, we continue to draw down on the loan in Q1 and as of today, have now drawn over $15 million from this facility. We are currently in a period of no interest payments with EXIM with those payments not starting until the end of March 2026 and principal payments starting at the end of March 2027. Looking forward to 2026, when we look at our backlog and frontlog, we see significant growth year-over-year within material handling. When looking at the new sales vertical, forecasting becomes more difficult as they are less mature than material handling. However, our conversations with these customers within the new verticals continue to advance, and we anticipate these to represent between 10% to 15% of revenue for fiscal 2026. Overall, we expect to exceed 30% growth in 2026 with revenue from material handling between 80% to 85% of that total and the balance made up of the new verticals that are recurring revenue channels. That concludes the financial overview. I'll now turn the call over to Raj for concluding remarks. Rajshekar Gupta: Thank you, John. In closing, I want to reiterate my sincere appreciation for the hard work, resilience and dedication of the entire Electrovaya team. Your efforts have made 2025 the most successful year in our history and more importantly, laid the foundations for even more success in the years ahead. I'm confident that we are well positioned to build on the momentum that we had in 2025 as we head into 2026 and continue advancing our strategic objectives. That concludes our remarks this evening. John and I would now be pleased to hold a question-and-answer session. Operator: [Operator Instructions] The first question comes from Eric Stine with Craig-Hallum. Eric Stine: So you did mention expecting in fiscal '26, the 10% to 15% from new verticals. But just curious, as you think about those verticals, I don't know if it's ranking them or just some more color, are there ones that you view as potentially being a little bit more near term could mean upside kind of from how you've set things right now? And then conversely, on the other side, is there an area which maybe isn't further as far along and potentially doesn't have the impact that you think it might? Rajshekar Gupta: Yes. As John mentioned, they all -- these are all new verticals. So the maturity level is not the same as it is in the material handling space. I said for robotics, we have one -- we have two key customers who have provided us with, I would say, fairly reliable forecasting. So we're -- I'm pretty optimistic that robotics after material handling will be the second largest revenue driver. After robotics, we also have pretty good line of sight from -- on the defense side, one of the two partners we're working with is giving us some level of visibility for 2026. The airport ground equipment, we have our products being trialed by a major U.S. airline. We're optimistic that airline is going to select our product. But that is more like a binary yay or nay type situation, which would either be a multimillion dollar revenue source in '26 or a very small revenue source in 2026. So it's harder to predict. But that 10% to 15% that John mentioned, from our perspective, sounds about right. Eric Stine: Okay. Thanks for the color. And then when thinking about fiscal '26, I know you called out that part of that factors in the potential for deferred orders. And as I think about what you've seen in the past, I mean, that has been something you've dealt with in material handling. I mean, should we assume that what you're talking about there is material handling? And if there were a surprise, is it fair to say that, that's mostly upside or all upside given that you are factoring the potential that, that happens? Rajshekar Gupta: Yes. I'd say we're being pretty conservative here on what we're -- and that's what we should do. The surprises would lie be on the upside, correct. Eric Stine: Okay. All right. Maybe last thing for me, just energy storage. I know you just launched the product. You said that there was a positive reception to it. I believe you've got three customers that you're in discussions with and maybe one further than the others. But maybe how the pipeline is shaping up beyond those three customers given that, that would be targeted to an end market where you've clearly got a pretty deep list of material handling customers. Rajshekar Gupta: So, Eric, great question. So when we started developing this product, it was with some of our existing material handling customers in mind because they had acquired about it and then that was what drove us to develop the product in the first place. What's happened since those customers still have strong interest, and we are planning and we're in initial discussions on projects with some of those names. Beyond that, though, we've seen quite a bit of interest since we announced the product. And what we've done with the product is we've focused our efforts on areas where the competition is somewhat lacking. So if you look at the energy storage space in general for lithium-ion batteries, most of the systems have been designed for, let's say, 4-hour energy storage, which is -- they're doing a good job of it, and that's, I'd say, a highly commoditized end of the market. The demand that we're seeing for backup power, they require short durations of high-power energy from an energy storage source. So our technology is actually ideal for high power. We can deliver high power and short bursts reliably and safely. And so we've designed our product to do that. And that's gaining quite a bit of interest across the board. All that said, 2026 energy storage is going to -- it's just proving the product, getting the product certified and enabling us to scale it in 2027. Most definitely, energy storage could be a huge, huge place for the company. Operator: The next question comes from Colin Rusch with Oppenheimer. Colin Rusch: Just following up on Eric's question. In terms of the ESS applications, I appreciate the ability to have faster pulse charging. But are you looking at applications inside data centers, warehouses? Just can you give us a sense of where you're seeing these things ultimately located? Rajshekar Gupta: Yes. So we've had some discussions with partners looking at data centers specifically. And the idea there is the -- is that 30-minute backup. That's really what seems to be the sweet spot. Whether they're located inside the buildings or outside them, it's -- at this point, it's too hard to say. But the -- one of the key selling points is the safety, right? The fact that our systems have this technology have such a good record in use are used inside buildings already, right? So a typical warehouse at one of these Fortune 100 companies that we are supporting might have 5, 6 megawatt hours of batteries operating inside buildings and performing flawlessly over and over and over again. And so that kind of performance gives these types of potential customers comfort in the technology. Colin Rusch: That's incredibly useful. So then just moving to the robotics market and the charge time that you guys offer. It sounds like you're competing with supercapacitors or ultracapacitors in some regards. Could you just talk about the competitive landscape of other batteries in that space? And how long the design cycles ultimately end up looking like as you work with some of these companies that are emerging with new form factors? Rajshekar Gupta: Yes. Great question, Colin. So there's a product we already have, right? The product we already have is a relatively fast charging battery system, and it's going into robots, right? Then there's the product that we're developing, and that's the super-fast charging, sub-5-minute type solution, and that would go head-to-head with supercapacitors or certain sort of niche lithium-ion chemistries. And we think we can do it with our technology does require a bit of investment, which we're making both at the cell level and the system level. But it seems like in our initial discussions with a couple of major robot partners that, that is a direction that they are looking for, and I think we can fill that need. It's going to take a bit of time and effort, but we have the core fundamental technology to do it. Operator: The next question comes from Jeffrey Campbell with Seaport Research Partners. Jeffrey Campbell: First of all, congratulations on the strong quarter. I noticed that when you talked about some of the technology development that you have done some work again with lithium phosphate -- lithium iron phosphate. And I was just wondering, it seems like it's back in play. What kind of applications are showing an appetite for that chemistry? Rajshekar Gupta: I mean we developed this. We announced it about a year ago or a little. And so it is -- we've gone and certified it, et cetera. One thing we've tried to do is avoid Chinese supply chains where possible. And our LFP product is going to utilize cathode chemistry coming from non-Chinese sources. What that ends up meaning is the cost of it is somewhat comparable to our existing NMC product. And so there is -- there are certain niche applications which may want it. I don't necessarily, at this point, see it being a huge product for us, but that could change. Having it is important. Fundamentally, the Electrovaya technology is agnostic to chemistry. So we can apply our Infinity technology to NMC, LFP, various anode chemistries. The outcome is enhancement on safety, enhancement on longevity. Jeffrey Campbell: I wanted to ask how the Energy- as-a-Service initiative is progressing. And in particular, is it starting to bring the Infinity battery to a different type of customer? Rajshekar Gupta: Yes, it's progressing. We're working with at least one third-party logistics company in marketing that product and it's now that we're able to support it better, I expect it to gain traction in 2026. Jeffrey Campbell: And my last question is, you mentioned that you're doing work with robotics OEMs in both the U.S. and Japan. I just wonder, are their requirements generally the same or any significant differences between these two markets? Rajshekar Gupta: The robots are all different, but there's no geographic driver for a difference. Operator: The next question comes from Theo Genzebu with Raymond James. Theophilos Genzebu: Congrats on a good quarter and the year. Just as a quick follow-up on the rapid charging for the robotics. Are there any upcoming major milestones you're looking to achieve or expectations you can speak of or shed some color on? Rajshekar Gupta: We're going to -- you'll hear it from us. So there's development work ongoing currently at both the cell level and from the system level. We're also looking at filing some IP in the area, but it doesn't happen immediately. Theophilos Genzebu: Right. Okay. Understood. And just on the $40 million in equipment orders, and I appreciate, John, I think you said it was $15 million. I was already drawn from the on loan. Will all these orders be funded over like the next few quarters? Or will some of that slip into 2027? John Gibson: There will be probably a small portion. We'll hold back a small portion of the payments just for the final financing. So that may slip into 2027 fiscal year, but the majority of the cash will be drawn in 2026. Theophilos Genzebu: Great. Okay. And then maybe just another one for me. You guided to about like greater than 30% revenue growth for fiscal '26 and about $105 million in backlog. I was just curious on like what percentage of that backlog is tied to firm orders versus pipelines, if you can disclose that and what other key bottlenecks that could defer revenue into '27? John Gibson: So when we look at our guidance, we kind of look at overall total backlog to date our run rate, our conversations with our customers and where we see other verticals going, then we take that number and we discount it quite significantly to take into account any pushouts, any delays, customers changing their mind. And then you've got the uncertainty of the different verticals we're going into as well. So when it comes to guiding to a percentage growth, it really -- it's a difficult task with these different verticals and the potential upside there is almost like closing your eyes and throwing at a dart board. It's difficult to put a number to it. But our backlog is healthy frontlog is looking really good and the conversations with the customers are -- we're getting new customers coming and speaking to us every single day. So... Rajshekar Gupta: Yes. The other part is in the material handling space, especially, right, the orders come often in the last minute, right? So our actual firm orders come in the last minute, but we're given, I'd say, very high confidence forecasting well before that. And so that provides us the framework. Actual order might come a couple of weeks before it's meant to ship, right? Operator: Up next is Craig Irwin with ROTH Capital Partners. Unknown Analyst: It's Andrew on for Craig. A lot of my questions have been answered, but just one quick one for me. Last quarter, you called out you started a second shift in Mississauga. As we get closer to Jamestown commencing operations, how should we just think of the transition of capacity from one to the other? Or you keep the second shift in Mississauga? And how quickly do you think we'll get Jamestown up and running? Rajshekar Gupta: So, the second shift, so what we do in Mississauga is we make battery systems. Primarily, we're also making some battery modules. Jamestown is going to make battery, battery modules and cells, right? So they're somewhat apples and oranges. I don't anticipate us slowing down in Mississauga as Jamestown ramps up. So Jamestown is going to ramp up in all three areas. The cell portion is the most complex, most capital intensive, and that's where most of the investment from EXIM is going in. But there's also a substantial amount for battery modules, and we're planning to make a much larger variety of battery modules in Jamestown. Battery systems will also be manufactured there. And so it's not a zero-sum game at all. John Gibson: Yes. We'll be looking to level load from a capacity standpoint as well. Like we don't want to be running significant overtime up in Canada if there's capacity available in Jamestown. So it's about looking to be as efficient as possible with our available capacity and basically determining what's best to be manufactured for. Operator: Okay. Our next question comes from Amit Dayal with H.C. Wainwright. Amit Dayal: I just have one, actually, most of my questions have been asked. With now that the balance sheet has strengthened pretty significantly, you have various lines of credit and funding to ramp capacity in Jamestown. So your working capital needs, your CapEx needs, all are sort of in good shape. Do you think it would be safe for us to assume that the company is going to be more aggressive with sales and business development efforts maybe compared to, say, a year ago? Rajshekar Gupta: So, again, in 2026, I think we know what's going to happen. In 2027, we have significantly increased capacity. So what we're focused on is setting ourselves up to get to a position where we're rapidly filling up the plant in Jamestown. So, for instance, energy storage is a good example. 2026, we prove out the product. We might do a couple of pilots. Revenue generation is not a priority for energy storage in 2026. Certifications most definitely are. But 2027, we think it can be a home run product, right? So that's our objective. Now the other objective we have is to make very high-quality battery systems. There have been -- there have been competitors out there who may launch products prematurely and they get recalled. I mean just recently, I read one -- probably the largest electric bus manufacturer in North America is recalling every single bus they've made because the batteries have problems. We want to make sure our batteries work perfectly before they get into customer hands. And we've done a great job of doing that over the years, and we're going to -- that's #1 focus. Amit Dayal: Understood. And on the energy storage side, Raj, are you thinking you will take market share from sort of some of the existing folks? Or are these new opportunities that you will be participating in? Rajshekar Gupta: We're going after noncommoditized parts of the energy storage space, right? Our mandate is to sell our Infinity product at 30% margins. We're focused on opportunities which can do that or exceed that. And whether -- I don't know whether that's taking away from our competition is really filling a specific demand in the market for what we provide. Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks. Rajshekar Gupta: Well, that concludes our call, and thank you for listening. We look forward to speaking with you all again after we report our first quarter 2026 results. Have a wonderful evening. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, and welcome to the IXICO plc Final Results Investor Presentation. [Operator Instructions]. Before we begin, I would like to submit the following poll. And I would now like to hand you over to Chief Business Officer, James Chandler. Good afternoon to you. James Chandler: Good afternoon, and thank you for joining the financial results presentation for the 2025 year. Great pleasure in introducing Bram Goorden, CEO, you can see on the call on your left. And Grant Nash is on the right of your call, who's the Chief Financial Officer and Chief Operating Officer. We've got a presentation that will probably take us sort of, I would say, up to sort of 20 minutes, 25 minutes. We want to leave plenty of time for questions. We have seen that the questions that have been submitted now, so we'll try and get to those 2. All other questions we will get to at the end. So please ask questions towards the end, and I will let the 2 gentlemen now kick off with the results presentation. Bram Goorden: Well, thanks very much, James, and welcome, everyone. Thanks for taking the time to witness and listen to the results, which we're presenting for 2025. I'm delighted to confirm what I think has been a great year. If we go to the next one. And maybe before I do that, just to sort of set the scene for those who are less familiar with us, we are IXICO. We are a leading imaging CRO business in the CNS space, so central nervous system in the neuroscience space, which we believe is becoming an ever more fertile ground for us to operate in, as you will see also through some of the data that we're presenting today. And the services that we offer are very much based on an AI-driven biomarker analytics platform, obviously, surrounded by an expert team with whom we deliver A2Z services mainly to biotech and pharma, but more recently also to the diagnostics industry, and I'm sure we'll come back to that today as well. Maybe just to highlight that we are currently serving 28 studies -- as you will hear later on, we have actually served 38 projects over the past 12 months or in 2025. And then obviously, on the bottom, the number of brain scans analyzed is an ever-evolving number as well. And that is, of course, sort of the goal, which we're sitting on because that is the data that also feed our AI-driven platform. The business model of the company very much holds as well for those who may remember, I joined the company about a year ago. We then actually also did a capital raise and very much redefined what is our strategic focus, but very much basing ourselves still on the strengths that we have in-house. So at the one hand, the IXICO AI platform, it's a platform that has been completely revamped, which we actually went live with about 12 months ago. Every new customer is now coming on board that new platform, which is very exciting. And over the past 12 months, we've also seen that it really works well. IXICO expertise, as already mentioned, those are the people working with us, mainly at the headquarters in the U.K., but also worldwide. And again, as you may remember, we've actually increased our footprint, especially also in the U.S. The main activities are then imaging biomarker development, trial management and then analyzing the data, which is very much the results that pharma and biotech contact us for. Maybe just to highlight that to the right-hand side, you see some of the key disease areas which we are operating in. Most people that know IXICO since its 20 years existence know that we're an absolute leader in rare CNS disorders and especially Huntington's disease. But that more recently, we've now really deepened our footprint, especially in Alzheimer's, Parkinson's disease, but also active in other disease areas. As mentioned, the focus on CNS is very much a stronghold. It gives us focus. It gives us clear purpose, and it really makes us that global leader in that space. And as you will see in a minute, this is a space which is very much growing. This is how we like to measure and look at ourselves after we did this capital raise around a year ago. You may remember that the strategy, which we set forward then was innovate, lead scale. And if you look at the right-hand side of this slide, these are some of the KPIs that we have been measuring throughout. And this is sort of the picture today, if you wish, against some of those measures. So starting with the first bucket, innovate, which was very much about equipping the platform, so the IXI platform with novel algorithms, novel biomarker algorithms in order to go deeper into that AD/PD space and then deploying that platform with customers, which then leads to diversification of our portfolio, so therapeutic area diversification. We feel it's appropriate to put sort of green there across the board because very clearly, we have made those investments. We have put these algorithms on platform. And so we do feel that IXI is very much equipped now to go deeper into these disease areas. And that's, of course, also what has resulted into the, I would say, excellent revenues for the past year and also the more recent big order book increase, which we will come back to. There's this little white box here, novel IXI applications and revenues. I made it wide because it's not necessarily what we set out to do over the past 12 months, but we did sort of uncover over the past 12 months that clearly there are other technology applications, which are presenting to us and which we do believe we can capitalize on. And that will actually come back then to some of the strategic partnerships, which we are further pursuing and which we're hoping to report out to you later in the year in 2026. So moving on to the second one, lead. That is very much about then making some noise around the innovation, which we've put on platform and also much more deliberately working together with key opinion leaders, with thought leaders. You may have seen that we actually did some press releases very recently where we announced that we're working together with Mike Weiner, Professor from UCSF in the U.S., Joanna Wardlow from the University of Edinburgh. And this is very much deepening now that expertise in that collaboration, especially in the area of dementia. So heightened conference attendance, more prominent KOL expansion, medical affairs, but then as mentioned as well, the operational and commercial footprint expansion, especially in North America. Data partnerships is an important one as well. We especially announced also the partnership or the deepened partnership, I should say, with GAP, the Global Alzheimer's Platform, where we solidified our access to the data in Bio-Hermes 2, which is a pivotal data set for us to further validate some of the biomarkers that we have on platform. And so the third bucket here, if you wish, the scale is then actually more sort of a lagging indicator. So what does this all result into? At the one hand, existing project revenue expansion. So this is actually about making sure that with our current clients, we see additional work as thought leaders, we've sort of positioned ourselves to look at what further biomarker research can be done, and that has resulted into revenue expansion in 2025. New biomarker revenues, which really relates to that new vertical that we're serving now, which is the blood-based biomarker space, so a diagnostic space. And then order book growth, which especially more recently, and you'll hear Grant talk about that, has quite drastically increased. So very much an indicator which we felt we could put on green where we are now today. Then in terms of pipeline expansion, I'm giving that a number. We see very much new projects coming on board. But clearly, 2026 is the year where I really want to solidify this so that we can keep also that order book growing. And obviously, that will then feed to revenue growth, which we have now projected in the market, as you may have seen, to be 15% for this year, 2026. And of course, the expectation is that, that will not slow down or on the contrary in the future. And then strategic partnerships, I'll come back to that, but this is very much how we would like to see further revenue streams develop, and that will be very much through partnering our technology in a different way than the service model that we do through the CRO. And again, I'll come back to that. I'm giving you the number, not because we're not making progress on the contrary. I think we've made a lot of progress, but it wasn't necessarily the strategic focus of 2025, and it will very much be the strategic focus for 2026. So this is then the year sort of in -- on one page and on a time line. So the Innovate Lead Scale strategy. I will not walk you through every event there because I think I already did that to some extent the past minutes here. But I think it's fair to say that after the capital raise, which happened at the beginning of the year, we had a somewhat slower H1. And so I think the results of that new strategy and of that capital raise really started to pan out in that second half of 2025. And that's also where we saw an order book increase then from GBP 13.1 million to GBP 13.8 million. And that momentum is really what we now see continued also in these first 2 months of 2026 with an order book that's actually landing at GBP 17.7 million. Obviously, we're early in the year. We're definitely not done. So we do have an objective of increasing that number further. But I think this is definitely a great level of comfort because it does inform and Grant will come back to that confidence around the revenue number, which we've put out there for 2026 as well. I've already highlighted some of the events that you see on this pipeline, like the Fujirebio FDA clearance, that was an important one because it was sort of our first collaboration with a blood-based biomarker diagnostic company. It was maybe a smaller project in value, but it was also a project that didn't take much time to complete less than 6 months, which means that revenue recognition around this type of project goes very fast. And obviously, that goes straight to the top line, and we've got more of those lined up now in the pipeline. And then, of course, the GAP deal, as I already mentioned, which then at the end of the day, led to a positive trading towards the end of the year. And then at the end of the year, we saw more Alzheimer's work coming on board, more rare CNS contracts coming on board. And then eventually, just in the new year, that Phase III trial, which was a GBP 3.5 million contract that we announced and which obviously has now had a very positive impact on our order book. So with that, I think I'm going to move to the next one. So the way we positioned the increase and the progress was very much by going deeper into Alzheimer's and Parkinson's disease. And you see that here with that platform progress, so these sort of green dials, if you wish, try to show how what we've brought on platform is now starting to have an impact in the market, so clinically with customers, but then also, of course, for us, commercially in terms of projects that we're landing. And I think it's fair to say that, that progress in Alzheimer's disease has been witnessed -- we have actually landed some of these contracts. We have also now opened this new vertical with the blood-based biomarkers, and that is very much thanks to those biomarker algorithms that we decided to bring on platform to further differentiate ourselves, of course, helped by increased footprint and commercial efforts. With Parkinson's disease, it's very much the same. It's sort of slightly more to the left because it hasn't translated necessarily into a massive pipeline of opportunities yet. The pipeline is there, but it's now about converting those into actual wins, and that is very much what we are planning to see in 2026. Huntington's disease, as you know, is an area where we are dominant. And so for us, it's very much about, if you wish, defending the fortress here. And of course, with the recent win of the Phase III trial, but also with onboarding some earlier-stage Phase I trials, we feel that we've very much proven that we're still very much the leader in that space. So with that, I suggest we go to the next one. And I think this is the last one that I'm presenting before I hand it to Grant, and then I'll come back to talk a little bit more about the future and some of the things that are exciting for us. I recognize that this is a busy slide, but what we're trying to do here is share with you how we are looking at the market and at the space in which we operate, so especially around these 3 main disease areas, Alzheimer's, Parkinson's, Huntington's, but then also the other rare CNS disease areas because we've seen a lot of momentum there and momentum, which is also informing our pipeline and our commercial success. So starting with Alzheimer's disease, I think as many will know, we've had approved drugs in that space since a while now by Biogen, Eisai and Lilly. And obviously, those anti-amyloid disease-modifying therapies are now very much informing also the next generation of pipelines, and that is strengthened also by novel biomarker solutions such as the blood-based diagnostics. So this is very fertile ground for us as you have also witnessed now in some of these wins. The other thing I would like to call out here is the GLP-1 development. Many of you will know that this is a class of drugs, which has really shaped a whole new area of obesity management, especially. Lilly and Novo are the 2 players that often come to mind, but there's hundreds of these assets actually in development at the moment. They are believed to also have an impact on dementia, which comes through metabolic and vascular pathways. And since we brought vascular biomarkers on platform 12 months ago, which at that moment, we sort of considered a little bit of bet, we do see that we're now in the middle of this opportunity, which obviously is something that we're very excited about. If we then move to Parkinson's disease, one of the key events is Roche, which entered into Phase III with their disease-modifying therapy. And that is a big step because Parkinson's disease has been an area where we've seen a lot of need and really sort of a gap in terms of bringing true disease-modifying therapies to -- further into the development cycle. We know that one of the key new biomarkers that is being looked at through MRI imaging is neuromelanin. And again, for those who remember how we started off the year, this is one of the key biomarkers, which we decided to bring on platform. So obviously, again, this brings us now in the middle of this field of research and so also close to the clients that we are targeting there together with associations such as the Michael J. Fox Association. And so then very briefly, Huntington's disease. For those who have followed the press, there's been some very positive press around it. There was actually a client of ours, uniQure, which got some very positive feedback from the FDA, which was then subsequently nuanced slightly because it was only a Phase I/II trial, which they were working on. And so there is a requirement for further efficacy endpoints. But at the same time, we see that these assets are further progressing. We also see that Novartis now initiated a Phase III trial. And you can see to the right that IXICO is actually supporting a Phase III trial. So I'm letting you connect the dots here. And then last but not least, other rare CNS. We mentioned that during our Capital Markets Day as well. It is a very thriving arena as well. And so we are actually serving some of these big pharma companies that are almost solely focusing in CNS at least on rare disease because they know that this is actually an area with especially gene therapy as very fertile ground. And again, since we have the platform since many -- or since 2 decades now that has really been equipped with some of these bespoke biomarkers, we see increased engagement there, too. So I think with that, I'm going to pass it to Grant for a moment, and he will talk a little bit more in detail about the financials. Grant Nash: Thank you, Bram. I will talk through where we are in terms of our financial performance, our financial position and then go into a little bit of detail on our order book, which helps look towards the future. So on this slide, I'm presenting the financial performance in the company over the last 12 months focused specifically around revenues on the left, where you can see we've reported GBP 6.5 million of revenues across the year, which reflected 13% growth in revenues. That comes from winning new contracts and extending contracts, but also, as Bram mentioned, the diversification of those revenues to including the validation of blood-based biomarkers. As Bram mentioned, we serve 23 clients, 37 projects across the year. And with that increase in revenues, we also see an increase in our gross margin, the middle graph, which showed that we achieved gross margin of just under 50% for the year. That was increased by the revenue increase, which at this stage in our scaling accesses the operational leverage that exists within the business because we have a relatively high fixed cost base. So the more revenues we deliver by volume, the higher that gross margin will be. That was tempered a little bit this year because we made some specific investments in adding operational footprint on the ground in the U.S. to augment our service offering in that important market. The key point for us and to explain on gross margin is that -- the factors that influence it are the level of revenue. So the higher the level of revenue, the higher the margin will be, that operational leverage piece, but also the mix of trials. So we have tended to have more Phase I, Phase II trials, so early-stage clinical trials over the last few years, which tend to have a slightly lower gross margin than some of the later phase trials, the Phase III trials. As we start to see more Phase III trials coming into our order book has been the case in the last couple of months, so we can expect to see that feed through into higher gross margins. And of course, underlying all of that, we will continue to closely manage our costs to deliver the best and most efficient gross margins that we can. That all feeds through into our EBITDA position, our profit position over on the right. So we report a GBP 1.3 million EBITDA loss in the year, which is a 20% reduction in EBITDA loss compared to prior year. That again is driven by the revenue increase, which is really where the relatively high fixed cost base of the business means that additional revenues fall quite quickly through all the way through to profitability or profit position, offset to a certain extent by the investments we made following the capital raise a year ago, which are designed to drive forward sustained growth and ultimately sustained profitability. We also -- I just want to emphasize that when you compare our 2025 EBITDA loss of GBP 1.3 million compared to 2023, which is at GBP 0.8 million for relatively similar revenue levels. The reason for the differential is at that point, we were actually capitalizing GBP 800,000 more cost moving from our P&L to our balance sheet. So on a like-for-like basis, the comparison would be minus GBP 1.6 million in '23, minus GBP 1.3 million in '25. So essentially, we are delivering our revenues and our profitability more efficiently than we were a couple of years ago. Moving on to our financial position. We have a strong balance sheet position, closing cash of GBP 3.5 million, that was supported in the year by the capital raise we did in October of '24 with an underlying cash utilization of just under GBP 2 million. That -- those investments were driven by that capital raise we did, where we outlined that we were going to invest in the Innovate Lead Scale strategy that Bram has spoken to, and that has been obviously what we've been doing in deploying those -- in deploying that cash. The middle graph shows our capital investment, shows the fact that we have invested GBP 1.3 million in the year. About GBP 600,000 of that was in our platform, which is comparable to the GBP 500,000 we invested last year. In 2023, you can see we invested much more than that, almost GBP 2 million. And that was the completion of the deployment of our new technology platform, a key asset and cornerstone for our business going forward, which we launched in 2024 and which will become a key topic of this presentation when we come back to Bram in a moment. On top of the GBP 600,000 of investment in the platform, we also invested GBP 700,000 in data. This is absolutely critical for us in terms of driving the differentiation of the pipelines we use to support the biopharma industry in analyzing the data they're collecting in clinical trials. It's data that really separates us out from the competition, differentiates our product and creates a competitive moat to others in terms of the AI capabilities that we're able to deploy. And then for completeness on the right, we show a net asset position at the end of the year of GBP 11.7 million, increased by 24% on the prior year, supported by the capital raise and split round numbers into GBP 8 million of long-term assets, the investment that we've made in the platform and in data, which will drive our revenues over the coming years and move us back to profitability. Working capital of just over GBP 4 million, and we have almost no long-term liabilities whatsoever. I then want to just spend a moment or 2 talking through our order book. As a reminder, our order book is the value of contracts that we have signed but not yet delivered. So this essentially is the backlog and the visibility of future revenues that the organization will be delivering over the coming years. So in terms of future-looking KPIs, this is the key one because the growth in the order book is what gives you confidence in sustained growth going forward. I talk you through the chart, we had an order book at the end of September last year '24 of GBP 15.3 million. In the financial year, we delivered GBP 6.5 million revenues. We had GBP 1.2 million of trials whether were descopes or reductions in the value of the trials simply because the trials haven't been successful, and that's something that happens in clinical trials and particularly in CNS area. And then we won GBP 6.2 million of contracts, leading to a year-end closing order book of GBP 13.8 million. One thing I want to highlight here is that across the year, in the first half of the year, we had a relatively slow contracting period. We won GBP 2 million of contracts. That reflected the wider market challenges, which are well publicized, where biotech, in particular, was struggling to raise capital. And across the market, there was a relatively slow level of new trials being started and funded. We saw that pick up materially in the second half of the year where we signed GBP 4.2 million of new contracts. We believe that was driven by an improvement in the market conditions, but also the improvement in our capability to communicate to the market the differentiation of our products that came directly from that Innovate Lead Scale strategy, particularly that lead element of the strategy. So we finished the year with GBP 13.8 million, having grown the order book from the midyear point of GBP 13.1 million. But then very significantly, in the last 2 months since the year-end, we have won a further GBP 5.1 million of contracts. So what this shows is that since the financial year-end in the 2 months, we've recognized GBP 1.2 million of revenues. We've had no further client trial descopes, and we've won an additional GBP 5.1 million, which leads us to an order book at the end of November of GBP 17.7 million. So an increase since the end of the year of 27% -- that is important because what that meant is this morning, we were able to release improved revenue expectations for this financial year. So having delivered GBP 6.5 million last year, we're now -- the guidance in the market is that we will deliver GBP 7.5 million this year. That's 15% increase in revenues. We were confident that we could deliver that forecast because we have within that GBP 17.7 million order book, so that order book of contracted revenues, 84% of that GBP 7.5 million revenue projection already contracted. So we essentially have approximately GBP 1 million of revenue still to find in the remaining 10 months in the year, which is a very achievable target for us. So looking at the way that we've contracted across the last 14 months, so between the end of September '24 and the end of November '25, we've signed GBP 11.3 million of new contracts. 17 contracts totaling just under GBP 8 million were new. And then we have 35 contract extensions, so extensions on existing contracts across 15 clients totaling just under GBP 3.5 million, giving us an overall book-to-bill gross position of 1.5, which is very healthy, obviously, to deliver sustained growth going forward. I then got my next slide, which again focuses on the order book. This is quite a busy slide. What I want to -- what I'm showing here is in each of the 3 sets of charts, the position at the end of September '24, the position at the end of September '25 and the position at the end of November '25. What I'm going to do is I'm going to jump forward and just take out the September '25 figures. So you can see those overall trend across that 14-month point in time between the end of September, GBP 15.3 million order book and the end of November '25, GBP 17.7 million. And what I'm showing here in the graph on the left is that order book broken down by the projects within it. So each colored bar within the 2 overall bars is the value of the project held within it. So at the end of November, we had 28 projects in the order book at the end of September '24, we had 25. And you can see that we have a very well-diversified order book. We're not overly reliant on any individual project, which means that we have diversified away risk of -- or significantly minimized risk of trial descopes and cancellations because we don't -- we're not reliant on any particular specific project. But also, we've increased the opportunity that exists in our order book because every single one of those projects have the potential to move to later-stage projects, which we are then very well positioned to follow on with. So we essentially have a pipeline of opportunity that exists within our order book. So we have a GBP 17.7 million order book where we've reduced the risk and we've increased the opportunity. Then as you move to the middle chart, what this shows is that same order book by value, but split by the different clinical trial phase of projects. And what you'd expect to see over time is that you bring new projects in Phase I. If those projects are successful, they moved to Phase II. If they're successful, they move to Phase III. And what you can see is that, that has been exactly what's happened to us over the last 14 months. We've had projects in Phase I that have moved to Phase II, which is projects in Phase II have moved into Phase III. So you can see in 30th of November '25, our Phase III projects have moved from GBP 2.9 million 14 months ago to GBP 6.1 million of value. And those projects, we can expect to have higher project gross margins and will have higher proportions of analysis, which is positive for the organization. And then finally, on the right, you see the order book this time split by number of projects. And the reason we've done this is to show the split of number of projects that we have within HD, AD, PD and Rare. And what we have focused on is whilst we are committed to growing our order book overall, the investments that we're making and have made in the last few months following that capital raise, have been focused on expanding our opportunity in AD and PD. So whilst we're very pleased with the growth in our order book, and we expect to see that continue, where we want to see further growth is coming through the number of projects in AD and PD. Those projects will tend to be Phase 1 projects. So they'll tend to be lower value, but it's those projects that will lead to greater opportunity as they mature into Phase IIs and Phase IIIs. So at that point, I'm now going to move back to Bram, who will talk a little bit about the future. Bram Goorden: Thanks, Grant. And I'm conscious that James promised a 20- to 25-minute presentation. So I'll try to be brief. But hopefully, you all see that this was a successful 2025, which is now translating into a great start in 2026, and that gives us as a team actually also the chance to think a little bit more around that medium to long term and where do we really derive value. And I did want to share that with you today so that you also understand what is the agenda of us as a company to create even more value as a company. So if you go to the next slide, the way we like to depict this, and I appreciate that this is a very sort of cartoon slide almost, but the thin line that you see here is our business today, obviously turned around because it hasn't always been growing over the past years. So as an imaging CRO, we do now see linear growth. We've just put out 15%, as Grant said, for 2026. And obviously, the expectation is that we will do the same or better even in '27 and beyond. And that will then bring us to that GBP 10 million in revenues quite rapidly. And just sort of to put things clearly, as a company, we believe to -- or we strive to be breakeven with the GBP 9.5 million top line number. So this very much is now within that time frame that we announced a year ago when we did the capital raise, but we don't want to stop there. We do believe that there is an opportunity, and it's also an inbound opportunity through partners that are reaching out to us to accelerate that growth towards that blue line, which we believe is going to be more through a tech bio model. And what we mean by that is that we want to start to partner our IXI platform in different ways than the way we're using it now, which is a little bit sort of a bespoke system, if you wish, that fuels the services which we offer. So we very much want to continue, of course, to be that leading CRO in the CNS space, but we also realize and acknowledge that we've got a technology, which is of interest to some of the bigger partners that we're working with. And so if you keep those 2 lines in mind, I've got sort of 2 slides to share with you. The first one, which is the next slide, shows how we're going to continue to go down that straight 15% at least growth line. And that has to do with the disease areas, which we have decided to go deeper into, especially Alzheimer's and Parkinson's disease. And so if you look at this chart here, and we start at the bottom, you see that Huntington's and rare, which is very much our bread and butter, it's our -- the market where we believe we are very dominant. We've sort of conservatively estimated that there's around 13 million in novel projects on an annual basis to gain. And we know that we've got access to the majority there, which is also why we say that we've got an 80% market share. In terms of how much we want to convert there, we're projecting 6 million. So that is what we need to win as contracts in order to make that revenue number that Grant was talking about before. And obviously, with some of these wins in the first quarter, we are very well positioned to achieve that. And so there's high confidence there. And then if you look at Alzheimer's and Parkinson's, obviously, we're now talking about much bigger markets, even if you could argue that conservatively or that there might actually be upside there. But for us, the work is now very much about penetration. So in this light blue -- these light blue bands that you see, that is the market which we believe is readily available for us. That is the market around which we're building our pipeline. And then I think quite conservatively, we're saying let's project to convert at least 3 million in projects in Alzheimer's disease and 1 million in Parkinson's disease. And I think most people will agree with me that this is a very achievable target, especially if you look at some of the most recent wins, especially also in the Alzheimer's and dementia space. But I think it sort of highlights a little bit how -- what we are projecting out there is not pie in the sky. It's actually very achievable, and I would argue maybe even conservative. And so this GBP 10 million revenue in the medium term is definitely something we stand by and that will be achievable. So if we then move to the exciting part, which is the next one or the other exciting part, I should say, how do we utilize our platform in different ways to further grow revenue at the one hand, but also increase the value of us as a company. So at the left-hand side, you see IXI as a platform, which is modular, flexible, scalable, but very much sort of our own proprietary technology that we translate into these A to Z services as a CRO. We're very much going to continue to grow that, as I just mentioned, but we also have 2 big other avenues of revenue generation, which we are pursuing and which we are now discussing also in terms of corporate development and technology development. The first one is what we call ICRO, which is further automating the platform, obviously driven by the AI evolutions, which we witnessed in the industry and which we are a driver of, I should say, and looking at how we can implement those into the platform to then further partner with other technology platforms that serve similar clients as ours. So it's pretty close to home as in we continue to serve pharma and biopharma, but we know that there's other players out there like large-scale CROs or data providers, electronic data capturing systems that have access to these same clients and with whom we could partner and integrate our platform. And it's a bit early days now to start to talk in great detail, but this is something that I'm hoping to communicate back to the market in the next coming months in this year. And then the second one is a clinical one, which has always been an obvious one, but which really we're now doubling down on. And that is how can our platform, which already is used in the hands of radiologists in the clinical trial space, be utilized closer to patients in the clinical decision space. And as you see at the bottom of these boxes, we're not necessarily suggesting that we're going to start to build the route to market and build all the teams around reaching these targets. We do want to partner with other companies that already have access there. And the good news is that these are partners today already for us. For example, in the clinical space, we are already today contracted with Siemens, GE and other device producers. So what we endeavor here is to accelerate revenue generation because we really do believe that we can get to a top line, which looks much closer to, say, GBP 50 million, but we also much more importantly believe that, that will really restore and further increase actually the value of us as a company because that underlying proprietary value will be recognized as such as well. So that brings me, I think, to the last slide, and then we'll be very happy to go into Q&A. Just to sort of summarize the investment case for us as a company. Obviously, financial performance comes first, and that is what we set out to do in '25. We will continue, of course, to do that in '26. But I'm happy to report that when it comes to revenue and order book, those boxes are ticked at the moment. Obviously, that work isn't done, but we are very much in the green. Scientific track record, the company has celebrated this 20-year track record. But very importantly, we've really expanded, I think, our reach by making sure that we work more closely with some of the key opinion leaders and that we give our Chief Scientific and Medical Officer also really that opportunity to strengthen that team as we communicate the innovation that we bring on platform. Then technology advantage, which very much comes back to what I just mentioned. We do believe that we're sitting on an underutilized platform that can be scaled in many other ways. And obviously, the ideas that will further equip the group of our Chief Technology Officer to bring that to life together with partners. And that market growth is not an unimportant one either. We are a leader in neurology. And we believe that, that focus on CNS, so on the neurodegenerative space is also what makes us so successful. And the good news is that this is a space which is very much thriving and growing despite some of the macroeconomics that we see in other areas. And so to the right here, value creation will come first and foremost, through that revenue growth, which we said was going to be double digit, and we sort of upgrade to 15%. But then, of course, also order book. And as I mentioned, that underlying value then from the technology, which I invite you to sort of stay tuned as we further develop that. So I'm going to end here, James, and I think we're ready to take some questions. Operator: That's great, Grant. [Operator Instructions]. James, if I may now hand back to you to take us through the Q&A session, and I'll pick up from you at the end. Thank you. James Chandler: Thank you, Alex. So we've had quite a lot of questions. So thank you for being so proactive on the channel. I think I'm going to go through each of them in order. There is a bit of repetition. So if I jump your specific question, it's probably going to get covered somewhere else. What I will also do in some instances is just start with perhaps a comment and then hand it to either Grant or Bram. And I'll read the questions out as we go. So the first question is, given the patent cliff pressures in the biopharma space and the resulting potential for increased M&A activity, how does the company anticipate this environment affects IXICO's position, competitively differentiates it and the likelihood of future contract wins as a result? And so I guess Bram is very well placed to answer this having spent most of his career in big pharma. But if I can just quickly sort of start to head on that question, which would be that I think patent cliffs and M&A activity are not new challenges and in fact, they are constant in the pharma R&D space. And generally, I think what we've seen in terms of pharma organizations facing patent cliffs, they tend to double down on new research. And I think as CNS is experiencing this renaissance that Bram has discussed and talked about at some length, actually, we're seeing -- there's a pressure on pharma to increase R&D activity, and this is likely to benefit IXICO. And then I guess on the M&A side, what we also see is as organizations consolidate, they tend to place a greater emphasis on vendors demonstrating specialist expertise and sort of proven quality and operational reliability. And again, that's an area where IXICO differentiates itself strongly. But as I said, Bram has spent a large time in big pharma. So perhaps, Bram, if you would like to comment on the question. Bram Goorden: Well, yes, not much to add. I think you said it quite eloquently, actually, James. I think what's to remember here is that, that focus on CNS means that we're actually much more in an area where there is a renaissance of research and development. We now do see actually some of the big pharma players coming back to that arena after -- I mean, I don't think the surge in oncology research is done. I think there's a lot of unmet need there as well. But we do see that there's, again, appetite now from big pharma to go into CNS. And of course, when big pharma does that, that also helps fund some of the biotechs that often are the ones behind the Phase I and Phase II. And I think the most prominent example that we have witnessed from the first bench is in Huntington's disease, where we have seen that a smaller biotech got a product to Phase II which then was picked up by big pharma for GBP 1 billion, and that actually really delivered us then an opportunity to further the research with a Phase III. So while patent cliffs definitely put a lot of pressure on pharma, I think James mentioned it, doubling down on research is mostly the answer. And in CNS at the moment, we see that, that actually delivers growth, especially in the areas of dementia and Parkinson's. James Chandler: Thank you, Bram. So I'll move to the next question, which there's quite a few of these. So there's quite a lot around when will we break even. And just to remind you, we talked about a GBP 10 million revenue target. We talked about a GBP 9.5 million breakeven point in that target. And Grant talked extensively also about how the investments made as part of the Innovate Lead Scale strategy have sort of accelerated the path towards profitability. But Grant, did you just want to cover again just that how we see that path to profitability? Grant Nash: Yes. Thank you, James. I think you've given the key points there. But I think what I'd add is that we have deliberately taken the decision and was a key part of the capital raise we did 12 months ago to move this business not just to profitability, but to sustainable profitability. And we probably could get to profitability quicker than we would probably at lower than GBP 9.5 million. But actually, what we're trying to do here is build a business that sustains growth in terms of revenues and sustains profitability once we achieve it. And the way to do that is to ensure that we're addressing a market that is large enough that when you have peaks and troughs as you inevitably do in one particular area, you have other opportunities that sit elsewhere, which is why it's so important we break into AD and PD and that's what we're doing, which means that we, as an organization, would rather take a little bit longer to get to breakeven because we're making the investments upfront, knowing that once we get there, we're going to sustain it. And that's exactly what we're working towards. James Chandler: Thank you, Grant. The next -- there's a couple of questions around when we see new contract wins coming. And I know that we spent quite a lot of time talking about the pipeline and talking about the order book and in particular, an uplift in both, in other words, opportunities that we're seeing coming into the business and then translating those opportunities into contract wins and clearly as Bram and Grant have talked through this presentation and also the forecast now in the market, we've got some confidence behind that. But Grant, I just wonder if you want just to cross check against the pipeline side again a little bit and just explain why we're feeling confident. Grant Nash: Yes. So I think perhaps I'll start with the order book where, again, we sign contract -- when we sign contracts, these contracts generally are multiyear contracts. We have the benefit now that we have these biomarker validation type contracts, which are much quicker than that, and they can augment our revenues quickly. But essentially, what we're building with the order book is long-term visibility of revenue growth. So having moved to an order book of GBP 17.7 million at the end of November, we now have several years of visibility of strong revenue basis, which we can build on and accelerate our revenues further. So whilst that increase in the order book has still largely come from the success we've seen in Huntington's disease and rare diseases, with the investments we've been making in AD and PD, we're seeing more opportunities now coming into our pipeline in those therapeutic indications as well as HD and rare. So we're in a good position now, as I said, with 84% of our revenues for this year -- projected revenues this year covered already in contracts that as we strengthen our pipeline further, convert that into contracts, which we expect to continue to do across this year, that will drive that revenue line higher. James Chandler: Thank you, Grant. The next question is around how the U.K. budget affected the, so the most recent U.K. budget announced a couple of weeks ago by the chancellor. And I think that we would say it was broadly positive. There were commitments made to investments on further tax incentives. And clearly, and Grant will speak to this in a minute, we'll continue to monitor and leverage favorable R&D tax credits. I think more broadly for the life sciences sector, what we saw is the announcement of the U.K. life sciences sector plan. And to remind everybody, that identified life sciences as a key growth sector in the British economy and signaling quite significant strategic support and sector level backing for that. And so we think this may help effect attract further investment in talent and possibly some favorable regulatory or funding conditions. And potential to strength in the U.K.'s competitiveness as a hub for biotech and medical research. So I think we saw it broadly positive. But Grant, did you want to comment at all on the specifics of the tax incentives announced? Grant Nash: Yes, I can do. So obviously, we were pleased as a small cap U.K. business to see incentives like the expansion of the VCT EIS headroom available for companies in our area to raise capital. Obviously, there was an element of it being slightly muddled by the budget also reducing the tax incentive. But ultimately, we see that as broadly positive for the small company and the very important sector of innovative investment in new and exciting ideas, particularly obviously in our biotech med tech type area. And I think the other point that you touched on, James, is that our customer base is international. So whilst we are a U.K.-based company, a lot of what we're doing is based outside of the U.K. And it's, therefore, positive, of course, that there are U.K. incentives to drive for innovation, which is what we're doing, but it's also important that the wider market is available. So the U.K. budget has an impact, but it's not the be all end all for us. We were pleased, of course, there wasn't quite as much inflationary impacting items as there were perhaps 12 months ago, which ultimately will hopefully see interest rates come down a bit and make us -- make U.K. a bit more competitive worldwide. But yes, I think your answer was a good one, James. James Chandler: And then just the last question we'll cover is, is there's sort of question about trial delays and cancellations in pharma and headwinds around that and then how resilient IXICO's pipeline is under those conditions. And I think the numbers that been announced today have demonstrated actually that we have some resilience towards that. I think also the fact that we're in the CNS space gives us some resilience to that. And I also think that we haven't particularly seen the pharma clients that we're contracting with canceling or pulling back on trials at this moment in time. But I was going to offer that question really, Bram, maybe to you to start with and then Grant, I think you'll have a view too. Bram Goorden: Yes. We -- I mean, I think Grant has been quite clear on how we've been spared from that definitely in the recent past. I mean, we've seen some cancellations and some descopes in 2025, but nothing that was unexpected. So there's always going to be cancellations. There's always going to be some descopes. We are in the business of clinical research where not every asset unfortunately makes it into an approvable drug. We can't say that we've really experienced projects or programs that were stopped because of economic pressures. Maybe some delaying decisions. It's true that we would always want a faster sales cycle or shorter sales cycle, I should say. But I think that, again, is something that we are quite used to. And so I think at the end of the day, it is now very much around that diversification of the order book, which hopefully, Grant showed quite clearly where we are, at this stage, really not reliant on one big program or even a handful of programs, but where we really now have a very nice variety of programs across phases, across disease areas, across geographies. So hopefully, that answers that question a little bit. And then, James, I think you said this was the last question, but am I allowed to quickly chime into some of the questions that I see around differentiation of the platform? James Chandler: Yes, please do. Bram Goorden: I mean it is sort of our bread and butter, right? And I saw a few questions passing around. How do you measure differentiation versus some of the other CROs. I think someone is asking, is vascular on other platforms. So maybe to start with that last one. No, we took vascular as a bet, if you wish, 12 months ago because we feel that's really where the dementia space requires novel biomarkers. And we do believe we're on the forefront there. And so 12 months later, we're actually very excited about the progress that we've made there. And some of us come back from the clinical trials in Alzheimer's disease conference, which took place in San Diego last week. And very clearly, there's excitement around that space. And so we feel that, that was definitely a bet, which we made well. Now of course, that doesn't mean that others will sit still. So we do need to keep the momentum of our development. And so that brings me then to that question on how do you differentiate yourselves? I think there's sort of a quantitative and a qualitative aspect to it. The quantitative development is about making sure that we actually have the most novel biomarkers on platform. And we do believe that in that space of neurodegenerative disease, IXI as a platform is really superior to some of the others. And so we've managed to bring on platform functionality, which others don't have. But there's also the quality development because at the end of the day, why do we do this in order to allow radiologists to make the best informed insights around what you see in the brain. And obviously, that requires a very accurate and very precise AI-driven platform. That's what it's all about in order to actually see things which you would otherwise not see with the bare eye. And I invite everyone that is interested in some more details to look at the recording of our Capital Markets Day, where our Chief Technology Officer, Mark Austin, I think, did an excellent job sort of showing how you can sort of take a picture of the brain, whether that's an MRI or a PET scan. And then as you start to really overlay the technology, which we've built, you really start to now actually see what is happening there. And obviously, that is years and years of development and continuous training of the system. So sorry, James, if that took us a bit further, but I felt exciting about sharing that. James Chandler: And Bram, we've got a few minutes left. So I wondered if you just wanted to pass any closing comments to those listen. Bram Goorden: Sure. Yes. I hope we shared today that '25 was a good year. But having said that, for us, that's already long past. We're well into 2026. We wanted to make the effort to share what has happened over the past 2 months, obviously, because it's been exciting from a commercial perspective, from an order book perspective. But I think it also sort of shows you what's possible and how fast things can really now evolve in the right direction, thanks to the Innovate Lead scale strategy. So we are a company of more than 80 people worldwide. We believe that, that will be growing further actually in the next coming months, years as well. And I actually want to take also an opportunity to thank all these people because we've been working very hard. We believed in what we brought on platform to differentiate. And I think even if it is early stage and we're only getting started that we're now seeing really the signals of this being the right choice and IXICO making a bigger impact in the market. And so with that, I want to thank also everyone today to have taken the time to listen to our story for now. Operator: That's great, Bram, Grant, thank you for updating investors today. I please ask investors not to close this session as you'll now be automatically redirected to provide feedback in order that the team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of IXICO plc, we would like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Good day, and welcome to the Amtech Systems Fiscal Fourth Quarter 2025 Earnings Call. Please note that this call is being recorded and simultaneously webcast. I would now like to turn the call over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead. Jordan Darrow: Thank you, and good afternoon, everyone. We appreciate you joining us for Amtech Systems' Fiscal Fourth Quarter 2025 Conference Call and Webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer; and Wade Jenke, Chief Financial Officer. After close of market today, Amtech released its financial results for the fourth quarter of 2025. The earnings release is posted on the company's website at www.amtechsystems.com in the Investors section. Before we begin, I'd like to remind everyone that the safe harbor disclaimer in our public filings covers this call and the webcast. Some of the comments to be made during today's call without contain -- will contain forward-looking statements and assumptions that are subject to risks and uncertainties, including, but not limited to, those contained in our SEC filings, all of which are posted in the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of today. These statements are not a guarantee of future performance, and actual results could differ materially from current expectations. Among the important factors, which could cause actual results to differ materially from those in the forward-looking statements are changes in technologies used by customers and competitors, change in volatility and the demand for products, the effect of changing worldwide political and economic conditions, including trade sanctions, the effect of overall market conditions, including equity and credit markets and market acceptance risks; ongoing logistics, supply chain and labor matters and capital allocation plans. Other risk factors are detailed in our SEC filings, including our Form 10-K and Form 10-Q. Additionally, in today's conference call, we will be referencing non-GAAP financial measures as we discuss the fiscal fourth quarter financial results. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today. I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle. Robert Daigle: Thank you, Jordan, and good afternoon, and thank you for joining us today. I'm pleased to report that our fourth quarter performance was above expectations with revenue of $19.8 million versus a guidance range of $17 million to $19 million. Strength in demand for the equipment we produce for AI applications continues to be our primary growth driver. However, both our Thermal Processing Solutions and our Semiconductor Fabrication Solutions segments did exceed forecast, reflecting our strong position for advanced packaging solutions in AI markets and more stable demand within the mature node semiconductor market. Adjusted EBITDA also came in above expectations at $2.6 million or about 13% of revenue versus the mid-single-digit EBITDA expected. These recent results are demonstrating our strong operating leverage and ability to generate cash. We ended the quarter with almost $18 million of cash on the balance sheet and continue to have no debt after paying it off last year. The cash swing over the past 2 fiscal years enabled us to eliminate our debt, which stood at over $10 million and increased our cash to current levels. Our stronger-than-expected results for the quarter reflect the combined contribution of improved operational discipline, the benefits of our transition to a more flexible semi-fabless manufacturing model and our focus on higher-margin products where we have competitive advantages. Expanding on our end markets, within the Thermal Processing Solutions segment, advanced semiconductor packaging remained a highlight this quarter with continued strength driven primarily by ongoing investments in AI infrastructure. For context, in the fourth quarter, revenue from equipment used for AI infrastructure accounted for over 30% of our Thermal Processing Solutions revenue versus 25% in the prior quarter. Based on our channel checks, we see no slowdown for this area of our business. Related to revenue mix, we generated about 60% of our revenue from capital equipment and 40% from reoccurring revenue, including consumables, parts and services. The balance between capital equipment and reoccurring revenue is important and reflects our strategy to expand higher-margin reoccurring revenue streams while we fully capitalize on opportunities for equipment used to expand AI infrastructure. As we look ahead, our fourth quarter bookings suggest we should continue to see strength for AI-related equipment revenue. To fully capitalize on this growth opportunity, we are continuing to invest in next-generation equipment that enables volume production of higher-density advanced packaging and electronic assemblies to increase our addressable market and the value we provide to customers. Turning to our Semiconductor Fabrication Solutions segment. As we indicated last quarter, demand for front-end equipment and consumables tied to mature node semiconductor applications in industrial and automotive markets remained weak. That said, performance in this segment slightly exceeded our expectations in the quarter. Beyond the cyclical ebbs and flows of this market, we remain committed to controlling our own destiny by investing in applications and product development to solve problems faced by our customers. We expect these initiatives to deepen customer relationships and increase reoccurring revenue streams as customers qualify our products and scale production. While these initiatives will take time to scale, we are encouraged by the level of customer interest and engagement. This is all part of our strategy to overserve the underserved. As a relatively small player in a very large overall market for semiconductor consumables and equipment, we are targeting high-end, high-margin applications where we can leverage strong technical capabilities and provide exceptional service. End markets include med tech and defense applications, among others, where we have strong customer engagement enabled by our foundry service and differentiated capabilities so we can develop sticky reoccurring revenue streams. Over the past 18 months, we've made tremendous progress optimizing our operating model and improving our cost structure. We implemented a series of cost reduction initiatives that included the elimination of some unprofitable products and a shift of some products to outsourced partners to reduce labor and fixed overhead costs. These initiatives, which include consolidation of our manufacturing footprint from 7 sites to 4 sites resulted in $13 million of annualized savings. Looking ahead, we expect to realize additional savings by subletting underutilized factories. These actions have significantly reduced our EBITDA breakeven point, improved our ability to scale profitably with higher volumes. With the majority of major optimization initiatives completed, we are now focused on growth initiatives to fully capitalize on AI equipment opportunities and increase our reoccurring revenue. Our improved financial performance, prospects for continued operating cash flow generation, CapEx-light business model and a strong balance sheet have provided us with the flexibility to return capital to shareholders while also investing in growth opportunities. So Amtech's Board of Directors has authorized a share repurchase program of up to $5 million of the company's common stock for a 1-year period. In summary, we have a strong foundation for growth driven by AI market opportunities and differentiated capabilities. The changes we've made to optimize our business model and streamline our product portfolio have created strong operating leverage, which positions us well to elevate profitability as we grow and create meaningful shareholder value. With that, I'll turn it over to Wade for further details on our financial results. Wade Jenke: Great. Thank you, Bob. Net revenues increased sequentially from the third quarter, driven primarily by strong demand in Asia for reflow ovens used in AI applications. The decrease in net revenues compared to the same period last year reflects higher AI-related revenues, offset by substantially lower mature node semiconductor revenues, primarily for sales of wafer cleaning equipment and parts in our Semi Fabrication Solutions segment. In our Thermal Processing Solutions segment, diffusion furnaces and high-temperature furnaces drove the decline in sales. GAAP gross margin decreased by $0.3 million sequentially from the prior quarter and decreased $1 million compared to the same prior year period. The decrease from the prior quarter was due to the onetime Employee Retention Credit received in the third quarter of 2025. The decrease in gross margin from the same prior year period is primarily due to lower sales volume in the mature node semiconductor market. Gross margin as a percentage of sales increased from 40.7% in the same prior year period, up to 44.4% this current year quarter, driven by cost save initiatives and product mix. Compared against the third quarter of 2025 and excluding the ERC onetime credit, gross margin would have been 41.5% versus the current fourth quarter of 44.4% gross margin, showing a nice sequential improvement. Selling, General and Administrative expenses decreased $1 million sequentially from the prior quarter and decreased $2.4 million compared to the same prior year period. The decrease from the prior quarter and the same prior year period is primarily due to cost reduction efforts around overhead expenses and cost structure changes to reduce our fixed costs. Research, Development and Engineering expenses increased by $0.2 million sequentially from the prior quarter and decreased $0.4 million compared to the same prior year period. The increase from the prior quarter is primarily due to growth initiatives and the decrease compared to the same prior year period is primarily due to a more focused approach to our investments in innovation. GAAP net income for the fourth quarter of fiscal 2025 was $1.1 million or $0.07 per share. This compares to GAAP net income of $0.1 million or $0.01 per share for the preceding quarter and GAAP net loss of $0.5 million or $0.04 per share for the fourth quarter of fiscal 2024. Non-GAAP net income for the fourth quarter of fiscal 2025 was $1.4 million or $0.10 per share. This compares to non-GAAP net income of $0.9 million or $0.06 per share for the preceding quarter and non-GAAP net loss of $7,000 or $0.0 per share for the fourth quarter of fiscal 2024. Unrestricted cash and cash equivalents at September 30, 2025, were $17.9 million compared to $11.1 million at September 30, 2024, due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections from customers, accounts payable management and the employee retention credit. Now turning to our outlook. For the first quarter, fiscal ending December 31, 2025, the company expects revenue in the range of $18 million to $20 million. AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to partially offset the transitions in our business related to mature node semiconductor product lines with the benefit of previously implemented structural and operational cost reductions, Amtech expects to deliver solid operating leverage, resulting in adjusted EBITDA margins in the high single digits. Amtech remains focused on driving further efficiency gains and cost optimization across all operations, positioning the company to expand margins and generate more consistent profitability going forward. Operations can be significantly impacted positively or negatively by the timing of orders, system shipments, logistical challenges and the financial results of semiconductor manufacturers. Additionally, although the company has been generating more revenues from recurring and consumable sales, the balance of the business is from semiconductor equipment industries, which can be cyclical and inherently impacted by changes in market demand and capacity utilization. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause actual results to differ from expectations. As you may have seen in our 8-K filing, I have submitted my resignation as Chief Financial Officer, effective as of the close of business on December 29, 2025. My decision to step down is not a result of any dispute or disagreement with Amtech Systems. The decision is based upon my personal and family interest in mind. I'll be assuming an executive role at a different company. I have agreed to serve in a consulting capacity for a period of up to 6 months to assist with the closing of the first quarter of fiscal 2026, preparation and filing of the 2026 Annual Meeting proxy statement and the transition of my duties to a new CFO. Amtech Systems plans to launch a search for a new CFO immediately. I want to take a moment to thank the Amtech Systems team who has achieved and improved substantially under my tenure. I also want to thank Bob Daigle for his tremendous vision and leadership as CEO. I have learned so much, and I will be eternally grateful for the opportunity. Thank you. And I will now turn the call over to the operator for questions. Operator: [Operator Instructions] And the first question will come from Craig Irwin with ROTH Capital Partners. Craig Irwin: Yes, I was on mute. I apologize for that. So Bob, can you maybe talk a little bit about your visibility with AI customers? I don't know if you can maybe just give us general color on backlog and backlog trends or orders and order indications and maybe even just the direct investment you're seeing in the different facilities that you're selling into there as far as the customer commitments. Robert Daigle: Yes. Yes. Let me walk through that, Craig. Yes. So again, broadly speaking, we're seeing very strong demand. I would characterize my sense right now is most of the equipment in the pipeline has been really being put into existing facilities, but what we're hearing is there are new facilities being built as well. So I think there's plans that go out there quite a while. In terms of our visibility and backlog, it's one of these -- and I think we've talked about this before. We have a very efficient, effective manufacturing organization for this back-end equipment. We can basically, for the most part, book and ship in the same quarter. Our lead times will run 6 weeks or so for this equipment out of our Shanghai factory. So typically, we're getting orders and in most cases, shipping within the same quarter. Having said that, there is an increased level of business where we're -- in some cases, they're telling us we're still finishing up a factory, and it's going to be in, for example, the March quarter or in some cases, the June quarter before they want to take delivery. So I'd say we're getting a little bit more visibility out there because of other critical constraints in installing equipment. But for the most part, our volume has been driven by book and ship in current quarters. Craig Irwin: Understood. Understood. You've explained the nature of the business in the past, and it makes sense that it's not necessarily changing, just moving very well. So that makes sense. One area that you guys have really impressed me over the last couple of years is on the execution, bringing down OpEx, right, the $13 million in savings. Can you maybe frame out for us what the sublet savings could be from the underutilized facilities? And I don't know if you can get more specific about which facilities and whether or not these are sales or things where you're already leased, and you can -- you're subleased or if there's assets that can be sold. Robert Daigle: Yes. No, these are leases of underutilized facilities and both -- in both segments. I'd say combined, we're probably looking at once we sublet both facilities, let's say, $700,000 to $1 million in annualized savings associated with those. Craig Irwin: Okay. Excellent. Excellent. Then to change subjects again, there's quite a lot of interest out there about new applications for silicon carbide. Some of these AI chip producers are apparently looking at different substrates for future generations of chips. I know you guys get involved very early on with different customer groups as far as development necessary for new processes. Are you seeing some new customers maybe come in or new opportunities come in that might broaden your participation away from TPS into substrates for some of the AI momentum we're seeing in the market? Robert Daigle: Yes. If it migrates to silicon carbide for processing, it would be more on the consumable side of things, Craig, that we would participate. Actually, I thought what you were going to reference is there's a lot of literature and discussion around the fact that the data centers themselves are going to likely distribute instead of having low-voltage power across the facility, go to high voltage and step it down at the rack. And that allows them to significantly reduce the amount of copper needed for busing across these AI data centers. So I'm hearing more about that where basically it's another -- with EV pretty depressed right now across the industry, it's a potential growth driver for silicon carbide where it's the power electronics for these data centers. I've heard a little bit about silicon carbide as substrates. And again, I think for us, it would be more -- it could translate into consumables if that materializes. Craig Irwin: Yes. I can clarify that for you. I'm sure you know, but you're probably limited as far as what you can say. So I'll say it publicly. I know that the silicon carbide produced by Wolfspeed is used by EPC Power a private company based in California for the EPC power blocks sold by Vertiv and those use 3.3 kV MOSFETs, which are much higher power than the MOSFETs using EVs. And that is the primary product going in on the leading-edge data centers today. So I do know that DC is adopting silicon carbide for power. What I was curious about and really where things can get insanely interesting is if it's a substrate for the actual -- for the AI chips themselves and not just the power. Robert Daigle: Yes. And my sense would be that's a ways out if that develops, it's -- I think I haven't heard anything imminent on that front, I guess, I would say, Craig. Operator: The next question will come from Michael Legg with Ladenburg. Michael Legg: Bob, now that you've done a great job cleaning up the balance sheet and getting costs in line and your comment on overserving the underserved, can you talk a little bit about the opportunity in the service area? Robert Daigle: Yes. So what we're focused on is really high-value niche opportunities or areas of the market where -- let me characterize it this way. If you're a large semiconductor application area, you tend to get pretty high service levels and product availability is always there and you get development support for new products, new applications. And what we're finding are opportunities, and they tend to be a little bit more nichey in the medical area and the defense area where for a large player, the volumes may not be all that meaningful. But for us, it creates a nice opportunity for this reoccurring revenue stream. So we're leveraging our foundry service where we do contract development. We do -- we can help qualify products with some of these OEMs basically to get our products into some of these applications as an alternative to some of the large incumbents. And again, it's just going to take time to develop because it requires qualification, but it is very sticky business. It has a nice margin profile. And I think it helps develop some very strong connection with some key customers because we're there to support them where in many cases, others aren't. Michael Legg: Okay. Great. And then just a follow-up. On the CFO search, can you give us any update on your progress there? Robert Daigle: Yes. So we -- it's -- we just started, and we'll keep everybody informed as things develop. But we're still early in the search. Operator: The next question will come from Mark Miller with The Benchmark Company. Mark Miller: Just wanted to clarify, you indicated that the spread between equipment and reoccurring revenues was 60-40. Was that for both the Thermal Processing and the Semi Fab sales? Or was it some differences there? Robert Daigle: Yes. It's overall, I'd say the majority of the Semi Fabrication Solutions are the consumables parts service. And probably of the TPS segment, I'll give you a rough number, let's say, 80% equipment, 20% on the reoccurring side. Mark Miller: In terms of your backlog, is it -- you said you've been focusing on higher-margin products. What does it look like in terms of the margin profile of your existing backlog? Is it better than what you've been reporting recently? Robert Daigle: Yes, we basically cleaned that up for the most part, Mark. If you -- when we talked a year or 1.5 years ago, we had a lot of things in our backlog had -- I would characterize as substandard margins and pretty much moved beyond that now. So what's sitting there is of high quality for the majority of it. Mark Miller: You indicated that auto remains soft for you, but I was a little surprised by that because it's my understanding, at least for EVs that auto sales in China are better this year than last year. Robert Daigle: Yes. I think -- yes, most of the most of our exposure in the auto industry is with the Western OEMs. So let's say, U.S., European players, less so in Mainland China. So my comments, frankly, referred to the semiconductor industry that serves the Western world. Operator: The next question will come from George Marema with Pareto Ventures. George Marema: A couple of questions. Do you guys expect any effect from the ramp-up of Blackwell versus Hopper and also kind of the ramp-up of these custom ASICs like TPUs, et cetera? Robert Daigle: They -- from our perspective, they're basically using our understanding very similar processes and equipment capabilities. So I think to the extent they ramp and it's more volume that's beneficial. But in terms of significant technology differences at this stage, I wouldn't say there isn't much impact on us if the mix shifts. George Marema: Okay. And then as you look out to '26 in terms of your focused R&D on innovative investments and new products, any update on any new products for '26 and new initiatives? Robert Daigle: Yes. So let's talk about the initiatives. And again, there's really 2 areas of focus for our investments. On the Thermal Process Solutions side of things, it really is around enabling continuous processing for higher density, higher -- tighter pitch devices. where we think it could potentially open opportunities to participate in more of the processes that are used for these GPUs, TPUs and frankly, even the electronic assembly of dense boards for the AI data servers. So I think that's our emphasis for TPS is really around how do we participate in more of the process. And by the way, that equipment has a high level of complexity and the requirements are more stringent. So we think the ASP would also be meaningfully higher. Then on the SFS side of things, our investment is really on driving our growth in our consumables, particularly -- specifically our chemicals business where we have some very strong capabilities on the application development that leverage -- basically leveraging our foundry. We have very strong technology folks in our R&D labs, our formulators. So -- and we think there's -- based on the engagement level, we think there are customers that can significantly benefit from our capabilities and support. So that's where we're investing. Very much line of sight, though. I've said this before, we're a small company. We work on -- these aren't grand initiatives, if we build it, they'll come kind of things that we're working on things that are very much involve customer engagement so that the goal here is to convert R&D efforts into meaningful revenue as quickly as possible. George Marema: Okay. And then one last one. Has there been any change in the competitive landscape in thermal area? Robert Daigle: Nothing that I'm aware of visible to, George. I think it's pretty much very similar situation in that space. Operator: Ladies and gentlemen, at this time, we've reached the end of the question-and-answer session. I'd like to turn the floor back over to management for any closing remarks. Robert Daigle: All right. Thank you. Well, first of all, in closing, I'd like to thank Wade for his service to Amtech over the past 16 months and his assistance as we transition the responsibilities to a new CFO. Our back-office processes and systems have greatly improved as a result of Wade's efforts, and I wish him the best in his role in his new company. And in closing, I also want to thank everybody on the call today or those who will participate in the recast for their interest in Amtech and for joining our conference call today. And we look forward to updating you on our progress in the months to come. Have a good evening, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Please be advised that this conference call is being recorded. Welcome to The North West Company Inc. Third Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Dan McConnell, President and Chief Executive Officer. Mr. McConnell, please go ahead. . Daniel McConnell: Hello. Good morning, and welcome to The North West Company Third Quarter Conference Call. So joining me here today is John King, our Chief Financial Officer; and Alexis Cloutier, our VP, Legal and Corporate Secretary. Alexis will begin with our disclosure statement. . Alexis Cloutier: Thank you, Dan. Before we begin today, I remind you that certain information presented may constitute forward-looking statements. Such statements reflect North West's current expectations, estimates, projections and assumptions. . These forward-looking statements are not guarantees of future performance and are subject to certain risks, which could cause actual performance and financial results in the future to vary materially from those contemplated in the forward-looking statements. Any forward-looking statements are current only as of the date they're made, and the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise other than what's required by law. For additional information on these risks, please see North West's annual information form and its MD&A under the heading Risk Factors. . Daniel McConnell: Okay. Thanks, Alexis. I'm going to start with an overview of our results for the quarter and then move on to comment on our outlook and the Next 100 program, and then I'll be opening up for questions. All right. Let me begin by summarizing the story of this quarter. Overall, we delivered solid net earnings gains with a very challenging quarter from a top line perspective. Sales in the quarter decreased 0.5% compared to last year. That's primarily due to less money in market resulting from reduced Child and Family services funding in Canada and a lower permanent fund dividend in Alaska. Despite these headwinds, we delivered a 12.9% increase in net earnings compared to last year, driven by improved gross profit rates from our Next 100 work and lower expenses. All right. Let's unpack that starting with sales. Consolidated same-store sales decreased by 1.7% this quarter compared to a 4% increase last year, and that's primarily due to the headwinds in our Canadian operations and the challenge of matching strong sales comps from Q3 last year. Canadian operations sales decreased 2%, with same-store sales down 2.8% compared to a strong 4.9% increase in Q3 of last year. The lower sales in Canada was primarily due to a decrease in money and market from the elimination of funding for the Inuit Child First food voucher program and a reduction in funding for Jordan's Principle programs compared to last year. Decrease in drinking water settlement payments and climate action incentive payments compared to the third quarter last year were also factors, but to a lesser degree. The decrease in money and market combined with consumers shifting their spending from general merchandise to food were the primary reasons for the 3.1% decrease in general merchandise and other sales in Canadian operations. As higher airline revenue from third-party cargo and passenger business and an increase in pharmacy sales were more than offset by an 11.1% decrease in same-store general merchandise sales. On a positive note, all of our stores in the communities impacted by wildfire evacuations have resumed operations and had a modest decrease in sales for the quarter. I'm going to switch gears now and just briefly comment on the international sales. Sales in our international operations were flat for the quarter as an increase in same-store food sales of 1% offset a decrease of 9.9% in same-store general merchandise sales. In Alaska, a lower permanent fund dividend of $1,000 compared to $1,700 last year, combined with consumers shifting more of their spending to food were the key factors contributing to the decrease in general merchandise sales. Softer economic conditions in the South Pacific markets were also a factor. Okay. With a deeper dive on sales, I'll briefly comment on consolidated gross profit and expenses. Gross profit increased 1.4% for the quarter with the gross profit rate up 64 basis points compared to the third quarter last year. This improvement reflects the positive impact from our Next 100 work particularly the ongoing refinement of our merchandise assortment and expanded private label offering in both our Canadian and international operations. A change in sales blend, including lower wholesale sales and a decrease in general merchandise seasonal markdowns in our international operations compared to last year were also factors. Expenses decreased by 1% for the quarter and were down 13 basis points as a rate to sales largely due to reduced share-based compensation costs primarily related to the changes in the company's share price and a decrease in vessel repairs in Transport Nanuk. We also incurred $1.3 million in onetime costs related to the execution of our Next 100 program, which were more than offset by the benefits from our Next 100 initiatives. We continue to see store labor productivity gains, which are resulting in lower store staff costs as a percentage of sales in addition to other cost savings initiatives such as reduced print media. The net impact of all these factors, combined with a decrease in interest expense and a lower effective tax rate resulted in a 12.9% increase in net earnings for the quarter. All right. Now let me talk briefly about our outlook and provide a few comments on the Next 100 program. Since we provided commentary on the key factors, we expect to impact our outlook in the report to shareholders, I will just comment on the expected near-term impact of money and market in Canada. The elimination of ICFI food voucher funding and a reduction in Jordan's Principle program funding are expected to continue to impact sales in Q4. With some offsets anticipated from an increase in consumer demand from First Nation Child and Care settlement payments. As we noted in our outlook, the distribution of first class of Child and Care settlement payments to individuals in the communities we serve began with a very small number of payments at the end of Q3 and there's been a modest increase in the volume of payments so far in the fourth quarter. We expect the distribution of Child and Care settlement payments to ramp up in 2026 and extend for a number of years beyond 2026 based on the requirements for individuals in the removed child class to reach the age of maturity before payments are issued, combined with the anticipated opening of the application process and distribution of settlement payments for the other 8 classes. Regarding the Next 100 program, we remain focused on driving operational excellence and cost efficiencies. From a category manage perspective -- category management, sorry perspective, we continue to refine our merchandise assortments and procurement strategy with a focus on the expansion of our private label offering. Throughout 2025 we have ramped up the rollout of new merchandise assortments and expanded the private label offering in both our Canadian and international operations. Although it is still early in the process, feedback from customers has been positive, and the trends of private label penetration are encouraging. The implementation of store-based inventory forecasting replenishment technology and a new warehouse management system are also underway. With these new processes and tools, we expect to improve on shelf availability for our customers and streamline the merchandise ordering processes for our store and warehouse teams. We are pleased with the progress and results to date, but also recognize that there's still a lot of work to do as we continue to learn and refine this new operating model. Let me wrap up by saying that the Next 100 operational excellence focus has helped mitigate some of the external headwinds that impacted our results this quarter and the foundation we're building is expected to continue to deliver value for our customers, shareholders and employees going forward. With that, operator, I will now open up the call for any questions. Operator: [Operator Instructions] Our first question will be coming from Ty Collin of CIBC. Ty Collin: To start, I guess, can you maybe just help us understand the relative impact of the various factors you called out driving the same-store sales decline in Canada. And with respect to the declines in government funding specifically, is that stable? Or is that kind of worsen compared to last quarter? Daniel McConnell: You turn if off? It is hard to hear. Can you -- sorry, can you repeat that question? You cut... Ty Collin: Yes, sure thing. I'll go again. So I'm just wondering if you could help us understand the relative impact of the -- you got me. I just want to understand the relative impact of the various factors driving the same-store sales decline in Canada. And then with respect to the declines in government funding for some of those programs, is that stable? Or did that worsen compared to Q2? John King: Okay. Lots to unpack there. So look, I'll give you the full down. The biggest impact on sales was definitely the money in market. And that's, I think, something that -- I think we've been pretty consistent with that and clear on some of the messaging that we've identified, especially with the ICFI, the Jordan's principle, the pullback in funding and the slower pace, I guess, than some of the market has anticipated, although we've always said that I think Q1 is when we thought we were expecting some of the payments from the child benefit. But I would say so money in market is the #1 headwind. Big ticket motorized sales reduction. That's also a big one. Obviously, they're higher price point, lower margin, but that's been a pretty big impact as well. Definitely some taste -- some thumb pointing, like we've just gone and we've rolled out. We've engaged with a lot of -- with new vendor our supply chain that we just rolled out this year, where we've moved over to a new system on a push system, and there was some disruption there. So I would say it's not nearly the degree as some of the others, but there was probably higher out of stock on our shelves than typical, just as a result of some of the turbulence that we experienced, which would be expected, but definitely reacted very quickly and are looking very positive as far as how we're rebounding from that and being a lot stronger as a result of it, I might add. Some of the -- with reducing prices, I know we're just getting into it, but with the private label program, obviously, lowering prices, increasing gross profit, but lowering prices for our customers had some impact, not a lot, but certainly something to be considered as the private label program is starting to gain a lot of traction in our markets. And don't forget, we're comping some big quarters. I mean, double digit, I think, of this year, certainly Q3, Q4 and then Q1 into next with some of the -- with a lot of the money that was in the market previously. However, as we indicated, we are expecting to be able to offset that in Q1 with more of the child care benefit money coming in. I'll also say that with respect to payments, I mean, look, there has been some press out there. If you recall, I've been pretty consistent with forecasting in Q1 is when we thought the majority of the money is going to come. The childcare benefit did ramp up from the previous quarter. But again, it's not anywhere near at the level that we're anticipating. So yes, I think that's -- I think I answered your question, sir. Ty Collin: Yes, that's great. Appreciate those comments. And then on Next 100 I appreciate all the commentary there. I guess, can you -- maybe just update us with respect to which initiatives you still see the most low-hanging fruit for at this point? And then maybe just at a higher level, I mean, how far along would you say you are in the overall journey of executing Next 100 as we're exiting 2025 here? Daniel McConnell: Okay. So as we're exiting 2025, there's a number of different initiatives. So the low-hanging fruit not sure there's any more low-hanging fruit, but it's all -- we're in execution phase. As you know, like we're -- as indicated on the private label, we're starting to get ramped up. I would say we had it executed October, November, but it's with some fixes in place. So we're on a nice trajectory there. Things are getting better and better as we go on. On the other hand, the supply chain optimization, it was a little rocky. We anticipate the headwinds are behind us. And -- but yet, it's going to be -- it's still a pretty good journey. We're -- we've got the pilots stores are done. We've rolled it out now to the -- to most of the chain in Canada on our forecast and replenishment. And we anticipate that it would probably be up and operational fully in '27, but we think that -- we know there's going to be some benefits certainly throughout 2026. The CPI work, the category performance improvement plan, I would say we're probably 50% through that approximately. And -- but we expect to see some more benefits into 2026 and probably -- I would say it will probably level off by the end of 2026, and then we'd be comping that into '27. John, looking at GNFR, I think, is pretty -- we're pretty much into the -- pretty well into it, I'd say 75% through GNFR. Yes, goods not for resale, sorry. So I think that the biggest benefit probably to come is going to be from the supply chain optimization, and that's in our forecast and replenishment, moving away from the poll system that we had in the stores previously and going into a push working through algorithms to just get more controls and be more accurate with our inventory management. Ty Collin: Okay. Great. And if I could just sneak one more in. So you guys renewed your NCIB last month. Do you plan to be active on the NCIB going forward? Or how are you thinking about potential buybacks relative to some of your other priorities? Daniel McConnell: Well, I mean, our other priorities are in and operating, and we have some healthy investments to make in the business now and into 2026, obviously, with some of the things that we talked about and some of the new store renovations in some of our major markets. So I think it's somewhat TBD, obviously, much like you would look at it depending on what the stock price does, but we're really optimistic about the future of the company. So we have no problem investing more into the NCIB. Yes. Operator: And our next question will be coming from Michael Van Aelst of TD Cowen. Michael Van Aelst: Just to finish up on the NCIB question. So you do have a higher level of spending short-term. Can you comment on what the CapEx rollout looks like the -- this year, next year and maybe '27? And then given that you have a strong balance sheet, would you be willing to supplement any free cash flow with some maybe balance sheet leveraging to also fund the NCIB while the share price is depressed. Daniel McConnell: Yes, I think we would look at that, absolutely. And it's something that we are looking at just how we would want to position ourselves going forward, pending our next phase strategy, which is work that we're undergoing as we speak. So in other words, much like the same commentary I've made before. We think the best place for the money, obviously, is investing it in our business and infrastructure in order to generate some strong returns for our shareholders. If there's no opportunities at that point in time, then we certainly -- and we had a buildup of cash, we would certainly look to execute on the NCIB. And if it was sustainable, if we had sustainable higher cash flows, then obviously, we would look at working with our dividend. Michael Van Aelst: Okay. So what is the CapEx look like, the next little while $145 this year still? Daniel McConnell: $145, yes. Michael Van Aelst: And how about next year? Daniel McConnell: $160, is I think what we're forecasting currently? Michael Van Aelst: Okay. And so I mean that's above your normal run rates. Is that -- when do we get back to a normal like more normal level. Daniel McConnell: I would say at the following year '27, we've had some pretty sizable projects that were kind of in the midst of Michael. So as soon as we get over that hump, then it will start to normalize. Both with IT, with some of our IT investments as well as some of our major markets that have had a long drought of capital, I would say. And so we've just undergone a project. It's been a 3-year project, particularly into [ Calgary ] is what I'm talking about. So that's -- that will be coming to an end at the end of '26. Michael Van Aelst: And so what's 2020 -- like what's the normal level of CapEx that we can expect over time. Daniel McConnell: It's a great question, especially given the inflation and the cost and what it costs to do things in the north. But I would say my expectation would be to be sub $140. Michael Van Aelst: All right. So just getting back then so to the NCIB, would you -- I mean it seems like you're going to be using a lot of your free cash flow on your dividend and CapEx and growth of our excess incremental CapEx. So -- but your balance sheet at just over 1x leverage is very clean relative to other retailers out there. So I'm wondering, like would you -- are you thinking of looking at that now and leverage -- using some leverage to buy back the stock opportunistically given the low price? Or would you -- or are you just waiting until free cash flow comes. Daniel McConnell: Sure. Currently, we were waiting for free cash flow, Michael, but I can tell you that we're, it is fluid. So we are undergoing some strategy work right now to understand what our future -- our next adventure is. we wanted to make sure that we focus on execution, obviously, with a number of ideas as to where we would like to go from here. But I would say, currently, to be frank, it was more thinking about future incremental cash flows drying down NCIB. We would -- we haven't -- we have not planned to currently flex the balance sheet to buy NCIB current right now. But I'd say it's somewhat fluid, but that's not in the cards right now. Michael Van Aelst: Okay. Just -- and then on the Next 100, that was also mostly covered, but just to summarize on that one. If you're kind of -- if you're looking at $100 in total benefit, let's call it, over the course of it. Where would you have been in '25? And where do you think you'll be in '26 before getting all of it in '27. Daniel McConnell: I would say, that's a great question. I'd say 50%, I'd say 50%. Michael Van Aelst: 50% in '25. Daniel McConnell: Yes. Michael Van Aelst: Okay. And then I guess, we extrapolate and say 75% or 80% in '26 and then all of it in 100% in '27. Daniel McConnell: Yes. Michael Van Aelst: Okay. Right. Good enough. Just to get an idea. Okay. So -- and then I just wanted to touch on some of those Jordan Principle claims settlement payments. And so -- it sounds like the [ AFN ] is talking about something like 6,600 payments having been made at this point, which just over $40,000, it's about $40,000 each by the sounds of it, which is a pretty big ramp-up compared to 0 almost a few months ago, but also only 1% of the total payments that are expected over time. So why do you think you're not seeing a bigger ramp up in Q4 in your communities. Daniel McConnell: Currently, I mean, look, it could be the postal strike. It could be the administrative efficiency of the administrators. This isn't new, though, right? I mean, like we've seen this many times before as far as the disbursement of these different payments. So which is why I would always put a hedge on it on time frame. So I would -- I can't answer why, but I can tell you that it's not unexpected. And so it's something that we're kind of ready for and optimistic, obviously, hopefully, for this season that people have a few more dollars in their pockets to enjoy the season. But like I said, more so looking to Q1 of '26 is when we think that it's going to start coming in. I mean, look, it's not -- I don't think there's any question on whether it's coming. We know it's coming. It's just about how quickly it can be processed. And I think we can appreciate that, that -- the history has shown that it doesn't happen as quickly as everybody would like, including some of the leaders that are obviously advocating on behalf of some of their constituents. Michael Van Aelst: Right. Yes, that's clear. Okay. So if I remember correctly, like some of these other other payments that you're -- that are falling off now the water settlement payments and things like that. I mean those were smaller than what this one is going to be. And the only -- the water settlement itself only affected 30 of your communities, I think, if I remember correctly. Daniel McConnell: So -- just under that. I think yes. Michael Van Aelst: Just under -- so does this Jordan's Principle settlement, is this affecting all 140 of your communities? Is this benefiting all of them? Daniel McConnell: No, it wouldn't be all of them. A large majority of them, I would say, in Northern Canada, but not all of them. I think the number is about 60%, so just under half. Michael Van Aelst: Okay. So about 60. Daniel McConnell: Yes. Michael Van Aelst: Okay. And so do you have any sense as to what percentage of that $23 billion of payments that are going to be made are going to end up in your communities? Daniel McConnell: I think you probably have to do your own math on that, Michael, just because it's -- there's a lot of assumptions that we make. And knowing you, I think you'll probably get pretty close to an assumption that we would. But no, we wouldn't -- it would be -- it's a really highly educated -- it's a very high assumption. That's what we had. So it's not something that we would release. I just, yes. It wouldn't be productive. I don't think for you -- for us to give you a number. Michael Van Aelst: Last question for you. Are you -- could you try to hazard or give us some kind of insight into your capture rates in the past when these types of programs or payments come out in your communities? Daniel McConnell: No, we don't release that. But we do -- I will tell you that the capture rates that we've seen and the few that we've had have been on our forecast pretty consistent with what we anticipated, with slight improvement. But I would say it's -- so we're pretty -- we've been pretty accurate so far -- we just need more of it. Operator: [Operator Instructions] Our next question will come from Stephen MacLeod of BMO Capital Markets. . Stephen MacLeod: Lots of great color so far. So a lot of my questions have been answered, but I just wanted to get see if I could get a better sense of, Dan, you're talking about the fact that you've always said that Q1 is probably when you expect to see some of the more meaningful settlement payments coming through. And obviously, it's been a bit -- hasn't been very transparent in terms of the timing from the administrator. So I was just curious if -- what kind of visibility you have into the payments beginning in Q1 and kind of how we should think about that actually coming to fruition? Daniel McConnell: Maybe I wouldn't say I'm an expert, but I would say that it's just based on some of the -- being around the history that we've -- how we've seen payments administered in the past. It's hypothesis, it's a guess. But it's -- I know I get exposed to the same information that everybody else does. So -- and you heard some of the people that are closed, they thought it would have been sooner. And so I was probably putting a contingency on what some of the other people were identifying. So it's not all that scientific, unfortunately. But it's -- yes, I wish I could give you more assurance, but I can't. It's simply a gas based on putting a hedge or a contingency on what is anticipated or expected with some of the community leaders who are in the -- I'd say, on the front line of negotiations and in constant conversations. But it gets -- comes down to bureaucracy and bureaucracy is controlled by -- I don't know if you find out, let me know, but it's just -- so the decisions are reached, the decisions are made, so I don't think there's anything in a halted. It's just on the timing of the payments. Yes. So I guess that's it's calming -- it's calming, the fact that you know it's coming, but everybody is anticipating and including obviously the customers that are going to be receiving it. I would think nobody wants it more than them, but it's just that's where we're sitting right now. Stephen MacLeod: Yes. No, understood. And then maybe just looking at the Inuit Child First food voucher program and the reduction in funding from Jordan's Principle programs, which kind of -- which weighed on the Q3 numbers and you kind of -- you highlight as uncertainty in the outlook. Do you have any insight? Are those -- maybe thinking of each of those ones separately, is there a scenario where the funding for those programs ramps back up? Or are those being phased out, and we just have to deal with it going forward and kind of ramp, we comp the impact next year? Daniel McConnell: Timing is -- so the Inuit Child First, I don't anticipate that's going to ramp up again. But I know that there's a lot of works in place to try and get that to be the case. Jordan's Principle, that comes down to -- that will ramp up again, I think. When I don't know because it's between a negotiation now with some of the indigenous leaders on how it's going to be administrated. But it's already -- you could say it's already committed to by Canada. But as you recall, the vote came through with the chiefs in the regions, and they had voted that they weren't going to accept it, and it wasn't based on the quantum or the settlement. It was more based on the -- how is it going to be administered within their communities. So as you know, Ontario actually elected to accept it and the rest of the regions declined it. And so that was one of the major causes of some of the retraction of the Jordan Principle money. And so I do anticipate that will come back around, but it's stuck in some political dispute right now. So I couldn't venture a guess as far as when that's going to be resolved. But once it is resolved, it will be a positive for sure for the community members in the North. Stephen MacLeod: Okay. That's helpful. And then maybe just turning to the international business because we don't want to leave any stone unturned here. You get a lot in Canada. Just obviously, kind of flattish same-store sales growth. And were you seeing obviously, the permanent fund dividend was a negative impact as well as weaker economic conditions in the South Pacific. So can you talk about what some of the positive offsets were to those 2 headwinds? Daniel McConnell: Sure. So the positive offsets a little different, a lot of book, not necessarily transacted, but there -- we have started to sell more big ticket in Alaska, although I think the seasons ahead are going to be stronger than prior, but we will see a big increase in particularly schedules in Alaska, but also we had a new store come online, which is a -- which is real positive, which was real positive for AC. So that was a nice offset as well, new store in Barrow, Alaska. So that was -- that's a really nice community and it's going to be a good asset for Northwest for sure. Otherwise, the team is working hard right now. It's a tough environment in Alaska -- and the Caribbean again, is starting to -- it's doing fine, and it's had some -- it's been stable, but it's really the South Pacific that has been a bit of a drain on -- and just getting back from some of the -- some of the typhoon work and just the economy is -- the competition has increased and the economy has worsened. So -- it's kind of a tougher situation, but we're optimistic next year that some of the strategies that we're putting in place are going to hold us in a good stead. We're combining some of our operations and building a more impactful, efficient store that's going to take you out and put one in, and we think it's going to make a real positive impact in Guam. Stephen MacLeod: Right. And then maybe just finally, with the maybe not a reduction in SNAP benefits, but the noise around SNAP benefits through the Big Beautiful Bill, -- did any of that sort of work into your numbers? And was that an impact in the quarter? Daniel McConnell: I think that's more this quarter, Stephen. So that will be -- have a little bit of an impact on this quarter. And it was -- yes, it was a bit of a there. Operator: Our next question will be coming from Ryland Conrad of RBC Capital Markets. . Ryland Conrad: Just starting off on the $23 billion settlement and the payment volumes being low there today, like have you actually observed any in-market spending from those payments? Or is that what you're expecting to be more of a Q1 event? . Daniel McConnell: You mean the -- sorry, the individuals that did get payments have we seen an increase in spend of those payments in our stores. Is that what you mean? Ryland Conrad: Yes. Correct. Yes. Daniel McConnell: Yes. And yes, we have. And as we said, -- we've seen a good -- we've retained a lot of those -- our expected retention on the money that we've been able to track in markets. . Ryland Conrad: Okay. Great. And then just on the two open classes within that settlement. I guess can you just talk about your expectations around those, I think -- from my perspective, it seems like more of the renewed child family class compensation would be flowing to individuals on reserve in your markets. So just curious to hear your thoughts about those two. Daniel McConnell: I don't really have too much thought around it other than the fact that we're excited for the rest of the class to open, but this is just getting going. So I don't know, maybe I'm not understanding your question. Could you go a little deeper as far as how I think about the quantum, is that? Ryland Conrad: Yes. I guess just with how the money is flowing to the individuals that are eligible under those classes. I guess there would be obviously circumstances where children might have been renewed from their homes under the renewed child class that are no longer on reserve. So maybe directionally, there'd be more money flowing to reserves through the renewed child family class, if that makes sense. Daniel McConnell: No, I don't know. Sorry, John, do you understand the question. I'm sorry, I'm having a tough time. Do you mean money going to the reserve to the council or the administration on the reserve rather than the individual? Ryland Conrad: No, two individuals. . Daniel McConnell: But like we can take it offline as well. Ryland Conrad: Yes, that would be great. Sorry. And then just on international on the PFD. I mean we've seen a few years of lower dividends now. Next year is an election year in Alaska. So do you think it would be reasonable to assume that we should see a larger PFD next year? Daniel McConnell: No, I don't think it's -- it's not always rational, it's next year is not an election year. So the election year usually when they ramp up. And if you remember, it's been as high as 3,000 plus, last year 1,000 this year. I don't anticipate it will go down, but I don't think it would get in my kind of experience is just watching the cycles. I don't expect it's going to triple and it's tough to even forecast what it's going to be, but I would not anticipate it would go down. I would say, if anything, marginally up, but it's yes. Ryland Conrad: Okay. Got it. And then just lastly on private label. I know it's still early days, but I guess, could you just provide an update on how many stores are now stocked with those products? And just whether you've seen any trade down from the national brands? Daniel McConnell: Yes. Most of the stores are now stocked with the private label. With the exception of a few, like, for example, where we're doing a major renovation in Calgary, for example, which is a substantial store and a couple of others, but most of the stores are up now with the private label offering. Operator: I'm showing no further questions. I would now like to hand the call back to Mr. McConnell for closing remarks. Daniel McConnell: All right. Well, thank you, operator. Yes, really, I'd just like to -- I wish everybody a very best of the holiday season. And I look forward to speaking to you on our Q4 earnings in April. So thank you. Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to Oxford Industries Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Brian Smith from Oxford. Thank you, and you may begin. Brian Smith: Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we'll be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO and COO. Thank you for your attention. And now I'd like to turn the call over to Tom Chubb. Thomas Chubb: Good afternoon, and thank you for joining us today. As is typical for our third quarter, I'll keep my comments on Q3 relatively brief before turning to what we're seeing in the early weeks of the fourth quarter and how we are approaching the holiday season and the rest of the year. We are pleased with what we were able to accomplish during the third quarter with our financial results broadly in line with the expectations we set earlier in the year. The environment remained highly competitive and promotional, and the consumer continued to be selective with their discretionary spending, often requiring new and innovative product to catch our attention. Against that backdrop, our team stayed focused on our long-term priorities and executed well on the fundamentals of our strategy. Strong sales growth in both the Emerging Brands Group and Lilly Pulitzer offset declines at Tommy Bahama and Johnny Was. Total company comp sales were slightly positive. And while gross margins continue to reflect the pressures we've discussed in prior quarters related to tariffs, our underlying adjusted gross margin, absent that pressure, improved over last year's even in a highly promotional environment. In addition to the financial results, we made important progress on a number of key initiatives across the enterprise, starting with people, we were pleased to have realigned and strengthened our teams in Johnny Was and the Emerging Brands Group through a combination of internal promotions and hiring key executive talent from outside the company. Also at Johnny Was, we made significant progress with the business improvement plan we discussed last quarter. In Tommy Bahama, our bars and restaurants are a distinct competitive advantage, and we were pleased to have added 2 important restaurant openings during the quarter. In Lilly Pulitzer, we anniversaried last year's very successful Palm Beach Fashion show with a fashion show in Key West. Last year's event has helped fuel creative content and commercial success throughout 2025, and we expect this year's event to do the same for 2026. We also completed the renovation of our Worth Avenue Lilly Pulitzer flagship location in Palm Beach. Finally, we are in the final stages of construction of the new state-of-the-art fulfillment center that will be such an important asset to our direct-to-consumer businesses. None of these items will have immediate impact on our financial results, but are critical parts of the foundation of future success. As I previously mentioned, across the portfolio, performance varied by brand as it has for much of this year. The bright spot continued to be Lilly Pulitzer, where the brand again demonstrated a deep connection with its core consumer and delivered healthy growth in the quarter. Our Emerging Brands business also posted strong year-over-year sales gains, reflecting growing recognition, relevance, customer engagement and growth potential. Moving to Tommy Bahama. While our third quarter results did not meet our goals for the brand, we did see encouraging progress. Comps improved sequentially to down low single digits from down high single digits earlier in the year. We believe we've made meaningful headway in addressing key areas that contributed to softness early in the year, particularly around color assortment and completeness of the line, which led to disparate regional performance and softness in Florida, our most important market. There is still work to do, but we feel good about the adjustments made so far. At the same time, we continue to invest in the long-term health of the brand through thoughtful expansion of our retail and hospitality footprint. During the quarter, we reentered the important St. Armands Circle outside of Sarasota with a beautiful new full-service restaurant and retail store, which replaced our previous restaurant that was damaged and closed in 2024 due to a hurricane. This new location reinforces the strength of our hospitality model in one of our most important markets. We also opened a new Marlin Bar in the Big Island of Hawaii, further deepening our connection to a region that has been central to the Tommy Bahama brand for decades. Both locations are off to encouraging starts, and we believe they will be long-term assets for the brand. Turning to Johnny Was. We made several important changes during the quarter to strengthen the foundation of the brand and position it for long-term success. As we discussed last quarter, Johnny Was is an incredible brand with beautiful product, a loyal and engaged customer base and a hard-working, deeply dedicated team. To ensure the brand can fully capitalize on that potential, we have refreshed key leadership roles, including the promotion of Lisa Caser, our formal Chief Commercial Officer at Johnny Was, to lead the brand as President of Johnny Was. Lisa is an experienced business leader with over 25 years of leadership roles at Neiman Marcus, including 10 years as SVP, General Merchandising Manager of Women's ready-to-wear. We also made changes to the lead designer and Head of retail positions to bring sharper creative focus, strong merchandising discipline and more consistent execution across the business. Earlier in the year, we also engaged an outside specialist to help us assess the Johnny Was business and identify the actions needed to meaningfully improve profitability. That comprehensive project has now been largely completed, and we have begun executing against its recommendations with clear priorities around creative direction, merchandising and planning, marketing efficiency and retail performance. While we are still early in the process, we're encouraged by the focus, energy and alignment we are seeing across the team. We believe that the combination of refreshed leadership with a very capable incumbent team and a clear actionable plan will allow us to reinforce the fundamentals of the brand and unlock the substantial long-term opportunity we continue to see in Johnny Was. With that backdrop, let me turn to the fourth quarter and our early read on the holiday. As a reminder, our comps in the fourth quarter last year were flat and benefited from a post-election bounce. When evaluating the early results of the fourth quarter this year, it is clear that the softer start to the holiday season reflects a combination of tariff-related product limitations and a holiday period that has been more promotional across the industry compared with last year that made for a difficult environment, along with the more challenging comps than earlier in the year. Most significantly, our brands have experienced challenges in our product assortments that trace back to the tariff-related sourcing decisions made earlier in the year. When our brands were building their holiday and resort lines last spring, the tariff landscape was highly uncertain with the potential for substantial increases on certain China origin categories. As a result, we made difficult but prudent choices to reduce our exposure in categories heavily reliant on China, for example, sweaters and other cold weather product that are important at this time of year. Those decisions were appropriate given the information available at the time. However, they left us with assortments that were not as complete or as comprehensive as we would like for the holiday season. Sweaters in particular have historically been strong drivers of fourth quarter demand across our portfolio and our reduced presence in this category has been a meaningful headwind. At the same time, the holiday selling period has been more promotional than last year with consumers showing heightened sensitivity to value and a willingness to wait for deeper discounts. While our promotional cadence and depth were consistent with our brand-appropriate approach, many competitors entered the season earlier and more aggressively. That dynamic contributed to a slower start for us in the opening weeks of the quarter. At Lilly Pulitzer, our holiday promotions included curated gift with purchase events and a broader seasonal sale, both of which resonated well with our core consumer, and we saw strong engagement with many of our most giftable styles and capsules. Unfortunately, our successful gift with purchase events were somewhat limited due to high Chinese tariffs and the difficulty of shifting the production of these items elsewhere. Similarly, we identified that there were gaps in our assortments related to the tariff environment, particularly in novelty items and certain other seasonal products that could not be quickly moved out of China, which limited our ability to fully serve demand. We also leaned into our core programs to mitigate tariff exposure, which reduced the level of newness we might have otherwise offered. At Tommy Bahama, we built on themes introduced earlier in the year, offering a compelling mix of gift-ready items and cold weather seasonal product. But as with Lilly, many of the categories that historically carry momentum for us during holiday, especially sweaters and other cold weather essentials that are heavily China reliant were reduced as a result of the tariff uncertainty earlier in the year. Those gaps, coupled with a promotional marketplace that moved earlier and deeper than usual, created incremental pressure. Despite these challenges, we have seen continued encouraging response in our Tommy Bahama Boracay pants that we discussed last quarter. While the price point increased from $138 to $158, new product innovation has led to significant sell-throughs and the Boracay pant has played meaningfully into the holiday gifting mindset. This success also highlights some of the trends we have seen in the market where consumers are gravitating to versatile products that can be worn to work and casual events and are less discretionary than some other categories. At Johnny Was, the customer continues to connect most strongly with the unique artful product that defines the brand. Elevated embellished pieces, rich textures and vibrant color stories, again resonated with loyalists. But similar to our other brands, limitations in certain seasonal categories due to tariff-driven sourcing adjustments, along with heightened promotional intensity across the marketplace created a more challenging backdrop for converting that interest at the levels we had anticipated early in the season. While still small in absolute terms, our emerging brand group continues to be a meaningful source of energy and growth within the portfolio. Southern Tide, The Beaufort Bonnet Company and Duck Head have each built strong momentum this year, and we are seeing that momentum carry into the holiday season with a stronger start than what we have seen in our 3 larger brands. These brands benefit from exceptionally loyal customer bases, focused product stories and highly engaged teams and their performance is a testament to the opportunity we believe exists in each of them. As we continue to invest in their capabilities, particularly in product, marketing and retail expansion, we remain very encouraged by the role of the Emerging Brands Group can play in our long-term growth algorithm. Taken together, these early holiday trends reinforce what we observed throughout the year when we deliver fresh, differentiated product that aligns with our brand heritage, the customer responds. However, given today's promotional climate, achieving that response requires a more competitive value proposition. As a result. And as Scott will detail in a few minutes, we now expect our fourth quarter performance to land below our previous guidance, and we are revising our outlook for the remainder of the year. And that is our focus across the portfolio, concentrating on what makes each brand special and ensuring that what we put in front of the consumer inspires confidence, joy and a sense of possibility. That same focus has guided our product development and marketing plans throughout the year. It's why we have leaned into newness and innovation across our brands, and it's why we continue refining our offerings to match the customers' mindset heading into resort in the early spring period. While the environment remains dynamic, we are approaching the remainder of the year with clear-eyed realism. We recognize that the consumer continues to navigate uncertainty and that promotional intensity remains high, but our teams are executing with discipline, and we believe we are well positioned to meet the consumer where she is today while investing in the long-term strength and potential of our business through initiatives such as those I outlined at the beginning of the call. As we look ahead to fiscal 2026, we are approaching the year with a clear focus on improving profitability and with confidence in the levers we have already begun to put in place. We expect to begin realizing the benefit of cost reduction initiatives that we started during fiscal 2025, including efforts around indirect spend and other SG&A-related efficiencies across the enterprise. At Johnny Was, the significant merchandising and marketing work we undertook this year should begin to bear fruit, and we also expect to extend the merchandising efficiency project we piloted at Johnny Was to the other brands in our portfolio. In addition, we will continue to focus on input cost reductions and tariff mitigation as we refine our sourcing strategies. Capital expenditures will decline significantly as we complete our new fulfillment center in Lyon, Georgia, which will allow us to meaningfully reduce our debt levels. All of these actions position us well to make tangible progress on profitability while continuing to invest with discipline in the long-term strength of our brands. As always, I want to express my deep appreciation for our people across the enterprise. Their resilience, creativity and focus on our customer continue to be the foundation of everything we do. With that, I'll turn the call over to Scott for more detailed commentary on our updated financial outlook. K. Grassmyer: Thank you, Tom. As Tom mentioned, our teams have shown great discipline and resilience in executing our plan against the backdrop of a challenging consumer and macro environment. In the third quarter, our teams were able to deliver top and bottom line results within our previously issued guidance range. In the third quarter of fiscal 2025, consolidated net sales were $307 million compared to sales of $308 million in the third quarter of fiscal 2024 and within our guidance range of $295 million to $310 million. Our direct-to-consumer channels were up in total with a total company comp increase of 2%, which was in line with our guidance for the quarter. The direct-to-consumer increase was led by increased e-commerce sales of 5% and increased sales in our food and beverage and full-price brick-and-mortar locations of 3% and 1%, respectively. The increases in full-price brick-and-mortar were driven primarily by the addition of noncomp locations, with comps in our restaurant and full-price brick-and-mortar locations down slightly at 2% and 1%, respectively. Sales in our outlet locations were comparable to the prior year. Our increased direct-to-consumer sales were offset by decreased sales in the wholesale channel of 11%, driven primarily by decreases in off-price business. By brand, Lilly Pulitzer delivered another strong quarter with total sales increasing year-over-year, driven by double-digit growth in retail and high single-digit growth in e-commerce, partially offset by a decline in the wholesale channel. The positive comp sales at Lilly Pulitzer, along with positive comp sales and overall sales growth in our emerging brands businesses helped to offset the low single-digit negative comp at Tommy Bahama and high single-digit negative comp at Johnny Was that led to sales decreases in both businesses. Adjusted gross margin contracted 200 basis points to 61%, driven by approximately $8 million or 260 basis points of increased cost of goods sold from additional tariffs implemented in fiscal 2025, net of mitigation efforts and a change in sales mix with a higher proportion of net sales occurring during promotional and clearance events at Tommy Bahama and Lilly Pulitzer. These decreases were partially offset by lower freight cost to consumers due to improved carrier rates from contract renegotiations, a change in sales mix with wholesale sales representing a lower proportion of net sales and decreased freight rates associated with shipping our products from our vendors. Adjusted SG&A expenses increased 4% to $209 million compared to $201 million last year, with approximately 5% or approximately 70% of the increase due to increases in employment costs, occupancy costs and depreciation expenses due to the opening of 16 net new brick-and-mortar locations since the third quarter of fiscal 2024. This includes the 13 net new stores, including 3 Tommy Bahama Marlin Bars and 1 full-service restaurant opened in the first 9 months of 2025. We also incurred preopening expenses related to some planned new stores scheduled to open in the fourth quarter. The result of this yielded an $18 million adjusted operating loss or negative 5.8% operating margin compared to a 3% operating loss or negative 1.1% in the prior year. The decrease in adjusted operating income reflects the impact of our investments in a challenging consumer and macro environment. Moving beyond operating income. Our adjusted effective tax rate was 30.3% was higher than we anticipated due to certain discrete items that were amplified by our operating loss. Interest expense was $1 million higher compared to the third quarter of fiscal 2024, resulting from higher average debt levels. With all this, we ended with $0.92 of adjusted net loss per share. As a result of interim impairment assessments performed in the third quarter of fiscal 2025, the company recognized noncash impairment charges totaling $61 million, primarily related to the Johnny Was trademark. The impairment charges for Johnny Was reflect the impact of organizational realignment activities in the third quarter of 2025, including changes to the Johnny Was executive team that Tom discussed. Revised future projections based on Johnny Was recent negative trends in net sales and operating results and challenges in mitigating elevated tariffs. I'll now move on to our balance sheet, beginning with inventory. During the third quarter of fiscal 2025, inventory increased $1 million or 1% on a LIFO basis and $6 million or 3% on a FIFO basis compared to the third quarter of 2024, with inventory increasing primarily as a result of $4 million of additional costs capitalized into inventory related to the U.S. tariff implemented in 2025. We ended the quarter with long-term debt of $140 million compared to $81 million at the end of the second quarter and $31 million at the end of fiscal 2024. Our debt historically increases during the third quarter, primarily due to seasonal fluctuations in cash flow with lower earnings during the third quarter, resulting in increased cash needs. Cash flow from operations provided $70 million in the first 9 months of fiscal 2025 compared to $104 million in the first 9 months of fiscal 2024, driven primarily by lower net earnings and changes in working capital needs. We also had $55 million of share repurchases, capital expenditures of $93 million, primarily related to Lyons, Georgia distribution center project, which remains on track for completion and go live in early 2026 and the addition of new brick-and-mortar locations and $32 million of dividends that led to an increase in our long-term debt balance since the beginning of the year. I'll now spend some time on our updated outlook for 2025. Comp sales figures in the fourth quarter to date are negative in the mid-single-digit range, which is lower than our previous expectations of flat to low single-digit positive comps. While our average order value has increased nicely, traffic has been mixed, but mostly down, and conversion has been very challenging across our portfolio. Due to the slow start to the holiday season, we are revising our guidance for the remainder of the year with the expectation that the mid-single-digit comp will continue for the remainder of the year. For the full year, net sales are expected to be between $1.47 billion and $1.49 billion, reflecting a decline of 2% to 3% compared to sales of $1.52 billion in fiscal 2024. Our revised sales plan for the full year of '25 includes decreases in our Tommy Bahama and Johnny West segments, driven primarily by negative comps, partially offset by growth in our Lilly Pulitzer and Emerging Brands segments, driven by positive comps and new store locations. By distribution channel, the sales plan consists of a low single-digit decrease in most channels, including wholesale, full-price retail, e-commerce and outlets, partially offset by a low to mid-single-digit increase in our food and beverage channel that is benefiting from the addition of 3 new Marlin Bar locations and 1 new full-service restaurant opened during the year. For fiscal 2025, our current annual guidance reflects a net tariff impact of approximately $25 million to $30 million or approximately $1.25 to $1.50 per share. While tariffs represent the primary driver of margin contraction this year, we also expect continued promotional activity across our brands to weigh on margins as consumers remain highly responsive to value and deal-oriented shopping in the current macroeconomic environment. We expect our gross margins for the year to contract by approximately 200 basis points. In addition to lower sales and gross margins, we expect SG&A to grow in the mid-single-digit range, primarily due to the impact of our recent continued investments in our businesses, including the annualization of incremental SG&A from the 30 net new locations added during fiscal 2024, incremental SG&A related to the addition of approximately 15 net new locations this year, including 3 new Tommy Bahama Marlin bars and a new full-service restaurant. Also within operating income, we expect lower royalties and other income of approximately $3 million in fiscal 2025. Additionally, our fiscal 2025 guidance includes the unfavorable impact of nonoperating items, including $7 million of interest expense compared to $2 million in 2024 or an approximate $0.20 to $0.25 incremental EPS impact. Increased debt levels in fiscal 2025 are due to our continued capital expenditures on the Lyons, Georgia distribution center, technology investments and return of capital to shareholders exceeding cash flow from operations. We also expect a higher adjusted effective tax rate of approximately 25% compared to 20.9% in 2024. The higher tax rate is primarily a result of a significant change in the impact that our annual stock vesting had on income tax expense in 2025 compared to 2024. We anticipate the higher tax rate will result in an approximate $0.15 to $0.20 per share impact. Considering all these items, including the $1.25 to $1.50 per share impact from tariffs, higher interest expense and a higher tax rate, we have revised our guidance and expect 2025 adjusted EPS to be between $2.20 and $2.40 versus adjusted EPS of $6.68 last year. The biggest drivers of the decrease in EPS guidance includes a reduction of our fourth quarter comp assumption from low single-digit positive comps to a mid-single-digit negative comp. A decrease in royalty and other income from lower order expectations from key licensing partners who customers have elevated inventory levels that will lead to a shift in orders from Q4 to Q1 of next year; an increase in SG&A, primarily resulting from increased consulting costs related to our ongoing projects to improve operating results and some additional costs related to our new Lyons, Georgia distribution center. In the fourth quarter of 2025, we expect sales of $365 million to $385 million compared to sales of $391 million in the fourth quarter of 2024. This primarily reflects our mid-single-digit negative comp assumption and decreased wholesale sales in the low single-digit range, partially offset by the impact from noncomp stores. We also expect gross margin to contract approximately 300 basis points, primarily driven by increased tariffs and a higher proportion of net sales occurring during promotional and clearance events. SG&A to grow in the low to mid-single-digit range, primarily related to the new store locations, increased interest expense of $1 million, decreased royalty and other income of $1 million and an effective tax rate of approximately 26%. We expect this to result in fourth quarter adjusted EPS between $0 and $0.20 compared to $1.37 last year. I will now discuss our CapEx outlook for the remainder of the year. Consistent with our prior guidance, we expect capital expenditures for the year to be approximately $120 million compared to a total of $134 million in fiscal 2024. The remaining capital expenditures relate to completing the new distribution center and the execution of our current pipeline of new stores at Tommy Bahama and Lilly Pulitzer. We expect this elevated capital expenditure level to moderate significantly in 2026 and beyond after the completion of the Lions Georgia project. Consistent with the seasonal nature of our business, we expect a modest decrease in outstanding borrowings in the fourth quarter. Thank you for your time today, and we will now turn the call over for questions. Bond? Operator: [Operator Instructions] Our first question comes from Ashley Owens with KeyBanc Capital Markets. Ashley Owens: So just first and foremost, I appreciate all the color on what was exactly a gap within each of the banners in terms of assortment for the holiday. But just moving forward as we navigate the quarter, just how meaningful would you expect this to be for the upcoming season? Is it something that's been corrected? Or are you observing some disruption still? Just want to understand how much of holiday is now fully aligned versus where you originally planned? And then maybe on that, I know China is complex right now and that it might be ironing out a little bit, but would ask if this gap -- is this shifting your viewpoint or sourcing strategy moving forward? Would you try to diversify further, place orders further in advance? Just any color there. Thomas Chubb: Yes. I think the big thing and while we did give a lot of detail, one thing that we didn't really call out specifically was that it's really what's on the floor right now that most impacted some of our sourcing decisions. And the reason is at the time that we were placing the buys for what's on the floor right now corresponded with that brief period of time where the duty or the tariff on China was going to be 145%. When it's been 20% or 27% or whatever, that's something that we could make a conscious decision to just stay in China with a particular product if we needed to and just try to take various routes to mitigate that tariff. When we were looking at 145%, which that's off the table at this point, but that was right when we were placing the buys for what's on the floor now. lots of stuff we were able to move out of China. Tommy and Lilly are mostly out of China, if not completely. But sweaters are the one category, and there are a couple of other ones. Sweater is the big one, but there are just not a lot of -- haven't historically been great resources that we could go to outside of China. So what we decided to do, Ashley, and at the time, I think it was the right call. We knew we couldn't bear that much tariff. So we really cut back the sweater assortment and tried to fill it in with other products. You look at our assortment right now, and you wish you had the sweaters. And that's really what we were talking about. So by the time you get to spring, that had settled down a lot. The tariff stuff is still a little bit up in the air, but it settled down a lot, and we were able to either move the stuff or know that it was going to come in at a tariff rate that we could deal with otherwise. So for spring, I don't think we have the same kind of impacts. We still have tariff issues that we have to deal with, but they're not going to impact the assortment the way that they have for this season. Does that help? Ashley Owens: Yes, that's super helpful. Just a couple of other questions really quickly. So I think you mentioned earlier that competitors were more aggressive with promotions for holiday and also earlier, which created that tougher backdrop. Any insight as to what you're seeing in the marketplace now in terms of that and if the intensity has moderated, but also how that's helping to inform your promo strategy for the balance of the year? And then additionally, just following your leadership refresh and then the external assessment on Johnny Was. Would be curious as to what emerged as the key priorities you're now focused on? And then also as you look out to 2026, key objectives for the brand? And should we be thinking of this as another period of stabilization? Or any color you could provide us on some of the road map or some of the key building blocks for stabilizing Johnny? Thomas Chubb: Okay. So with respect to the promotional sort of intensity out there, I would say right now, it still feels quite high, but we're a little bit in that in between time between the Black Friday, Cyber Monday weekend and the final stretch, and those are usually the most promotional times. I don't think it's really retracted, but I'm not sure it's taken another step up yet but wouldn't be surprised to see that happen. And we're going to try to be responsive to that in brand-appropriate ways. I think the catchword in all the brands is to stay nimble. We do want to make sure that we're not totally selling out our brands, but we're also thinking about things that we can do to respond to the marketplace. The one other thing I'll point out, and this is this calendar that we have this year where there are 27 days between Thanksgiving and Christmas and Christmas falls on a Thursday. The last time we had that calendar was in 2014. And that year, the business sort of came very late. If you looked at the sales build through the Thanksgiving to Christmas selling period, it really came on late. Last year, if you remember, you had Christmas on Wednesday. So this year, they got an additional weekday to shop, which could be meaningful. And also, it allows us to cut off e-com shipments probably on Saturday or in some cases, even Sunday and still have people feeling good that they're going to get them by Christmas, while last year, that was mostly on Friday that we were cutting off. So there are some things there that we kind of built the current trajectory into our forecast, but I think there's some reason to hope that it could -- the season could rally a bit. I don't think it's going to be a great one, but there are some differences there that are worth noting. And then on the Johnny Was plan, the -- I will say a couple of things that the game plan was developed by the team at Johnny Was with some outside assistance, but it's very much the team's plan. Lisa Kaiser, who's now the President of Johnny Was, was part of that team. She's relatively new to Johnny Was, but she's been with us for several months. She was the Chief Commercial Officer before, and she was very, very much central to the development of that plan. So the refreshment of the leadership does not entail, I would say, any change in the direction of the plan that we've been working on. And as we talked about last quarter, the keys to that are merchandising effectiveness, which is about having better assortments that hit -- have the right level of investment in the right price points, the right product categories, getting that to the stores at the right time and in the right store level assortments. And all of that will drive, we believe, some incremental sales versus what we would have otherwise had and also improve the margins, improve full price sell-through and ultimately gross margin. And then the other -- 2 other big areas of focus by the team, and again, it's the team's plan, really the same team. We've just added a few more people and elevated a few people, including Lisa, who we're very excited about. But the second element is about marketing efficiency. And that's really just more effectively spending the dollars that we spend to drive better results. And some of that, we've already started to kick in. And I will say what we're seeing to date is encouraging in that we're actually getting, I would call it, better efficiency out of the spend that we've done in the last month or so, maybe a little longer than that. And then the last thing is about improving the go-to-market process and calendar, and that's something that the whole team led by Lisa is they're very bought into that. Lisa is a big believer in that kind of discipline. So I think this -- the refreshment of the leadership team and the elevation doesn't change the plan because they all developed the plan, but it enhances our ability to execute it well. Ashley Owens: Great. Appreciate all the information, and I'll pass it along, but best of luck. Operator: Our next question comes from Janine Stichter with BTIG. Janine Hoffman Stichter: I wanted to dig into wholesale a little bit. I know it's a relatively smaller piece of the business, but just curious if you can share what's going on there. It sounds like your wholesale partners are being a bit more cautious with orders, but there's maybe a little bit more inventory in the channel. And then I think you mentioned that off-price was going to be down. Is that a strategic plan? And maybe just elaborate on what's going on there. Thomas Chubb: I think on the -- overall on the wholesale, I think it is a level of concern and caution by the retailers. And I would say most, especially the specialty retailers that are a big part of our wholesale base. And during uncertain times, they tend to pull back a bit, and I think we're seeing that now. And Scott, I don't know if you want to elaborate on the off-price situation a bit. K. Grassmyer: Yes. Yes, we did have less inventory that needed to be liquidated through those channels. So we are trying to keep our owner inventory and hopefully, we'll continue to have less that we have to put through those channels. Janine Hoffman Stichter: Got it. And then just thinking through the tariffs, as you're just now seeing the impact of the products that you were planning, I guess, in April or May when the China tariffs were 145%, is the Q4 what we should think of as a peak headwind from tariffs? Or how much should we think about continuing into the first quarter of next year? Thomas Chubb: Well, I think in terms of it -- the impact it had on our product assortment, I think it is peak. I think as we get into spring, we were able to make the product that we wanted to make it somewhere that was a manageable level of tariff. In terms of the impact, the financial impact of tariffs, remember, we didn't have them during the first quarter of last year. really, they didn't really kick in until later in the year. So first quarter, you're not going apples-to-apples. And then as you get later in the year, you start to lap the tariffs. I don't know if you want to add. K. Grassmyer: Yes, yes. We accelerated a lot of products early in the year, knowing that tariffs were going to be coming or fearful they are going to be coming. So we were able to most of the first quarter had very, very minimal. Now we go into first quarter of next year, everything will have some tariff on it, but we will have some price increases to at least help mitigate that impact. As we get later in the year, we'll be going apples-to-apples with tariffs and hopefully have a little bit more mitigation price-wise as the year moves on. Operator: Our next question comes from Joseph Civello with Truist Securities. Joseph Civello: Following up on wholesale a bit, I understand the general cautious tone from retail partners. But can you give any incremental color on your sort of competitive positioning within the channel and maybe as we get past the tariff pressures on inventory and stuff like that, that you're facing right now? Thomas Chubb: Well, I think through third quarter, our relative performance to the extent we know, and we don't always have perfect information, but I think we performed well, and I don't think we -- for the -- overall, I would say, well, there were small pockets where maybe that was not the case. But I would say, overall, our performance was quite good on the retail floor. For the fourth quarter and the holiday, I think it's too early to know for sure. We don't have enough data, but my hunch is that we're going to continue to perform well relative to the rest of the floor, and it's more about the general caution. Joseph Civello: Got it. Makes sense. And then if we could also just get a little bit more color on thoughts around price increases as we go through the spring, which I believe is like the original trajectory you're looking at? K. Grassmyer: Yes. We do have some price increases in for the fall holiday. period, but there will be more in the spring. But again, we'll have the full tariff load coming in that inventory. And then we're looking at next fall pricing on are there any adjustments we -- additional adjustments we need to make. So I think there will be -- once we get out the early part of next year, the pricing should -- the goal is to have it mitigate the tariff dollars. I don't think we'll get the percentage quite mitigated, but the dollars once we get out of the early part of the year. The goal is to have the pricing mitigate the tariff dollars. Operator: Our next question comes from Paul Lejuez with Citigroup. Tracy Kogan: It's Tracy Kogan filling in for Paul. I had a question about what you're seeing quarter-to-date. And outside of the key sweater category, can you talk about the trends there in some of those other categories and also talk about trends by brand quarter-to-date. Is it pretty broad-based weakness you're seeing across the brands? Or is there a big deviation of one brand or the other? Thomas Chubb: Sure. Thank you, Tracy. Well, I would say that -- and we talked about this in the prepared remarks, but the big 3 brands are all relatively weak at the moment. And the smaller brands are still sort of humming along. They were plus 17% in the third quarter, and they're continuing to have a strong fourth quarter, while the big brands are where we're really seeing the softness. And then in terms of product, we also talked about that a little bit. And I think in Lilly, we're -- because of the China tariff situation and the threat of 145%, China is where we make a lot of our more embellished kind of novelty type stuff, things with sparkles and [indiscernible] and bows and that kind of stuff. And so we've just got less of that stuff. And so the consumer is almost being forced into some things that -- I mean, Lilly is never basic product that within the Lilly spectrum are a little more tame. And then in Tommy Bahama, we've actually seen very good performance in things like the Boracay pant which is basically a Chino. It's a really great one, really nice one, but it's a chino pant. And that, as we talked about third quarter and again this quarter, we introduced a new one or I say third quarter, second quarter. We introduced it earlier in the year. It's at 158 versus 138. It does have some new features and benefits, but it's sold just incredibly well. And actually, we're selling a lot more of them than we sold the old one last year. And then also things like long sweet sleeve wovens are performing well, some of the second layer knits. And I think the kind of theme to a lot of those things is versatility, things that can be worn on a lot of different use occasions. But we'll see more as the season develops, Tracy. Operator: Our next question comes from Mauricio Serna with UBS. Mauricio Serna Vega: I guess I understand now in this fourth quarter, you're experiencing some assortment issues that's related to the sweaters and the move out of China for that -- for this particular season. But as you think about the spring 2026 season, how are you thinking about your assortment, how ready you are in terms of different -- the 3 big brands, I guess, and the potential for maybe after getting through this bit of a hiccup in Q4, maybe having stronger results in the first half of next year? Thomas Chubb: I think the challenges to the assortment were really mostly for what's on the floor right now. I think as we get into spring, by the time we were placing those buys the 145% tariff was off the table and/or we had found other places to make things. So I don't think we'll have that challenge so much in the spring. As Scott mentioned a minute ago, the tariff issue for the spring will just be that this year we will have tariffs, whereas in spring of last year, we didn't really have them yet because that been implemented and/or we were pulled in inventory ahead of them. Mauricio Serna Vega: Got it. And just a reminder, what kind of price increase are you planning for Spring '26 to offset the tariffs? K. Grassmyer: Yes. It's kind of varying, but it's ranging from 4 to say 8%, but some of it, the ones that are more in the 8% or more of the -- it's more a little more elevated in mix. So I think for the tariff piece of it around 4 which kind of offsets the dollar impact. Yes. Yes, not quite the margin impact, but the dollar impact. Operator: This now concludes our question-and-answer session. I would like to turn the call back over to Tom Chubb for closing comments. Thomas Chubb: Thanks to all of you very much for your interest. We look forward to talking to you again in March. And until then, I hope you have a happy holiday season. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Greetings. Welcome to the Electrovaya Q4 Year-End 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Gibson, CFO. You may begin. John Gibson: Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q4 and full year 2025 financial results. Today's call is being hosted by Dr. Raj Das Gupta, CEO of Electrovaya; and myself, John Gibson, CFO. Today, Electrovaya issued a press release concerning its business highlights and financial results for the year ended September 30, 2025. If you would like a copy of the release, you can access it on our website. If you want to view our financial statements, management discussion and analysis and annual information form, you can access those documents on the SEDAR+ website at www.sedarplus.ca or on the SEC EDGAR website at sec.gov/edgar. As with previous calls, our comments today are subject to the normal provisions related to forward-looking information. We will provide information relating to our current views regarding market trends, including their size and potential for growth and our competitive position within our target markets. Although we believe that expectations reflected in such forward-looking statements are reasonable, they do obviously involve risks and uncertainties, and actual results may differ materially from those expressed or implied in such statements. Additional information about factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the company's press release announcing the Q4 fiscal 2025 results and the most recent annual information form and management discussion and analysis under Risks and Uncertainties as well as in other public disclosure documents filed with Canadian and U.S. security regulatory authorities. Also, please note that all numbers discussed on this call are in U.S. dollars unless otherwise noted. And now I'd like to turn the call over to Raj. Rajshekar Gupta: Thank you, John, and good evening, everyone. It is a pleasure to speak with you today as we review our fourth quarter and full fiscal 2025 results. Fiscal 2025 has been the most significant year in my tenure as CEO of Electrovaya. It marked a clear financial and strategic inflection point for the company, characterized by strong profitable growth, major balance sheet improvements and continued execution of our long-term technology road map. Let me highlight a few key milestones. We grew revenue by over 40% year-over-year and achieved the first full year of profitability in Electrovaya's history. This is a structural improvement driven by operational scale, product mix and disciplined execution, not a onetime event. We further strengthened our financial firepower with a new $25 million facility from Bank of Montreal, replacing our former high-cost private lender. We closed a $51 million direct loan from EXIM under the Make More in America program and have begun drawing funds as we build out our Jamestown lithium-ion cell manufacturing facility. As a nice surprise, we were honored to receive EXIM's Deal of the Year Award. Last year's winner was BETA Technologies, so we are in good company. We expanded our institutional investor base and improved liquidity with approximately $40 million in gross proceeds from two equity issuances over the last 12 months, which supports our long-term growth trajectory and positions us well as we continue scaling. Beyond these financial achievements, we made major strides in advancing our technology platform entering new applications and positioning Electrovaya at the forefront of the lithium-ion battery industry. Surpassing $20 million in quarterly revenue was another important milestone. And notably, we achieved this without straining our operational resources. This reinforces the scalability of our business model and supports our view that Electrovaya is now entering a sustained period of profitable growth. Given the number of new investors who have joined the Electrovaya story this year, I'd like to revisit our technology vision and road map. Electrovaya is at its core, a battery technology company. Our Infinity lithium-ion battery platform delivers industry-leading longevity, safety and increasingly high-performance attributes that are becoming essential across mission-critical applications. Earlier systems deployed at Walmart in 2018 have already outlasted the vehicles they power and continue operating. Our respected U.S. testing lab recently informed us that our cells are tracking towards approximately 15,000 cycles, providing rare real-world evidence of multi-decade performance. On safety, our ceramic-separator technology continues to maintain a perfect safety record. With lithium-ion-related recalls affecting electric vehicles, buses, consumer electronics and energy storage installations worldwide, we believe our safety profile is a unique competitive advantage and one that is gaining increasing market visibility. As a subsequent event to the fiscal year in November, we completed a $28 million equity raise. Funds from this round are partially planned to be utilized to support our future technology road map, reinforcing that Electrovaya is not only scaling profitably today, but also actively investing in our future. Some aspects of our road map include rapid charging cell development project, including both cell and system level architecture targeting sub-5-minute charging capabilities for select applications such as robotics and autonomous systems. Next-generation separator technologies aimed at further improving safety, high-temperature stability as well as domestic manufacturing of this key technology. Solid-state battery development, where we continue to make progress and expect to leverage our existing ceramic focused intellectual property and know-how to provide a strong foundation. We are investing in our Electrovaya lab site to enable production of larger cells that can be sampled to potential strategic partners. These initiatives underscore that Electrovaya is executing a dual mandate, deliver profitable high-growth revenue today while advancing the technologies that will define the next decade of the lithium-ion battery industry. Turning to our commercial progress. Our core material handling vertical continues to be a strong and durable foundation. We now have over 10,000 systems deployed globally, supporting 24/7 operations for some of the world's largest companies. This year, we deployed a record number of units with the largest drivers of demand being a few Fortune 500 and Fortune 100 companies, especially in the retail sector. Demand indications from our largest end customers point to continued growth into fiscal 2026. With this foundation solidly in place and expanding at sustainable levels, we are scaling into multiple additional mission-critical verticals. The first is robotics. This is one of the most exciting long-term opportunities we have. Autonomous systems require exceptional longevity, reliability and rapid charging, all areas where our technology excels. We have received initial orders and expect to scale deliveries beginning in the second quarter of fiscal 2026. Another vertical that we are bullish on is airport ground equipment, or GSE. We showcased our first GSE products in Las Vegas in September and several units are now in trials with a major U.S. airline. Safety and durability are key differentiators here, and we expect meaningful contributions in revenue beginning in 2026. In the long run, I expect stationary energy storage systems or ESS, to become a key element of our business. Our Infinity ESS platform launched this September is receiving strong early interest for applications such as data centers, backup power and rapid charging infrastructure. Pilot deployments are expected in 2026 with commercial scale beginning in 2027. I believe we provide a solution that fits an underserved part of the strategic industry, namely solutions that provide high power density with reliable safe performance, metrics that are critical for backup power and data centers, especially. Importantly, domestic cell production from Jamestown will qualify for full U.S. investment tax credits, enhancing both the competitiveness of our product and potential margins for our offering. Defense applications are also a strategic target for Electrovaya. We continue to see growing interest from defense customers, particularly in sea and land-based unmanned systems. We expect deeper collaboration with two global defense firms in the coming year with whom we've already had initial development work in progress. Finally, we are also targeting recurring revenue opportunities. We have historically highlighted the potential for recurring revenue through Energy-as-a-Service models, software and telemetry platforms, aftermarket and maintenance contracts. As our installed base grows and as we deploy systems into new verticals such as robotics, GSE and energy storage, we expect recurring revenue to become a more meaningful contributor to the long-term profitability and cash flow stability of the company. Turning to Jamestown. Construction is progressing well. The first components of the dry room arrived last week with additional major infrastructure build over the coming months. Jamestown is central to our strategy. It supports supply chain resilience, domestic content requirements, margin expansion and qualification U.S. manufacturing incentives like 45X and investment tax credits. Before I hand it back to John, I want to reiterate that our approach to capital allocation remains disciplined and focused. We will continue investing in profitable growth opportunities in high-impact R&D that strengthens our technology leadership and in preserving a strong and flexible balance sheet. Our goal is long-term sustainable value creation. With that, I'll now turn the call over to John for a detailed review of our financial results. John Gibson: Thanks, Raj. Electrovaya closed the year with our strongest quarter ever, capping off a very successful year for the company. Fourth quarter performance improved significantly both year-over-year and sequentially to Q3. During our Q3 call, we mentioned that we were steadily strengthening the financial foundation to drive scalable and sustainable growth. We demonstrated in this quarter that we can further improve throughput and productivity while maintaining margins and managing cost, providing us the platform to build on our growth to date and expand into new market verticals. Revenue for the quarter ended September 30, 2025, was $20.5 million compared to $11.6 million in the prior year. Revenue for the 12 months ended September 30, 2025, was $63.8 million compared to $44.6 million in the prior year, growth of 77% for the quarter and 43% for the full year. Gross margins for the quarter was 31%, an increase of 530 basis points over the prior year. Full year gross margin was 30.9% compared to 30.7% in the prior year. As is the case with previous quarters, the gross margin is primarily driven by product mix. And in a time of uncertainty around supply chains, increasing prices and tariffs, we kept costs under control and drove efficiency through increased production. This will continue to be a focus through 2026, especially as we expand into additional verticals. As we continue to increase our production volumes, we're able to push for better pricing from our key suppliers. And management believes the company is well positioned to maintain strong margins as we continue through 2026. Operating profit increased significantly for both quarter and full year. The operating profit for Q4 was $2.4 million compared to $0.7 million in the prior year. Operating profit for the 12 months ended September was $5.5 million compared to just $0.7 million in the prior year, an increase of 685% year-over-year. The company generated a net profit of $2 million for Q4, a significant increase over the net loss of $0.1 million in the prior year. Furthermore, the company generated a net profit for the 12 months ended September of $3.4 million compared to a net loss of $1.5 million in the prior year. We were able to achieve our net profit during Q2 and Q3 of 2025 and maintaining that for the full year is a significant step forward for the company. We also achieved this feat with just under $1 million of a loss on the fair value calculation of a derivative liability and nonrecurring costs relating to warrants that were exercised during the year. Despite this, we ended the year with an earnings per share figure of $0.09. We believe we can continue this trend of profitability into fiscal 2026 and beyond. Our adjusted EBITDA was $3.4 million for Q4 of 2025 compared to $1.5 million in the prior year, an increase of $1.9 million or 126%. Adjusted EBITDA for the 12-month figure being $8.8 million for 2025 and $4.1 million for the prior year, an increase of $4.7 million or 115%. Adjusted EBITDA as a percentage of revenue was 16% for the quarter and 14% for the full year. The company generated positive cash flow from operating activities of $1.7 million after accounting for net changes in working capital. The company ended the fiscal year with positive net working capital of $38.8 million compared to $0.8 million in the prior year, a current ratio of 4.82 compared to 1.03, a significant improvement, which demonstrates the continued improved financial and operating performance of the company and management is committed to continue this positive trend. At September 30, total debt was $20.7 million compared to $16.2 million in the prior year. This debt includes both working capital and the debt from the EXIM facility. Working capital debt was $17.7 million at the end of the fiscal year, an increase of $1.4 million over the prior year. We had also drawn $4.4 million from the EXIM loan as of September 30. In addition to the cash on hand of $7 million at the end of September, the company had availability within its bank facility of over $7 million. Subsequent to the end of the quarter, the company raised gross proceeds of $28 million from an equity issuance. This cash inflow, coupled with the turning of accounts receivable has put us in a position where we have a very high cash balance and the lowest debt balance in the company's recent history. As of today's date, we have available liquidity of over $40 million. We believe we have adequate liquidity to support our anticipated growth as we move into fiscal 2026. With respect to the Jamestown financing, we continue to draw down on the loan in Q1 and as of today, have now drawn over $15 million from this facility. We are currently in a period of no interest payments with EXIM with those payments not starting until the end of March 2026 and principal payments starting at the end of March 2027. Looking forward to 2026, when we look at our backlog and frontlog, we see significant growth year-over-year within material handling. When looking at the new sales vertical, forecasting becomes more difficult as they are less mature than material handling. However, our conversations with these customers within the new verticals continue to advance, and we anticipate these to represent between 10% to 15% of revenue for fiscal 2026. Overall, we expect to exceed 30% growth in 2026 with revenue from material handling between 80% to 85% of that total and the balance made up of the new verticals that are recurring revenue channels. That concludes the financial overview. I'll now turn the call over to Raj for concluding remarks. Rajshekar Gupta: Thank you, John. In closing, I want to reiterate my sincere appreciation for the hard work, resilience and dedication of the entire Electrovaya team. Your efforts have made 2025 the most successful year in our history and more importantly, laid the foundations for even more success in the years ahead. I'm confident that we are well positioned to build on the momentum that we had in 2025 as we head into 2026 and continue advancing our strategic objectives. That concludes our remarks this evening. John and I would now be pleased to hold a question-and-answer session. Operator: [Operator Instructions] The first question comes from Eric Stine with Craig-Hallum. Eric Stine: So you did mention expecting in fiscal '26, the 10% to 15% from new verticals. But just curious, as you think about those verticals, I don't know if it's ranking them or just some more color, are there ones that you view as potentially being a little bit more near term could mean upside kind of from how you've set things right now? And then conversely, on the other side, is there an area which maybe isn't further as far along and potentially doesn't have the impact that you think it might? Rajshekar Gupta: Yes. As John mentioned, they all -- these are all new verticals. So the maturity level is not the same as it is in the material handling space. I said for robotics, we have one -- we have two key customers who have provided us with, I would say, fairly reliable forecasting. So we're -- I'm pretty optimistic that robotics after material handling will be the second largest revenue driver. After robotics, we also have pretty good line of sight from -- on the defense side, one of the two partners we're working with is giving us some level of visibility for 2026. The airport ground equipment, we have our products being trialed by a major U.S. airline. We're optimistic that airline is going to select our product. But that is more like a binary yay or nay type situation, which would either be a multimillion dollar revenue source in '26 or a very small revenue source in 2026. So it's harder to predict. But that 10% to 15% that John mentioned, from our perspective, sounds about right. Eric Stine: Okay. Thanks for the color. And then when thinking about fiscal '26, I know you called out that part of that factors in the potential for deferred orders. And as I think about what you've seen in the past, I mean, that has been something you've dealt with in material handling. I mean, should we assume that what you're talking about there is material handling? And if there were a surprise, is it fair to say that, that's mostly upside or all upside given that you are factoring the potential that, that happens? Rajshekar Gupta: Yes. I'd say we're being pretty conservative here on what we're -- and that's what we should do. The surprises would lie be on the upside, correct. Eric Stine: Okay. All right. Maybe last thing for me, just energy storage. I know you just launched the product. You said that there was a positive reception to it. I believe you've got three customers that you're in discussions with and maybe one further than the others. But maybe how the pipeline is shaping up beyond those three customers given that, that would be targeted to an end market where you've clearly got a pretty deep list of material handling customers. Rajshekar Gupta: So, Eric, great question. So when we started developing this product, it was with some of our existing material handling customers in mind because they had acquired about it and then that was what drove us to develop the product in the first place. What's happened since those customers still have strong interest, and we are planning and we're in initial discussions on projects with some of those names. Beyond that, though, we've seen quite a bit of interest since we announced the product. And what we've done with the product is we've focused our efforts on areas where the competition is somewhat lacking. So if you look at the energy storage space in general for lithium-ion batteries, most of the systems have been designed for, let's say, 4-hour energy storage, which is -- they're doing a good job of it, and that's, I'd say, a highly commoditized end of the market. The demand that we're seeing for backup power, they require short durations of high-power energy from an energy storage source. So our technology is actually ideal for high power. We can deliver high power and short bursts reliably and safely. And so we've designed our product to do that. And that's gaining quite a bit of interest across the board. All that said, 2026 energy storage is going to -- it's just proving the product, getting the product certified and enabling us to scale it in 2027. Most definitely, energy storage could be a huge, huge place for the company. Operator: The next question comes from Colin Rusch with Oppenheimer. Colin Rusch: Just following up on Eric's question. In terms of the ESS applications, I appreciate the ability to have faster pulse charging. But are you looking at applications inside data centers, warehouses? Just can you give us a sense of where you're seeing these things ultimately located? Rajshekar Gupta: Yes. So we've had some discussions with partners looking at data centers specifically. And the idea there is the -- is that 30-minute backup. That's really what seems to be the sweet spot. Whether they're located inside the buildings or outside them, it's -- at this point, it's too hard to say. But the -- one of the key selling points is the safety, right? The fact that our systems have this technology have such a good record in use are used inside buildings already, right? So a typical warehouse at one of these Fortune 100 companies that we are supporting might have 5, 6 megawatt hours of batteries operating inside buildings and performing flawlessly over and over and over again. And so that kind of performance gives these types of potential customers comfort in the technology. Colin Rusch: That's incredibly useful. So then just moving to the robotics market and the charge time that you guys offer. It sounds like you're competing with supercapacitors or ultracapacitors in some regards. Could you just talk about the competitive landscape of other batteries in that space? And how long the design cycles ultimately end up looking like as you work with some of these companies that are emerging with new form factors? Rajshekar Gupta: Yes. Great question, Colin. So there's a product we already have, right? The product we already have is a relatively fast charging battery system, and it's going into robots, right? Then there's the product that we're developing, and that's the super-fast charging, sub-5-minute type solution, and that would go head-to-head with supercapacitors or certain sort of niche lithium-ion chemistries. And we think we can do it with our technology does require a bit of investment, which we're making both at the cell level and the system level. But it seems like in our initial discussions with a couple of major robot partners that, that is a direction that they are looking for, and I think we can fill that need. It's going to take a bit of time and effort, but we have the core fundamental technology to do it. Operator: The next question comes from Jeffrey Campbell with Seaport Research Partners. Jeffrey Campbell: First of all, congratulations on the strong quarter. I noticed that when you talked about some of the technology development that you have done some work again with lithium phosphate -- lithium iron phosphate. And I was just wondering, it seems like it's back in play. What kind of applications are showing an appetite for that chemistry? Rajshekar Gupta: I mean we developed this. We announced it about a year ago or a little. And so it is -- we've gone and certified it, et cetera. One thing we've tried to do is avoid Chinese supply chains where possible. And our LFP product is going to utilize cathode chemistry coming from non-Chinese sources. What that ends up meaning is the cost of it is somewhat comparable to our existing NMC product. And so there is -- there are certain niche applications which may want it. I don't necessarily, at this point, see it being a huge product for us, but that could change. Having it is important. Fundamentally, the Electrovaya technology is agnostic to chemistry. So we can apply our Infinity technology to NMC, LFP, various anode chemistries. The outcome is enhancement on safety, enhancement on longevity. Jeffrey Campbell: I wanted to ask how the Energy- as-a-Service initiative is progressing. And in particular, is it starting to bring the Infinity battery to a different type of customer? Rajshekar Gupta: Yes, it's progressing. We're working with at least one third-party logistics company in marketing that product and it's now that we're able to support it better, I expect it to gain traction in 2026. Jeffrey Campbell: And my last question is, you mentioned that you're doing work with robotics OEMs in both the U.S. and Japan. I just wonder, are their requirements generally the same or any significant differences between these two markets? Rajshekar Gupta: The robots are all different, but there's no geographic driver for a difference. Operator: The next question comes from Theo Genzebu with Raymond James. Theophilos Genzebu: Congrats on a good quarter and the year. Just as a quick follow-up on the rapid charging for the robotics. Are there any upcoming major milestones you're looking to achieve or expectations you can speak of or shed some color on? Rajshekar Gupta: We're going to -- you'll hear it from us. So there's development work ongoing currently at both the cell level and from the system level. We're also looking at filing some IP in the area, but it doesn't happen immediately. Theophilos Genzebu: Right. Okay. Understood. And just on the $40 million in equipment orders, and I appreciate, John, I think you said it was $15 million. I was already drawn from the on loan. Will all these orders be funded over like the next few quarters? Or will some of that slip into 2027? John Gibson: There will be probably a small portion. We'll hold back a small portion of the payments just for the final financing. So that may slip into 2027 fiscal year, but the majority of the cash will be drawn in 2026. Theophilos Genzebu: Great. Okay. And then maybe just another one for me. You guided to about like greater than 30% revenue growth for fiscal '26 and about $105 million in backlog. I was just curious on like what percentage of that backlog is tied to firm orders versus pipelines, if you can disclose that and what other key bottlenecks that could defer revenue into '27? John Gibson: So when we look at our guidance, we kind of look at overall total backlog to date our run rate, our conversations with our customers and where we see other verticals going, then we take that number and we discount it quite significantly to take into account any pushouts, any delays, customers changing their mind. And then you've got the uncertainty of the different verticals we're going into as well. So when it comes to guiding to a percentage growth, it really -- it's a difficult task with these different verticals and the potential upside there is almost like closing your eyes and throwing at a dart board. It's difficult to put a number to it. But our backlog is healthy frontlog is looking really good and the conversations with the customers are -- we're getting new customers coming and speaking to us every single day. So... Rajshekar Gupta: Yes. The other part is in the material handling space, especially, right, the orders come often in the last minute, right? So our actual firm orders come in the last minute, but we're given, I'd say, very high confidence forecasting well before that. And so that provides us the framework. Actual order might come a couple of weeks before it's meant to ship, right? Operator: Up next is Craig Irwin with ROTH Capital Partners. Unknown Analyst: It's Andrew on for Craig. A lot of my questions have been answered, but just one quick one for me. Last quarter, you called out you started a second shift in Mississauga. As we get closer to Jamestown commencing operations, how should we just think of the transition of capacity from one to the other? Or you keep the second shift in Mississauga? And how quickly do you think we'll get Jamestown up and running? Rajshekar Gupta: So, the second shift, so what we do in Mississauga is we make battery systems. Primarily, we're also making some battery modules. Jamestown is going to make battery, battery modules and cells, right? So they're somewhat apples and oranges. I don't anticipate us slowing down in Mississauga as Jamestown ramps up. So Jamestown is going to ramp up in all three areas. The cell portion is the most complex, most capital intensive, and that's where most of the investment from EXIM is going in. But there's also a substantial amount for battery modules, and we're planning to make a much larger variety of battery modules in Jamestown. Battery systems will also be manufactured there. And so it's not a zero-sum game at all. John Gibson: Yes. We'll be looking to level load from a capacity standpoint as well. Like we don't want to be running significant overtime up in Canada if there's capacity available in Jamestown. So it's about looking to be as efficient as possible with our available capacity and basically determining what's best to be manufactured for. Operator: Okay. Our next question comes from Amit Dayal with H.C. Wainwright. Amit Dayal: I just have one, actually, most of my questions have been asked. With now that the balance sheet has strengthened pretty significantly, you have various lines of credit and funding to ramp capacity in Jamestown. So your working capital needs, your CapEx needs, all are sort of in good shape. Do you think it would be safe for us to assume that the company is going to be more aggressive with sales and business development efforts maybe compared to, say, a year ago? Rajshekar Gupta: So, again, in 2026, I think we know what's going to happen. In 2027, we have significantly increased capacity. So what we're focused on is setting ourselves up to get to a position where we're rapidly filling up the plant in Jamestown. So, for instance, energy storage is a good example. 2026, we prove out the product. We might do a couple of pilots. Revenue generation is not a priority for energy storage in 2026. Certifications most definitely are. But 2027, we think it can be a home run product, right? So that's our objective. Now the other objective we have is to make very high-quality battery systems. There have been -- there have been competitors out there who may launch products prematurely and they get recalled. I mean just recently, I read one -- probably the largest electric bus manufacturer in North America is recalling every single bus they've made because the batteries have problems. We want to make sure our batteries work perfectly before they get into customer hands. And we've done a great job of doing that over the years, and we're going to -- that's #1 focus. Amit Dayal: Understood. And on the energy storage side, Raj, are you thinking you will take market share from sort of some of the existing folks? Or are these new opportunities that you will be participating in? Rajshekar Gupta: We're going after noncommoditized parts of the energy storage space, right? Our mandate is to sell our Infinity product at 30% margins. We're focused on opportunities which can do that or exceed that. And whether -- I don't know whether that's taking away from our competition is really filling a specific demand in the market for what we provide. Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks. Rajshekar Gupta: Well, that concludes our call, and thank you for listening. We look forward to speaking with you all again after we report our first quarter 2026 results. Have a wonderful evening. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, and welcome to the IXICO plc Final Results Investor Presentation. [Operator Instructions]. Before we begin, I would like to submit the following poll. And I would now like to hand you over to Chief Business Officer, James Chandler. Good afternoon to you. James Chandler: Good afternoon, and thank you for joining the financial results presentation for the 2025 year. Great pleasure in introducing Bram Goorden, CEO, you can see on the call on your left. And Grant Nash is on the right of your call, who's the Chief Financial Officer and Chief Operating Officer. We've got a presentation that will probably take us sort of, I would say, up to sort of 20 minutes, 25 minutes. We want to leave plenty of time for questions. We have seen that the questions that have been submitted now, so we'll try and get to those 2. All other questions we will get to at the end. So please ask questions towards the end, and I will let the 2 gentlemen now kick off with the results presentation. Bram Goorden: Well, thanks very much, James, and welcome, everyone. Thanks for taking the time to witness and listen to the results, which we're presenting for 2025. I'm delighted to confirm what I think has been a great year. If we go to the next one. And maybe before I do that, just to sort of set the scene for those who are less familiar with us, we are IXICO. We are a leading imaging CRO business in the CNS space, so central nervous system in the neuroscience space, which we believe is becoming an ever more fertile ground for us to operate in, as you will see also through some of the data that we're presenting today. And the services that we offer are very much based on an AI-driven biomarker analytics platform, obviously, surrounded by an expert team with whom we deliver A2Z services mainly to biotech and pharma, but more recently also to the diagnostics industry, and I'm sure we'll come back to that today as well. Maybe just to highlight that we are currently serving 28 studies -- as you will hear later on, we have actually served 38 projects over the past 12 months or in 2025. And then obviously, on the bottom, the number of brain scans analyzed is an ever-evolving number as well. And that is, of course, sort of the goal, which we're sitting on because that is the data that also feed our AI-driven platform. The business model of the company very much holds as well for those who may remember, I joined the company about a year ago. We then actually also did a capital raise and very much redefined what is our strategic focus, but very much basing ourselves still on the strengths that we have in-house. So at the one hand, the IXICO AI platform, it's a platform that has been completely revamped, which we actually went live with about 12 months ago. Every new customer is now coming on board that new platform, which is very exciting. And over the past 12 months, we've also seen that it really works well. IXICO expertise, as already mentioned, those are the people working with us, mainly at the headquarters in the U.K., but also worldwide. And again, as you may remember, we've actually increased our footprint, especially also in the U.S. The main activities are then imaging biomarker development, trial management and then analyzing the data, which is very much the results that pharma and biotech contact us for. Maybe just to highlight that to the right-hand side, you see some of the key disease areas which we are operating in. Most people that know IXICO since its 20 years existence know that we're an absolute leader in rare CNS disorders and especially Huntington's disease. But that more recently, we've now really deepened our footprint, especially in Alzheimer's, Parkinson's disease, but also active in other disease areas. As mentioned, the focus on CNS is very much a stronghold. It gives us focus. It gives us clear purpose, and it really makes us that global leader in that space. And as you will see in a minute, this is a space which is very much growing. This is how we like to measure and look at ourselves after we did this capital raise around a year ago. You may remember that the strategy, which we set forward then was innovate, lead scale. And if you look at the right-hand side of this slide, these are some of the KPIs that we have been measuring throughout. And this is sort of the picture today, if you wish, against some of those measures. So starting with the first bucket, innovate, which was very much about equipping the platform, so the IXI platform with novel algorithms, novel biomarker algorithms in order to go deeper into that AD/PD space and then deploying that platform with customers, which then leads to diversification of our portfolio, so therapeutic area diversification. We feel it's appropriate to put sort of green there across the board because very clearly, we have made those investments. We have put these algorithms on platform. And so we do feel that IXI is very much equipped now to go deeper into these disease areas. And that's, of course, also what has resulted into the, I would say, excellent revenues for the past year and also the more recent big order book increase, which we will come back to. There's this little white box here, novel IXI applications and revenues. I made it wide because it's not necessarily what we set out to do over the past 12 months, but we did sort of uncover over the past 12 months that clearly there are other technology applications, which are presenting to us and which we do believe we can capitalize on. And that will actually come back then to some of the strategic partnerships, which we are further pursuing and which we're hoping to report out to you later in the year in 2026. So moving on to the second one, lead. That is very much about then making some noise around the innovation, which we've put on platform and also much more deliberately working together with key opinion leaders, with thought leaders. You may have seen that we actually did some press releases very recently where we announced that we're working together with Mike Weiner, Professor from UCSF in the U.S., Joanna Wardlow from the University of Edinburgh. And this is very much deepening now that expertise in that collaboration, especially in the area of dementia. So heightened conference attendance, more prominent KOL expansion, medical affairs, but then as mentioned as well, the operational and commercial footprint expansion, especially in North America. Data partnerships is an important one as well. We especially announced also the partnership or the deepened partnership, I should say, with GAP, the Global Alzheimer's Platform, where we solidified our access to the data in Bio-Hermes 2, which is a pivotal data set for us to further validate some of the biomarkers that we have on platform. And so the third bucket here, if you wish, the scale is then actually more sort of a lagging indicator. So what does this all result into? At the one hand, existing project revenue expansion. So this is actually about making sure that with our current clients, we see additional work as thought leaders, we've sort of positioned ourselves to look at what further biomarker research can be done, and that has resulted into revenue expansion in 2025. New biomarker revenues, which really relates to that new vertical that we're serving now, which is the blood-based biomarker space, so a diagnostic space. And then order book growth, which especially more recently, and you'll hear Grant talk about that, has quite drastically increased. So very much an indicator which we felt we could put on green where we are now today. Then in terms of pipeline expansion, I'm giving that a number. We see very much new projects coming on board. But clearly, 2026 is the year where I really want to solidify this so that we can keep also that order book growing. And obviously, that will then feed to revenue growth, which we have now projected in the market, as you may have seen, to be 15% for this year, 2026. And of course, the expectation is that, that will not slow down or on the contrary in the future. And then strategic partnerships, I'll come back to that, but this is very much how we would like to see further revenue streams develop, and that will be very much through partnering our technology in a different way than the service model that we do through the CRO. And again, I'll come back to that. I'm giving you the number, not because we're not making progress on the contrary. I think we've made a lot of progress, but it wasn't necessarily the strategic focus of 2025, and it will very much be the strategic focus for 2026. So this is then the year sort of in -- on one page and on a time line. So the Innovate Lead Scale strategy. I will not walk you through every event there because I think I already did that to some extent the past minutes here. But I think it's fair to say that after the capital raise, which happened at the beginning of the year, we had a somewhat slower H1. And so I think the results of that new strategy and of that capital raise really started to pan out in that second half of 2025. And that's also where we saw an order book increase then from GBP 13.1 million to GBP 13.8 million. And that momentum is really what we now see continued also in these first 2 months of 2026 with an order book that's actually landing at GBP 17.7 million. Obviously, we're early in the year. We're definitely not done. So we do have an objective of increasing that number further. But I think this is definitely a great level of comfort because it does inform and Grant will come back to that confidence around the revenue number, which we've put out there for 2026 as well. I've already highlighted some of the events that you see on this pipeline, like the Fujirebio FDA clearance, that was an important one because it was sort of our first collaboration with a blood-based biomarker diagnostic company. It was maybe a smaller project in value, but it was also a project that didn't take much time to complete less than 6 months, which means that revenue recognition around this type of project goes very fast. And obviously, that goes straight to the top line, and we've got more of those lined up now in the pipeline. And then, of course, the GAP deal, as I already mentioned, which then at the end of the day, led to a positive trading towards the end of the year. And then at the end of the year, we saw more Alzheimer's work coming on board, more rare CNS contracts coming on board. And then eventually, just in the new year, that Phase III trial, which was a GBP 3.5 million contract that we announced and which obviously has now had a very positive impact on our order book. So with that, I think I'm going to move to the next one. So the way we positioned the increase and the progress was very much by going deeper into Alzheimer's and Parkinson's disease. And you see that here with that platform progress, so these sort of green dials, if you wish, try to show how what we've brought on platform is now starting to have an impact in the market, so clinically with customers, but then also, of course, for us, commercially in terms of projects that we're landing. And I think it's fair to say that, that progress in Alzheimer's disease has been witnessed -- we have actually landed some of these contracts. We have also now opened this new vertical with the blood-based biomarkers, and that is very much thanks to those biomarker algorithms that we decided to bring on platform to further differentiate ourselves, of course, helped by increased footprint and commercial efforts. With Parkinson's disease, it's very much the same. It's sort of slightly more to the left because it hasn't translated necessarily into a massive pipeline of opportunities yet. The pipeline is there, but it's now about converting those into actual wins, and that is very much what we are planning to see in 2026. Huntington's disease, as you know, is an area where we are dominant. And so for us, it's very much about, if you wish, defending the fortress here. And of course, with the recent win of the Phase III trial, but also with onboarding some earlier-stage Phase I trials, we feel that we've very much proven that we're still very much the leader in that space. So with that, I suggest we go to the next one. And I think this is the last one that I'm presenting before I hand it to Grant, and then I'll come back to talk a little bit more about the future and some of the things that are exciting for us. I recognize that this is a busy slide, but what we're trying to do here is share with you how we are looking at the market and at the space in which we operate, so especially around these 3 main disease areas, Alzheimer's, Parkinson's, Huntington's, but then also the other rare CNS disease areas because we've seen a lot of momentum there and momentum, which is also informing our pipeline and our commercial success. So starting with Alzheimer's disease, I think as many will know, we've had approved drugs in that space since a while now by Biogen, Eisai and Lilly. And obviously, those anti-amyloid disease-modifying therapies are now very much informing also the next generation of pipelines, and that is strengthened also by novel biomarker solutions such as the blood-based diagnostics. So this is very fertile ground for us as you have also witnessed now in some of these wins. The other thing I would like to call out here is the GLP-1 development. Many of you will know that this is a class of drugs, which has really shaped a whole new area of obesity management, especially. Lilly and Novo are the 2 players that often come to mind, but there's hundreds of these assets actually in development at the moment. They are believed to also have an impact on dementia, which comes through metabolic and vascular pathways. And since we brought vascular biomarkers on platform 12 months ago, which at that moment, we sort of considered a little bit of bet, we do see that we're now in the middle of this opportunity, which obviously is something that we're very excited about. If we then move to Parkinson's disease, one of the key events is Roche, which entered into Phase III with their disease-modifying therapy. And that is a big step because Parkinson's disease has been an area where we've seen a lot of need and really sort of a gap in terms of bringing true disease-modifying therapies to -- further into the development cycle. We know that one of the key new biomarkers that is being looked at through MRI imaging is neuromelanin. And again, for those who remember how we started off the year, this is one of the key biomarkers, which we decided to bring on platform. So obviously, again, this brings us now in the middle of this field of research and so also close to the clients that we are targeting there together with associations such as the Michael J. Fox Association. And so then very briefly, Huntington's disease. For those who have followed the press, there's been some very positive press around it. There was actually a client of ours, uniQure, which got some very positive feedback from the FDA, which was then subsequently nuanced slightly because it was only a Phase I/II trial, which they were working on. And so there is a requirement for further efficacy endpoints. But at the same time, we see that these assets are further progressing. We also see that Novartis now initiated a Phase III trial. And you can see to the right that IXICO is actually supporting a Phase III trial. So I'm letting you connect the dots here. And then last but not least, other rare CNS. We mentioned that during our Capital Markets Day as well. It is a very thriving arena as well. And so we are actually serving some of these big pharma companies that are almost solely focusing in CNS at least on rare disease because they know that this is actually an area with especially gene therapy as very fertile ground. And again, since we have the platform since many -- or since 2 decades now that has really been equipped with some of these bespoke biomarkers, we see increased engagement there, too. So I think with that, I'm going to pass it to Grant for a moment, and he will talk a little bit more in detail about the financials. Grant Nash: Thank you, Bram. I will talk through where we are in terms of our financial performance, our financial position and then go into a little bit of detail on our order book, which helps look towards the future. So on this slide, I'm presenting the financial performance in the company over the last 12 months focused specifically around revenues on the left, where you can see we've reported GBP 6.5 million of revenues across the year, which reflected 13% growth in revenues. That comes from winning new contracts and extending contracts, but also, as Bram mentioned, the diversification of those revenues to including the validation of blood-based biomarkers. As Bram mentioned, we serve 23 clients, 37 projects across the year. And with that increase in revenues, we also see an increase in our gross margin, the middle graph, which showed that we achieved gross margin of just under 50% for the year. That was increased by the revenue increase, which at this stage in our scaling accesses the operational leverage that exists within the business because we have a relatively high fixed cost base. So the more revenues we deliver by volume, the higher that gross margin will be. That was tempered a little bit this year because we made some specific investments in adding operational footprint on the ground in the U.S. to augment our service offering in that important market. The key point for us and to explain on gross margin is that -- the factors that influence it are the level of revenue. So the higher the level of revenue, the higher the margin will be, that operational leverage piece, but also the mix of trials. So we have tended to have more Phase I, Phase II trials, so early-stage clinical trials over the last few years, which tend to have a slightly lower gross margin than some of the later phase trials, the Phase III trials. As we start to see more Phase III trials coming into our order book has been the case in the last couple of months, so we can expect to see that feed through into higher gross margins. And of course, underlying all of that, we will continue to closely manage our costs to deliver the best and most efficient gross margins that we can. That all feeds through into our EBITDA position, our profit position over on the right. So we report a GBP 1.3 million EBITDA loss in the year, which is a 20% reduction in EBITDA loss compared to prior year. That again is driven by the revenue increase, which is really where the relatively high fixed cost base of the business means that additional revenues fall quite quickly through all the way through to profitability or profit position, offset to a certain extent by the investments we made following the capital raise a year ago, which are designed to drive forward sustained growth and ultimately sustained profitability. We also -- I just want to emphasize that when you compare our 2025 EBITDA loss of GBP 1.3 million compared to 2023, which is at GBP 0.8 million for relatively similar revenue levels. The reason for the differential is at that point, we were actually capitalizing GBP 800,000 more cost moving from our P&L to our balance sheet. So on a like-for-like basis, the comparison would be minus GBP 1.6 million in '23, minus GBP 1.3 million in '25. So essentially, we are delivering our revenues and our profitability more efficiently than we were a couple of years ago. Moving on to our financial position. We have a strong balance sheet position, closing cash of GBP 3.5 million, that was supported in the year by the capital raise we did in October of '24 with an underlying cash utilization of just under GBP 2 million. That -- those investments were driven by that capital raise we did, where we outlined that we were going to invest in the Innovate Lead Scale strategy that Bram has spoken to, and that has been obviously what we've been doing in deploying those -- in deploying that cash. The middle graph shows our capital investment, shows the fact that we have invested GBP 1.3 million in the year. About GBP 600,000 of that was in our platform, which is comparable to the GBP 500,000 we invested last year. In 2023, you can see we invested much more than that, almost GBP 2 million. And that was the completion of the deployment of our new technology platform, a key asset and cornerstone for our business going forward, which we launched in 2024 and which will become a key topic of this presentation when we come back to Bram in a moment. On top of the GBP 600,000 of investment in the platform, we also invested GBP 700,000 in data. This is absolutely critical for us in terms of driving the differentiation of the pipelines we use to support the biopharma industry in analyzing the data they're collecting in clinical trials. It's data that really separates us out from the competition, differentiates our product and creates a competitive moat to others in terms of the AI capabilities that we're able to deploy. And then for completeness on the right, we show a net asset position at the end of the year of GBP 11.7 million, increased by 24% on the prior year, supported by the capital raise and split round numbers into GBP 8 million of long-term assets, the investment that we've made in the platform and in data, which will drive our revenues over the coming years and move us back to profitability. Working capital of just over GBP 4 million, and we have almost no long-term liabilities whatsoever. I then want to just spend a moment or 2 talking through our order book. As a reminder, our order book is the value of contracts that we have signed but not yet delivered. So this essentially is the backlog and the visibility of future revenues that the organization will be delivering over the coming years. So in terms of future-looking KPIs, this is the key one because the growth in the order book is what gives you confidence in sustained growth going forward. I talk you through the chart, we had an order book at the end of September last year '24 of GBP 15.3 million. In the financial year, we delivered GBP 6.5 million revenues. We had GBP 1.2 million of trials whether were descopes or reductions in the value of the trials simply because the trials haven't been successful, and that's something that happens in clinical trials and particularly in CNS area. And then we won GBP 6.2 million of contracts, leading to a year-end closing order book of GBP 13.8 million. One thing I want to highlight here is that across the year, in the first half of the year, we had a relatively slow contracting period. We won GBP 2 million of contracts. That reflected the wider market challenges, which are well publicized, where biotech, in particular, was struggling to raise capital. And across the market, there was a relatively slow level of new trials being started and funded. We saw that pick up materially in the second half of the year where we signed GBP 4.2 million of new contracts. We believe that was driven by an improvement in the market conditions, but also the improvement in our capability to communicate to the market the differentiation of our products that came directly from that Innovate Lead Scale strategy, particularly that lead element of the strategy. So we finished the year with GBP 13.8 million, having grown the order book from the midyear point of GBP 13.1 million. But then very significantly, in the last 2 months since the year-end, we have won a further GBP 5.1 million of contracts. So what this shows is that since the financial year-end in the 2 months, we've recognized GBP 1.2 million of revenues. We've had no further client trial descopes, and we've won an additional GBP 5.1 million, which leads us to an order book at the end of November of GBP 17.7 million. So an increase since the end of the year of 27% -- that is important because what that meant is this morning, we were able to release improved revenue expectations for this financial year. So having delivered GBP 6.5 million last year, we're now -- the guidance in the market is that we will deliver GBP 7.5 million this year. That's 15% increase in revenues. We were confident that we could deliver that forecast because we have within that GBP 17.7 million order book, so that order book of contracted revenues, 84% of that GBP 7.5 million revenue projection already contracted. So we essentially have approximately GBP 1 million of revenue still to find in the remaining 10 months in the year, which is a very achievable target for us. So looking at the way that we've contracted across the last 14 months, so between the end of September '24 and the end of November '25, we've signed GBP 11.3 million of new contracts. 17 contracts totaling just under GBP 8 million were new. And then we have 35 contract extensions, so extensions on existing contracts across 15 clients totaling just under GBP 3.5 million, giving us an overall book-to-bill gross position of 1.5, which is very healthy, obviously, to deliver sustained growth going forward. I then got my next slide, which again focuses on the order book. This is quite a busy slide. What I want to -- what I'm showing here is in each of the 3 sets of charts, the position at the end of September '24, the position at the end of September '25 and the position at the end of November '25. What I'm going to do is I'm going to jump forward and just take out the September '25 figures. So you can see those overall trend across that 14-month point in time between the end of September, GBP 15.3 million order book and the end of November '25, GBP 17.7 million. And what I'm showing here in the graph on the left is that order book broken down by the projects within it. So each colored bar within the 2 overall bars is the value of the project held within it. So at the end of November, we had 28 projects in the order book at the end of September '24, we had 25. And you can see that we have a very well-diversified order book. We're not overly reliant on any individual project, which means that we have diversified away risk of -- or significantly minimized risk of trial descopes and cancellations because we don't -- we're not reliant on any particular specific project. But also, we've increased the opportunity that exists in our order book because every single one of those projects have the potential to move to later-stage projects, which we are then very well positioned to follow on with. So we essentially have a pipeline of opportunity that exists within our order book. So we have a GBP 17.7 million order book where we've reduced the risk and we've increased the opportunity. Then as you move to the middle chart, what this shows is that same order book by value, but split by the different clinical trial phase of projects. And what you'd expect to see over time is that you bring new projects in Phase I. If those projects are successful, they moved to Phase II. If they're successful, they move to Phase III. And what you can see is that, that has been exactly what's happened to us over the last 14 months. We've had projects in Phase I that have moved to Phase II, which is projects in Phase II have moved into Phase III. So you can see in 30th of November '25, our Phase III projects have moved from GBP 2.9 million 14 months ago to GBP 6.1 million of value. And those projects, we can expect to have higher project gross margins and will have higher proportions of analysis, which is positive for the organization. And then finally, on the right, you see the order book this time split by number of projects. And the reason we've done this is to show the split of number of projects that we have within HD, AD, PD and Rare. And what we have focused on is whilst we are committed to growing our order book overall, the investments that we're making and have made in the last few months following that capital raise, have been focused on expanding our opportunity in AD and PD. So whilst we're very pleased with the growth in our order book, and we expect to see that continue, where we want to see further growth is coming through the number of projects in AD and PD. Those projects will tend to be Phase 1 projects. So they'll tend to be lower value, but it's those projects that will lead to greater opportunity as they mature into Phase IIs and Phase IIIs. So at that point, I'm now going to move back to Bram, who will talk a little bit about the future. Bram Goorden: Thanks, Grant. And I'm conscious that James promised a 20- to 25-minute presentation. So I'll try to be brief. But hopefully, you all see that this was a successful 2025, which is now translating into a great start in 2026, and that gives us as a team actually also the chance to think a little bit more around that medium to long term and where do we really derive value. And I did want to share that with you today so that you also understand what is the agenda of us as a company to create even more value as a company. So if you go to the next slide, the way we like to depict this, and I appreciate that this is a very sort of cartoon slide almost, but the thin line that you see here is our business today, obviously turned around because it hasn't always been growing over the past years. So as an imaging CRO, we do now see linear growth. We've just put out 15%, as Grant said, for 2026. And obviously, the expectation is that we will do the same or better even in '27 and beyond. And that will then bring us to that GBP 10 million in revenues quite rapidly. And just sort of to put things clearly, as a company, we believe to -- or we strive to be breakeven with the GBP 9.5 million top line number. So this very much is now within that time frame that we announced a year ago when we did the capital raise, but we don't want to stop there. We do believe that there is an opportunity, and it's also an inbound opportunity through partners that are reaching out to us to accelerate that growth towards that blue line, which we believe is going to be more through a tech bio model. And what we mean by that is that we want to start to partner our IXI platform in different ways than the way we're using it now, which is a little bit sort of a bespoke system, if you wish, that fuels the services which we offer. So we very much want to continue, of course, to be that leading CRO in the CNS space, but we also realize and acknowledge that we've got a technology, which is of interest to some of the bigger partners that we're working with. And so if you keep those 2 lines in mind, I've got sort of 2 slides to share with you. The first one, which is the next slide, shows how we're going to continue to go down that straight 15% at least growth line. And that has to do with the disease areas, which we have decided to go deeper into, especially Alzheimer's and Parkinson's disease. And so if you look at this chart here, and we start at the bottom, you see that Huntington's and rare, which is very much our bread and butter, it's our -- the market where we believe we are very dominant. We've sort of conservatively estimated that there's around 13 million in novel projects on an annual basis to gain. And we know that we've got access to the majority there, which is also why we say that we've got an 80% market share. In terms of how much we want to convert there, we're projecting 6 million. So that is what we need to win as contracts in order to make that revenue number that Grant was talking about before. And obviously, with some of these wins in the first quarter, we are very well positioned to achieve that. And so there's high confidence there. And then if you look at Alzheimer's and Parkinson's, obviously, we're now talking about much bigger markets, even if you could argue that conservatively or that there might actually be upside there. But for us, the work is now very much about penetration. So in this light blue -- these light blue bands that you see, that is the market which we believe is readily available for us. That is the market around which we're building our pipeline. And then I think quite conservatively, we're saying let's project to convert at least 3 million in projects in Alzheimer's disease and 1 million in Parkinson's disease. And I think most people will agree with me that this is a very achievable target, especially if you look at some of the most recent wins, especially also in the Alzheimer's and dementia space. But I think it sort of highlights a little bit how -- what we are projecting out there is not pie in the sky. It's actually very achievable, and I would argue maybe even conservative. And so this GBP 10 million revenue in the medium term is definitely something we stand by and that will be achievable. So if we then move to the exciting part, which is the next one or the other exciting part, I should say, how do we utilize our platform in different ways to further grow revenue at the one hand, but also increase the value of us as a company. So at the left-hand side, you see IXI as a platform, which is modular, flexible, scalable, but very much sort of our own proprietary technology that we translate into these A to Z services as a CRO. We're very much going to continue to grow that, as I just mentioned, but we also have 2 big other avenues of revenue generation, which we are pursuing and which we are now discussing also in terms of corporate development and technology development. The first one is what we call ICRO, which is further automating the platform, obviously driven by the AI evolutions, which we witnessed in the industry and which we are a driver of, I should say, and looking at how we can implement those into the platform to then further partner with other technology platforms that serve similar clients as ours. So it's pretty close to home as in we continue to serve pharma and biopharma, but we know that there's other players out there like large-scale CROs or data providers, electronic data capturing systems that have access to these same clients and with whom we could partner and integrate our platform. And it's a bit early days now to start to talk in great detail, but this is something that I'm hoping to communicate back to the market in the next coming months in this year. And then the second one is a clinical one, which has always been an obvious one, but which really we're now doubling down on. And that is how can our platform, which already is used in the hands of radiologists in the clinical trial space, be utilized closer to patients in the clinical decision space. And as you see at the bottom of these boxes, we're not necessarily suggesting that we're going to start to build the route to market and build all the teams around reaching these targets. We do want to partner with other companies that already have access there. And the good news is that these are partners today already for us. For example, in the clinical space, we are already today contracted with Siemens, GE and other device producers. So what we endeavor here is to accelerate revenue generation because we really do believe that we can get to a top line, which looks much closer to, say, GBP 50 million, but we also much more importantly believe that, that will really restore and further increase actually the value of us as a company because that underlying proprietary value will be recognized as such as well. So that brings me, I think, to the last slide, and then we'll be very happy to go into Q&A. Just to sort of summarize the investment case for us as a company. Obviously, financial performance comes first, and that is what we set out to do in '25. We will continue, of course, to do that in '26. But I'm happy to report that when it comes to revenue and order book, those boxes are ticked at the moment. Obviously, that work isn't done, but we are very much in the green. Scientific track record, the company has celebrated this 20-year track record. But very importantly, we've really expanded, I think, our reach by making sure that we work more closely with some of the key opinion leaders and that we give our Chief Scientific and Medical Officer also really that opportunity to strengthen that team as we communicate the innovation that we bring on platform. Then technology advantage, which very much comes back to what I just mentioned. We do believe that we're sitting on an underutilized platform that can be scaled in many other ways. And obviously, the ideas that will further equip the group of our Chief Technology Officer to bring that to life together with partners. And that market growth is not an unimportant one either. We are a leader in neurology. And we believe that, that focus on CNS, so on the neurodegenerative space is also what makes us so successful. And the good news is that this is a space which is very much thriving and growing despite some of the macroeconomics that we see in other areas. And so to the right here, value creation will come first and foremost, through that revenue growth, which we said was going to be double digit, and we sort of upgrade to 15%. But then, of course, also order book. And as I mentioned, that underlying value then from the technology, which I invite you to sort of stay tuned as we further develop that. So I'm going to end here, James, and I think we're ready to take some questions. Operator: That's great, Grant. [Operator Instructions]. James, if I may now hand back to you to take us through the Q&A session, and I'll pick up from you at the end. Thank you. James Chandler: Thank you, Alex. So we've had quite a lot of questions. So thank you for being so proactive on the channel. I think I'm going to go through each of them in order. There is a bit of repetition. So if I jump your specific question, it's probably going to get covered somewhere else. What I will also do in some instances is just start with perhaps a comment and then hand it to either Grant or Bram. And I'll read the questions out as we go. So the first question is, given the patent cliff pressures in the biopharma space and the resulting potential for increased M&A activity, how does the company anticipate this environment affects IXICO's position, competitively differentiates it and the likelihood of future contract wins as a result? And so I guess Bram is very well placed to answer this having spent most of his career in big pharma. But if I can just quickly sort of start to head on that question, which would be that I think patent cliffs and M&A activity are not new challenges and in fact, they are constant in the pharma R&D space. And generally, I think what we've seen in terms of pharma organizations facing patent cliffs, they tend to double down on new research. And I think as CNS is experiencing this renaissance that Bram has discussed and talked about at some length, actually, we're seeing -- there's a pressure on pharma to increase R&D activity, and this is likely to benefit IXICO. And then I guess on the M&A side, what we also see is as organizations consolidate, they tend to place a greater emphasis on vendors demonstrating specialist expertise and sort of proven quality and operational reliability. And again, that's an area where IXICO differentiates itself strongly. But as I said, Bram has spent a large time in big pharma. So perhaps, Bram, if you would like to comment on the question. Bram Goorden: Well, yes, not much to add. I think you said it quite eloquently, actually, James. I think what's to remember here is that, that focus on CNS means that we're actually much more in an area where there is a renaissance of research and development. We now do see actually some of the big pharma players coming back to that arena after -- I mean, I don't think the surge in oncology research is done. I think there's a lot of unmet need there as well. But we do see that there's, again, appetite now from big pharma to go into CNS. And of course, when big pharma does that, that also helps fund some of the biotechs that often are the ones behind the Phase I and Phase II. And I think the most prominent example that we have witnessed from the first bench is in Huntington's disease, where we have seen that a smaller biotech got a product to Phase II which then was picked up by big pharma for GBP 1 billion, and that actually really delivered us then an opportunity to further the research with a Phase III. So while patent cliffs definitely put a lot of pressure on pharma, I think James mentioned it, doubling down on research is mostly the answer. And in CNS at the moment, we see that, that actually delivers growth, especially in the areas of dementia and Parkinson's. James Chandler: Thank you, Bram. So I'll move to the next question, which there's quite a few of these. So there's quite a lot around when will we break even. And just to remind you, we talked about a GBP 10 million revenue target. We talked about a GBP 9.5 million breakeven point in that target. And Grant talked extensively also about how the investments made as part of the Innovate Lead Scale strategy have sort of accelerated the path towards profitability. But Grant, did you just want to cover again just that how we see that path to profitability? Grant Nash: Yes. Thank you, James. I think you've given the key points there. But I think what I'd add is that we have deliberately taken the decision and was a key part of the capital raise we did 12 months ago to move this business not just to profitability, but to sustainable profitability. And we probably could get to profitability quicker than we would probably at lower than GBP 9.5 million. But actually, what we're trying to do here is build a business that sustains growth in terms of revenues and sustains profitability once we achieve it. And the way to do that is to ensure that we're addressing a market that is large enough that when you have peaks and troughs as you inevitably do in one particular area, you have other opportunities that sit elsewhere, which is why it's so important we break into AD and PD and that's what we're doing, which means that we, as an organization, would rather take a little bit longer to get to breakeven because we're making the investments upfront, knowing that once we get there, we're going to sustain it. And that's exactly what we're working towards. James Chandler: Thank you, Grant. The next -- there's a couple of questions around when we see new contract wins coming. And I know that we spent quite a lot of time talking about the pipeline and talking about the order book and in particular, an uplift in both, in other words, opportunities that we're seeing coming into the business and then translating those opportunities into contract wins and clearly as Bram and Grant have talked through this presentation and also the forecast now in the market, we've got some confidence behind that. But Grant, I just wonder if you want just to cross check against the pipeline side again a little bit and just explain why we're feeling confident. Grant Nash: Yes. So I think perhaps I'll start with the order book where, again, we sign contract -- when we sign contracts, these contracts generally are multiyear contracts. We have the benefit now that we have these biomarker validation type contracts, which are much quicker than that, and they can augment our revenues quickly. But essentially, what we're building with the order book is long-term visibility of revenue growth. So having moved to an order book of GBP 17.7 million at the end of November, we now have several years of visibility of strong revenue basis, which we can build on and accelerate our revenues further. So whilst that increase in the order book has still largely come from the success we've seen in Huntington's disease and rare diseases, with the investments we've been making in AD and PD, we're seeing more opportunities now coming into our pipeline in those therapeutic indications as well as HD and rare. So we're in a good position now, as I said, with 84% of our revenues for this year -- projected revenues this year covered already in contracts that as we strengthen our pipeline further, convert that into contracts, which we expect to continue to do across this year, that will drive that revenue line higher. James Chandler: Thank you, Grant. The next question is around how the U.K. budget affected the, so the most recent U.K. budget announced a couple of weeks ago by the chancellor. And I think that we would say it was broadly positive. There were commitments made to investments on further tax incentives. And clearly, and Grant will speak to this in a minute, we'll continue to monitor and leverage favorable R&D tax credits. I think more broadly for the life sciences sector, what we saw is the announcement of the U.K. life sciences sector plan. And to remind everybody, that identified life sciences as a key growth sector in the British economy and signaling quite significant strategic support and sector level backing for that. And so we think this may help effect attract further investment in talent and possibly some favorable regulatory or funding conditions. And potential to strength in the U.K.'s competitiveness as a hub for biotech and medical research. So I think we saw it broadly positive. But Grant, did you want to comment at all on the specifics of the tax incentives announced? Grant Nash: Yes, I can do. So obviously, we were pleased as a small cap U.K. business to see incentives like the expansion of the VCT EIS headroom available for companies in our area to raise capital. Obviously, there was an element of it being slightly muddled by the budget also reducing the tax incentive. But ultimately, we see that as broadly positive for the small company and the very important sector of innovative investment in new and exciting ideas, particularly obviously in our biotech med tech type area. And I think the other point that you touched on, James, is that our customer base is international. So whilst we are a U.K.-based company, a lot of what we're doing is based outside of the U.K. And it's, therefore, positive, of course, that there are U.K. incentives to drive for innovation, which is what we're doing, but it's also important that the wider market is available. So the U.K. budget has an impact, but it's not the be all end all for us. We were pleased, of course, there wasn't quite as much inflationary impacting items as there were perhaps 12 months ago, which ultimately will hopefully see interest rates come down a bit and make us -- make U.K. a bit more competitive worldwide. But yes, I think your answer was a good one, James. James Chandler: And then just the last question we'll cover is, is there's sort of question about trial delays and cancellations in pharma and headwinds around that and then how resilient IXICO's pipeline is under those conditions. And I think the numbers that been announced today have demonstrated actually that we have some resilience towards that. I think also the fact that we're in the CNS space gives us some resilience to that. And I also think that we haven't particularly seen the pharma clients that we're contracting with canceling or pulling back on trials at this moment in time. But I was going to offer that question really, Bram, maybe to you to start with and then Grant, I think you'll have a view too. Bram Goorden: Yes. We -- I mean, I think Grant has been quite clear on how we've been spared from that definitely in the recent past. I mean, we've seen some cancellations and some descopes in 2025, but nothing that was unexpected. So there's always going to be cancellations. There's always going to be some descopes. We are in the business of clinical research where not every asset unfortunately makes it into an approvable drug. We can't say that we've really experienced projects or programs that were stopped because of economic pressures. Maybe some delaying decisions. It's true that we would always want a faster sales cycle or shorter sales cycle, I should say. But I think that, again, is something that we are quite used to. And so I think at the end of the day, it is now very much around that diversification of the order book, which hopefully, Grant showed quite clearly where we are, at this stage, really not reliant on one big program or even a handful of programs, but where we really now have a very nice variety of programs across phases, across disease areas, across geographies. So hopefully, that answers that question a little bit. And then, James, I think you said this was the last question, but am I allowed to quickly chime into some of the questions that I see around differentiation of the platform? James Chandler: Yes, please do. Bram Goorden: I mean it is sort of our bread and butter, right? And I saw a few questions passing around. How do you measure differentiation versus some of the other CROs. I think someone is asking, is vascular on other platforms. So maybe to start with that last one. No, we took vascular as a bet, if you wish, 12 months ago because we feel that's really where the dementia space requires novel biomarkers. And we do believe we're on the forefront there. And so 12 months later, we're actually very excited about the progress that we've made there. And some of us come back from the clinical trials in Alzheimer's disease conference, which took place in San Diego last week. And very clearly, there's excitement around that space. And so we feel that, that was definitely a bet, which we made well. Now of course, that doesn't mean that others will sit still. So we do need to keep the momentum of our development. And so that brings me then to that question on how do you differentiate yourselves? I think there's sort of a quantitative and a qualitative aspect to it. The quantitative development is about making sure that we actually have the most novel biomarkers on platform. And we do believe that in that space of neurodegenerative disease, IXI as a platform is really superior to some of the others. And so we've managed to bring on platform functionality, which others don't have. But there's also the quality development because at the end of the day, why do we do this in order to allow radiologists to make the best informed insights around what you see in the brain. And obviously, that requires a very accurate and very precise AI-driven platform. That's what it's all about in order to actually see things which you would otherwise not see with the bare eye. And I invite everyone that is interested in some more details to look at the recording of our Capital Markets Day, where our Chief Technology Officer, Mark Austin, I think, did an excellent job sort of showing how you can sort of take a picture of the brain, whether that's an MRI or a PET scan. And then as you start to really overlay the technology, which we've built, you really start to now actually see what is happening there. And obviously, that is years and years of development and continuous training of the system. So sorry, James, if that took us a bit further, but I felt exciting about sharing that. James Chandler: And Bram, we've got a few minutes left. So I wondered if you just wanted to pass any closing comments to those listen. Bram Goorden: Sure. Yes. I hope we shared today that '25 was a good year. But having said that, for us, that's already long past. We're well into 2026. We wanted to make the effort to share what has happened over the past 2 months, obviously, because it's been exciting from a commercial perspective, from an order book perspective. But I think it also sort of shows you what's possible and how fast things can really now evolve in the right direction, thanks to the Innovate Lead scale strategy. So we are a company of more than 80 people worldwide. We believe that, that will be growing further actually in the next coming months, years as well. And I actually want to take also an opportunity to thank all these people because we've been working very hard. We believed in what we brought on platform to differentiate. And I think even if it is early stage and we're only getting started that we're now seeing really the signals of this being the right choice and IXICO making a bigger impact in the market. And so with that, I want to thank also everyone today to have taken the time to listen to our story for now. Operator: That's great, Bram, Grant, thank you for updating investors today. I please ask investors not to close this session as you'll now be automatically redirected to provide feedback in order that the team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of IXICO plc, we would like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Good day, and thank you for standing by. And welcome to the Medtronic's Fourth Quarter Fiscal Year 2025 Earnings Conference 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. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Ted Moreau, Head of Investor Relations. Please go ahead. Ted Moreau: Thank you, operator. George Makrokostas: Good morning, everyone. Welcome to our review of Photronics' fiscal fourth quarter 2025 financial results. Joining me this morning are George Makrokostas, Chairman and CEO Eric Rivera, CFO, Frank Lee, head of our Asia operations and Chris Progler, CTO. The press release we issued this earlier this morning together with the presentation material that accompanies our remarks are available on the Investor Relations section of our website. This call will include forward-looking statements that involve risks and uncertainties that could cause Photronics' results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained both in today's earnings release as well as our most recent SEC filings. During the quarter, we will be participating in the New York Summit next week, and the Needham Growth Conference in January. I will now turn the call over to George. George Makrokostas: Thank you, Ted, and good morning, everyone. We delivered strong financial results with sales of $216 million exceeding expectations and increasing 3% sequentially. The major positive in the quarter was record high-end IC revenue, led by The US and Asia. Non-GAAP diluted EPS also surpassed guidance coming in at 60¢ per share. During the quarter, we recognized a tax valuation allowance reversal, reflecting an improvement in our US execution and outlook, which Eric will elaborate on. As we look to 2026, we will continue to leverage our operational strengths and geographic footprint spanning 11 production facilities to continue to deliver high-quality photomasks. As previously communicated, we are currently executing strategic geographic expansions at existing facilities, reinforcing our position as a leading merchant provider of photomasks. These initiatives are expected to enhance the revenue contribution from these facilities, broadening and further diversifying our geographic revenue mix. Our investments are aligned with two industry trends. First, advanced node migration. Progression to more advanced nodes requires more mask layers per IC device and finer resolution mask features, driving increased mask demand and higher mask set ASPs. Our investments will increase our exposure to higher-end nodes in The US and in Korea. Second, regionalization. Semiconductor manufacturing continues to diversify globally, including meaningful reshoring of production in The US. We are a market leader in The US and will pursue numerous higher-end opportunities through our US investment plans. More specifically, a year ago, we announced our capacity expansion capability extension at our Allen, Texas facility. We expect to begin tool installation in the coming months with customer qualifications in the springtime frame and initial revenue later in 2026. In Korea, our cleanroom expansion is underway, with equipment installation beginning in 2026. Customer qualifications for eight nanometer are expected through fiscal 2027 with revenue contribution beginning in 2028. Additional node migrations are expected as market demands develop. Together, these initiatives will diversify our geographic revenue mix and increase our exposure to leading-edge chip designs. During the quarter, we achieved several positive technical and commercial developments. To highlight a few, one, we are recognizing more outsourced opportunities from captive mask makers, including leading-edge DRAM and logic nodes. Two, in advanced IC packaging, saw increased demand for our larger format masks that support AI-driven chip packaging applications. Three, we completed shipments of masks fabricated with our newest generation DRAM node mask process co-developed with a key memory customer. Four, demand tied to edge AI applications continues to rise across Asia, highlighting our exposure to this critical segment. And finally, our advanced multi-beam mask writer we installed in The US earlier in 2025 is now in full production with over 20 customers qualified, including multiple EUV users. Our technology roadmap continues to advance through joint development with customers, collaborations with consortia such as IMEC, and partnerships with critical suppliers. I will now review market conditions heading into fiscal 2026 before turning the call over to Eric. The high end of the market remains strong, supported by sustained investment in hyperscale data centers for AI rollouts. This momentum continues to drive demand for the highest-end photomasks. Many of our high-end customers are providing positive forecasts that reinforce favorable node migration trends and global manufacturing regionalization. While the high end of the market remains robust, the mainstream IC market remains soft, though appears to be stabilized. Returning to our quarterly results, IC revenue was $157 million. We achieved a quarterly record in high-end IC representing 42% of IC revenue, thanks to a strong technology portfolio and exceptional execution. Demand in The US has been particularly strong, validating our expansion initiatives designed to bring additional advanced production capacity to the market. As a reminder, we are the only US-headquartered company that can produce trusted masks, and our Boise facility is the only commercial high-end US trusted mask facility. In flat panel display, revenue of $58 million declined sequentially reflecting order timing. Demand softened later in the quarter and into the early days of Q1, but has since rebounded. FPD mask demand is expected to remain strong throughout Q1. Earlier in 2025, we shipped our first two g 8.6 AMOLED orders and anticipate additional g 8.6 demand in fiscal Q1 as adoption of this technology expands in consumer and enterprise high-performance display segments. I will now turn the call over to Eric to review our fourth-quarter results and provide first-quarter guidance. Eric Rivera: Thank you, George. Good morning, everyone. Fourth-quarter revenue exceeded expectations at $216 million, increasing 3% sequentially, though declining 3% year over year. IC revenue of $157 million declined 4% year over year. However, we experienced a meaningful mix shift towards high-end shipments which reached record levels in both absolute dollars and as a percentage of total IC revenue, at 42%. High-end IC strength reflects strong order patterns globally, including in The US, now representing 20% of total revenue, where reshoring efforts continue to create a favorable demand environment. Meanwhile, our mainstream IC revenue declined 12% year over year, due to several factors. The declines are broad-based geographically, because of market conditions. However, the mainstream IC decline deepened by recent geopolitical impacts across mainstream customer segments, primarily in China. Additionally, we strategically redirected mainstream capacity, including capabilities obtained from end-of-life tool replacements towards higher-end opportunities. Turning to FPD. Fiscal Q4 revenue of $58 million declined 1% year over year due to timing of order patterns. As we look to fiscal Q1, the temporary FPD slowdown that emerged later in Q4 persisted through much of November, but has since abated with recovering order levels. Gross margin improved to 35%, exceeding expectations driven by a favorable product mix. Operating margin of 24% also exceeded our guidance range. Diluted GAAP EPS attributable to Photronics shareholders was $1.07 per share. We experienced a favorable $16.8 million benefit related to the reversal of historical US tax loss valuation allowance. We had recorded this tax valuation allowance as the benefit was previously deemed unrealizable. Given the improved performance and outlook of our US business, US GAAP recorded a reversal of this tax loss allowance resulting in the positive $16.8 million results to GAAP net income. Excluding foreign exchange impacts, and a deferred tax valuation allowance reversal, non-GAAP diluted EPS was 60¢ per share. Our earnings performance reflects a greater contribution from our US operations. During the quarter, we generated $88 million in operating cash flow equating to 41% of revenue. CapEx was $68 million bringing full-year CapEx to $188 million. As discussed throughout the year, we have entered a period of elevated capital investments to drive future organic growth. Exemplifying this commitment, initiatives in The US and Korea will further strengthen our ability to capitalize on growth trends, including increased captive outsourcing, high-end node migrations, and geographic supply chain diversity. For fiscal 2026, total CapEx includes typical annual spending, incremental end-of-life tool upgrades, and special project investments in The US and Korea. Notably, end-of-life tool upgrades bring new capabilities, enhanced production efficiency, and allow us to target higher-value opportunities. We expect fiscal 2026 CapEx to total approximately $330 million. All investments have been carefully vetted to meet our return thresholds and align with major industry demand drivers. Total cash and short-term investments increased $12 million sequentially to $588 million. This includes $422 million of cash held in our joint ventures. Our capital allocation strategy includes three priorities: reinvesting for organic growth, pursuing strategic opportunities, and returning cash to shareholders. After spending $97 million in fiscal 2025, we will remain opportunistic in repurchasing the remaining $28 million under our stock authorization. Before providing guidance, I'd like to remind you that demand for our products is inherently variable. Visibility is limited with a typical backlog of only one to three weeks. Additionally, high-end mass sets carry significantly higher ASPs, meaning even a small number of orders can materially influence revenue and earnings. Demand is also affected by IC and display design activity, secondarily by wafer and panel capacity dynamics. Given current market conditions and the industry outlook George discussed, we expect fiscal Q1 revenue to be in the range of $217 million to $225 million. Based on those revenue expectations and our operating model, we estimate fiscal Q1 operating margin between 23-25% and non-GAAP diluted EPS between 51 and 59¢ per share. I will now turn the call over to the operator for your questions. Operator: Thank you. And wait for your name to be announced. And our first question coming from the line of Thomas Robert Diffely with D. A. Davidson. Your line is now open. Linda: Hi. Good morning. This is Linda on for Tom. Thank you for letting us ask questions. My first question is on the market share. Now that your largest competitor just went public, what is your relative size and or trends in share? Any color there will be very helpful. Eric Rivera: Could you repeat the question? I'm sorry. Linda: Oh, can you hear me now? George Makrokostas: Yes. We can, but we didn't hear the question clearly enough. Linda: Oh, okay. Yeah. So my first question was on market share. So with your largest competitor being public now, I was wondering how you're viewing your relative size and trends in the market share versus your competitor. Eric Rivera: So our market share thank you, Linda. This is Eric. So we see the market share being as we had perceived in the past. The fact that Texan now is a public helps us get a little bit more detail, but we see our market share being exactly what we thought before. And I see they have a little bit more they have more market share than we do. For sure, when you consider our FPD business you know, that they don't participate in. We're about the same size when you combine them. Linda: So since I have an FPD and different elsewhere, so TxSend doesn't participate in FPD? Photronics does. Texan is larger has a larger market share than Photronics does. And I see. And I see. And I see. However, when you consider our FPV business, we're around the same size. Linda: Okay. Got it. And then looking at the overall competitive environment, what is your view on the overall health of the environment? Yeah. Any comment there would be helpful. George Makrokostas: Yes. We are seeing a lot of node migration and especially in The States. In the past, we have our major operation facilities in Asia. But right now, with the reshoring of the semiconductor industry in The United States, Our Boise site, which has the high-end capability, we are the only high-end merchant mass supplier in the country, and we see growing high-end demand in the country, we believe we are on the right track to capture more high-end shares. So this also answers your first question that our market share with the growing US demand, especially in the high-end and trusted product, we believe our market share will continue to increase. And it will be supported by our investments in our Allen facility as well. Which is, you know, supporting the reshoring efforts as well. Linda: Oh, thank you. That makes sense. And then I also wanted to touch on the mainstream business. You say there is continued softness there, but you're seeing it stabilizing. Just curious if you're seeing any kind basically, what you're seeing on the supply and demand side of things. And yeah, how that has impacted margins and maybe how that is impacting your capital spend for next year. Frank Lee: Our mainstream market, we are referring to many our mid mainstream business in China. As most people are aware, that in China, that due to the geopolitical issue. They do have some made in China policy. So there are quite a few new local mass houses in China. However, as a market and technology leader in China, we try to differentiate ourselves from our local competitors. We are focusing more on our anchor key customers. We build relationships with these key customers with better product quality support and so on. And, also, we utilize our capacity better mainly for a more higher value product mix. So I think, there is some competition in the mentioned especially the low end of the mainstream. But with our capability, and also with our tour capacity and so on, we are moving ourselves to a higher value product mix. Linda: Great. Thank you for your time this morning. Eric Rivera: And thank you, Linda. Operator: Thank you. Our next question coming from the line of Christian David Schwab with Craig Hallum. Your line is now open. Christian David Schwab: Great. Thanks for taking my questions. Fantastic quarter. So just a follow-up on the mainstream. Is it fair to say that the new market entrants in China you know, on the I guess, higher the less complicated note. It is where you're you're seeing I would assume, increased pricing competition. And so as we think about that business and your shift to higher mix should we think about that business potentially being under any gross margin pressure? Or should we assume we're gonna focus where quality and support and better products stand out. And the growth rate there could be a little muted. I guess I'm trying to kinda put all the pieces of the puzzle together. Frank Lee: Okay. As I reported in China, right now, are very strong demand for our high-end product, especially in twenty-two and twenty-eight nanometer technology. So for this technology, there are many, many layers in one set of devices. So, our capacity in our China facility, we are using most of the capacities. For the high end, not necessary for critical layers. But also for semi and noncritical layers. So those step critical and those are noncritical or semi-critical layers. Actually, they have a much better ASP than the so-called typical mainstream. So in summary, our capacity needs to be optimized and so higher value for higher gross margin and profit margin is our the way we are doing business and the way we are working on the market. Christian David Schwab: Great. That's clear. Thank you for that. And as GA adoption and flat panel display eventually begins to broaden out into more main applications. You know, your ASPs there are I believe they are anyway, materially higher. Given the layer count When would you expect that to begin to be a meaningful percentage of that business? Is that something that happens in '26? Fiscal year twenty-six, or is that something that's in '27 and beyond? Chris Progler: Yeah. Hi. This is Chris. Yeah. So the g eight eight point six is at the early stage of production ramp. There's only a few fabs that are running that, but we're seeing additional fabs come online, actually, in multiple regions. For g 8.6 display. The application space is just as you said, it's larger format OLED displays and IT automotive, medical applications. So the application space is fairly broad. So we do expect that to be a strong opportunity for us because we have a leadership position there. As far as when it will have material impact on revenues and things like that, we don't really wanna talk about that here. But, I think 2026, you'll see gradual increases in the component of our display revenue driven by g 8.6. Think that's all we'll probably would say at the moment. Christian David Schwab: Okay. That's great. And then, you know, as we're adding new capacity and geographical expansion and replacing end-of-life tools I know that brings new capabilities and probably a different pricing structure. Is there any puts or takes to gross margin over about a year basis given those significant investments that we should be thinking about? Eric Rivera: Hello, Christian. Eric here. So as we invest in our tools, we do so understanding the market and where we see growth being. And basically, we do expect to have increased revenue as a result, contributions to gross margin. Our CapEx also includes purchases of end-of-life tools. Which provide also increased capabilities. So we do expect to see increased revenue. Increased depreciation as well associated with it. We expect our gross margins to continue at the same rate. And perhaps grow as we make these investments. George Makrokostas: Fantastic. This is George. It's no different than the past. I mean, we've always had end-of-life tools in the past and replacing them, etcetera. I mean, the new tools have better throughput, better capabilities, etcetera. So it should not be anything material. Changes as far as the depreciation is associated with the new tools. Christian David Schwab: Great. Fantastic. And then have you guys my last question here. Sorry for asking so many. As we ramp up the Allen Texas facility Could you give us an idea of like, revenue potential? I need to know exactly where you could give capacity. I could figure it out. But, you know, what should we assume the revenue capabilities of additional US capacity over a multiyear time frame could add to the company? Is that fair? Eric Rivera: I understand the question, Christian. So let me address the question and into what I can I don't wanna go to a level of granularity where we're disclosing how much revenue we're gonna have by site. So, you know, what I can say is that as a result of these investments, we're gonna go into the sort of the mid-range nodes or the higher the higher end of the main depending on how we define that. Right? And we're gonna have more capabilities is gonna have incremental revenue and profitability to Photronics in The US. We expect gross margins to improve. We expected revenue to start on these investments towards the second half of the fiscal year '26. And we expect those to continue on to '27 when we're fully ramped. Chris Progler: And one other point, Christian, we might make this kind of a knock-on effect to this Allan project and that it'll free up more capacity in our Boise site, is our most leading-edge facility because some of those mid-range masks we run there. So as Allen Ramps, Its Revenue, Of Course, Will Go Up. But The Boise will have more capacity to deploy for higher-end applications. So it's really a combination net benefit of both. Sites as far as the opportunity. Christian David Schwab: Great. Great. No other well, I let me sneak one more question in. Given the significant reshoring activities, that are potentially gonna be going on on a multiyear basis here in The United States. There are certain manufacturers who are gonna be adding additional capacity to source photomasks from outside of The United States, which some applications did may seem to me that they might be cost prohibitive to get all the way over here. Do you have any idea or aspiration that you're willing to share with us? What you think the opportunity for captive guys going the merchant market over a multiyear time frame, or is that am I just stating the obvious because we're adding capacity everywhere? But if there's any clarity on the movement from captive to merchant that you're anticipating other than just semiconductor unit growth. Any clarity there would be helpful, I think. Eric Rivera: So to be clear, is your question, do we expect the captives to be the merchant market effectively competing with us, or did I misunderstand that? Christian David Schwab: No. I'm saying giving up market, you know, giving market share, looking to merchant market suppliers versus doing it internally. Do you think that that is a trend that could come to the marketplace in particular The US geography? George Makrokostas: Was gonna say, I mean, unless it's a capability issue, issue that they can't get it here, I mean, typically, the cycle time is a big issue. Would wanna have a more locally sourced for, you know, for cycle time reasons. A more locally sourced mask shop. So I think we have the local advantage. I think the issue could be, if there was one, would be under capabilities. But let some of the other folks on the team here chime in. Eric Rivera: And I think we can broadly answer the question that we've seen over the last year, maybe a little longer, the tendency of the captives overall as a group to look at more outsourcing opportunities. And that's not just in The US. That's in other regions as well. So, generally, we're seeing an increase in interest and desire for the captives to outsource. This could be less critical layers of very advanced sets. It could be memory products that historically were done internally, but let's say broadly, there's more outsourcing opportunity. Particularly related to Photronics, we're well positioned in regions with that have some of the largest captives. And also some of the largest fabs. So we do expect to capitalize on that increased outsourcing trend of captives. I think beyond that, we won't be more specific at this time. We do see it as an opportunity. Christian David Schwab: Yep. Fantastic. That was extremely helpful. Go ahead. I'm sorry. George Makrokostas: I'll just add something quickly that I guess, stating the obvious. Right? The more regionalization trends essentially, there'll be more fabs making more wafers. They'll need more photomask. So the trend regionalization trend is only positive for merchant photomask manufacturers like Photronics. Christian David Schwab: Yep. A 100%. Get it. No other questions. Thank you. Frank Lee: Thank you, Christian. Eric Rivera: Appreciate your questions. Operator: Thank you. Our next question coming from the line of Gowshihan Sriharan with Singles Research. Your line is now open. Gowshihan Sriharan: Thank you. Good morning, guys. Can you hear me? Eric Rivera: Yes. We can, actually. Gowshihan Sriharan: Morning. Good morning. Just on that I'm glad you brought up that outsourcing issue. How do you guys think about the outsourcing, increase in sales about how you think about pricing and margins on those layers of relative relative to traditional mainstream IC? Eric Rivera: Well, high end has higher ASPs. Higher ASPs are good. They generally have a higher margin. With them. So any outsourcing that comes out of the captives would generally be on the high-end areas. George Makrokostas: And generally speaking, the captives, you know, when they're outsourcing, at least my experience is, they pay. I mean, I don't wanna say a, you know, a huge premium, but they're definitely not, bottom fishing for the, you know, for what the merchants can give them. Typically, it's, you know, they're outsourcing and they need it and they're paying a fair price. So I don't see them being overly cost-conscious if I'm making sense. Gowshihan Sriharan: Gotcha. Thank you. The first question was, we you talked a few quarters about how the customers were in holding patents. Because of tariffs, geopolitics, Setting aside Q1, are you seeing any change in the mix of conversation you're having more long-term planning discussions that would tell you about the sentiment that is quietly improving, under the surface. Eric Rivera: Okay. So overall, with respect to the export restrictions, I think that's what you're referring to. Mhmm. Or and or the tariffs. I guess that the tariffs are both of them. So we're seeing a little bit more, you know, easing of that, you know, I think as you said, customers are customers are, you know, have more understood the landscape and as a result, they're able to plan better and as such order. Now that's that is true for most areas. Perhaps in China, maybe it still remains the same, the issues that you've just described. But for the rest of the world, I think customers have a good plan of where they're gonna do their orders. And as a result, we can we're there to benefit from that. Does anybody wanna add? Chris Progler: I guess we can also say the two projects we've announced, the one in The US and the one in Korea were based on longer-term, both short and longer-term conversation with customers on their future demands and the opportunities. So those projects came out of, I would say, a more robust longer-term opportunity dialogue with key customers. So we are seeing an increase in that and we're acting on it appropriately by making the right investments in these projects. Gowshihan Sriharan: Yeah. Makes sense. And the high-end IC grew nicely in Q4. How concentrated is that growth towards a handful of programs customers And what would you see in the pipeline that gives you confidence that this becomes a broader, more diversified high-end run rate for the rest of fiscal 26. Chris Progler: This is Chris. Yeah. I can make a few comments. I think the high-end growth was basically from our existing core customer base. There are a few new customers. Mostly our core customer base that expanded production and capacity as well. So that was, memory customers, foundry logic probably being the strongest. And, recovery in Asia. So it's broad-based. It's a broad product mix coming out of foundry and memory. And it's our existing mostly our existing customer base, but more robust order patterns that match up to their improving demand cycles as well. So we think it's sustainable. It's consistent with the market generally improving, and we're well positioned with some of the stronger IC players. So we do think it's sustainable. And if anything, we see more opportunities there in the high end for sure. Gowshihan Sriharan: Gotcha. Thank you, bud. And I'll just make this my last question. On Korea specifically, with the capability extension and an increased exposure to the leading-edge chips, How does the commercial model in Korea compare to the US are the customers inclined to sign longer-term agreements, or is it a more transactional kind of quality work? Frank Lee: We don't want to be very specific on this one. But as Chris just mentioned, our customer especially the advanced logic, foundry customer, they continue their outsourcing policy not necessary for a mature node but go into a high end and more higher end. So, I think even there are no long-term agreements, but the trend and is continue. So, we do have a lot of conversation and communication with the customer about their low max and their outsourcing demand. And that's one of the reasons we are doing the courier side capacity and capability, expansion. Gowshihan Sriharan: Thank you, guys. I'll take the rest offline. Eric Rivera: Thank you, Gowshihan. Operator: Thank you. And I'm showing there are no further questions in the queue. I will now ask a callback over to Ted for any closing comments. Ted Moreau: Well, thank you for joining us today. We really appreciate your interest in Photronics. Look forward to catching up with everyone throughout the quarter. Have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Deborah Pawlowski: Greetings. Welcome to AstroNova's Third Quarter Fiscal Year 2026 Financial Results. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. At this time, I'll turn the conference over to Deborah Pawlowski, Investor Relations for AstroNova. Thank you, Deb. Deborah, you may now begin. Thank you, and good morning, everyone. We certainly appreciate your interest in AstroNova. And thank you for sharing your time with us today. Joining me on our call are Yorek Itmann, our President and Chief Executive Officer, and Thomas DeByle, our Chief Financial Officer. You should have the earnings release that crossed the wires earlier this morning as well as the slides that will accompany our conversation today. If not, you can find these documents on the Investor Relations section of our website AstroNovaInc.com. Please turn to slide two to review cautionary statements. As you are likely aware, during the formal presentation as well as the Q&A session, management may make some forward-looking statements about our current plans, beliefs, and expectations. These statements apply to future events that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is stated here today. These risks, uncertainties, and other factors are provided in the earnings release as well as in other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. Also, as noted on the slide, management may refer to some non-GAAP financial measures. We believe these will be useful in evaluating our performance. However, you should not consider a presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non-GAAP with comparable GAAP measures in the tables that accompany today's release and slides. So now if you will turn to slide three, I'll turn the call over to Yorek to begin. Yorek, Yorek Itmann: Thank you, Debbie. Good morning, everyone, and thank you for joining us today. Our third quarter results are an early demonstration of our execution on the plan to transform AstroNova. Our priorities remain focused on improving customer engagement, strengthening operational performance, and building a culture of accountability and urgency. While we are early in our transformation efforts, there were clear signs of progress across both segments in the quarter, including meaningful improvements in margins and cash generation. I am encouraged by the momentum we are building inside the organization. If you turn to slide four, I will talk through sales by segment. Product ID delivered year-over-year revenue growth in Q3, supported by improved execution across the business. Our mill and sheet flat pack printer business or Astra machine performed well, with sales up 14% as productivity improvements enabled increased shipment cycles. We also had higher shipments sequentially of direct-to-package overprint printers, including the redesigned AJ 800. Sales increased as updated systems reached customers and continued to gain valuable feedback. The reorganization of commercial sales, which focused separate teams on customer retention and customer acquisition, has gained traction. Sales of our legacy desktop label printers increased nearly 5% over last year's third quarter and were up 6% over the second quarter of this fiscal year. We are improving engagement by our existing customers, reconnecting with customers we have previously lost, and developing a clear understanding of the sales cycles for our newer, higher-value printer platforms. We also continue to advance and validate our next-generation print solutions. With upgraded Amtech's units now in customer environments, we are gaining insight. We need to refine the product to ensure our offering meets customer expectations. Turning to aerospace, the business maintained its leading market position with major aircraft manufacturers. We continue to make progress transitioning customers to our ToughRider product family. Customer adoption remains strong, and shipments of the ToughRider exceeded 80% of total flight deck printer in the quarter. We also saw healthy demand patterns this last quarter. Orders increased 24% year-over-year, and we benefited from improving production schedules at our major OEMs. Aerospace remains a stable and profitable business for us, and we expect industry build rates to remain a positive tailwind as we head into the fourth quarter and fiscal 2027. Across AstroNova, we continue to strengthen our culture around customer centricity, transparent communication, and disciplined operating focus. With that, I will turn it over to Tom to review the financials. Thomas DeByle: Thank you, Yorek, and good morning, everyone. Turning to slide five, gross profit in the second quarter was $14.2 million, up 3.5% year-over-year, and gross margin expanded 240 basis points on lower revenue. Sequentially, gross margin expanded 400 basis points driven by higher volume, productivity improvement, and improved mix. Year-to-date fiscal 2026, gross profit was $38.5 million or 34.1% of sales, a $1.5 million decline from the same period last year as a result of less favorable product mix associated with that atypical shipment of printheads in the aerospace segment. Looking at slide six, Product ID operating income was $1.9 million, consistent with the prior year period. Higher volume and a more favorable mix helped offset the $700,000 inventory provision related to a warehouse closure and segment true-up, as well as a $300,000 goodwill impairment charge. On an adjusted basis, operating income increased by 50% to $2.9 million or 10.6% of sales. Moving to slide seven, aerospace operating income for the quarter was $4.5 million, up 39% from last year. This was driven by cost reductions and a $300,000 benefit from the previously mentioned inventory true-up between segments. Sequentially, we saw the benefit of a shift towards the ToughRider systems, which contributed to improved mix and is expected to remain a margin tailwind. Year-to-date, the impact of royalty payments on the cost of goods sold was $1.8 million and is expected to be $2.3 million for the full year. This is down about half a million from fiscal 2025. Going into fiscal 2027, a major royalty agreement expires in September 2026, providing above $2.2 million annualized margin tailwind to be fully realized beginning in the fourth quarter. Turning to slide eight, our net income was $400,000 or 5¢ per share, reflecting improved financial performance this quarter. Adjusted EBITDA was $4.2 million, up 29% from the prior year. Adjusted EBITDA margin for the third quarter was 10.7%. Moving to slide nine, we had a strong quarter of cash generation, which was very encouraging. Cash provided from operations in 2026 was $3.4 million, up from the prior year due to strong cash earnings and reduced working capital requirements, primarily due to lower inventory mostly in the aerospace segment. AstroNova is a very capital-light business. CapEx year-to-date was $200,000, and we are expecting CapEx for the full year to be less than $500,000. We refinanced our credit facility during the quarter, extending maturity out to 2028 and beyond, consolidating our foreign debt into the US, providing temporary expansion of our revolver. The refinance lowered our principal payments and converted term euro debt to US dollar debt. Our new credit agreement provides us greater flexibility as we continue to strengthen the business. This quarter, we paid down $3.2 million in debt and have reduced the debt by $6.4 million year-to-date. Our net debt leverage ratio at the end of the quarter was at 3.38, comfortably below the maximum 4.75 coverage ratio allowed in our lending agreement. Our fixed charge coverage ratio was 1.27 at the end of the quarter, versus the minimum requirement of 1.05. As of October 31, 2025, we had $13.5 million in total liquidity, including $3.6 million in cash, and $9.9 million available on the revolver. We remained focused on improving cash generation, being disciplined in our capital allocation, and reducing leverage over time. Now please turn to slide 10 and I'll hand the call back to Yorek. Yorek Itmann: Thanks, Tom. We have orders of $35.9 million in the third quarter fiscal 2026, which were down $1.7 million from the prior year period, relatively unchanged sequentially as improvement in aerospace offset a slightly weaker order quarter for Product ID. In Product ID, orders were impacted by delays in renewing blanket orders with certain customers, which we expect to see return in the fourth quarter. The team now continues to engage more directly with current, past, and prospective customers to rebuild our consistency and strengthen the pipeline. In aerospace, we had strong order activity from major OEMs. As their inventories came down, we expect our shipments going forward to be more in line with the OEMs improving build rates. While quarterly order patterns can vary, the underlying production environment remains constructive, and the ongoing transition to our ToughRider product line continues to support a better mix. Lower backlog at quarter-end was driven by a decline in Product ID, which was not fully offset by growth in aerospace backlog. The decline in Product ID backlog was due to higher shipments of mill and sheet flat pack printers and the timing associated with blanket orders. If you will turn to slide 11, I will summarize that we are currently underway to put AstroNova on track to deliver stronger profitability and improved sales. Many of the initiatives we introduced last quarter are now well in motion, and we are beginning to see the benefits across the organization. We continue to strengthen our culture around customer centricity, transparency, and disciplined execution. Teams are collaborating more effectively, decision-making is faster, and we are aligning the organization around clear priorities. The reason we have focused our executive leadership on the higher value, long sales cycle products is given our experience there and the significant difference in the type of sale versus our shorter cycle desktop printer. By doing so, we can also better leverage the sales team experience on shorter cycle wins. Across the company, we are containing costs, improving processes, and simplifying our operation. The $3 million in annualized cost reductions we have discussed previously are now fully implemented, and we saw the full impact of the savings in the third quarter. We are investing in growth as well. We have added some new sales talent to build a pipeline of qualified opportunities. We are employing active digital marketing outreach campaigns, which are complemented by exhibits at high-impact industry events. We are also employing a very disciplined qualification process to prioritize the use of resources, improve forecasting quality, and maintain pipeline integrity. Our ongoing transition to the autonomous ink print head platform will enable greater supply chain flexibility. In aerospace, the upcoming royalty roll-off in fiscal 2027 remains a meaningful long-term margin opportunity. We are reiterating our guidance for the full year fiscal 2026. We expect to deliver full-year revenue of $149 million to $154 million, which implies fourth-quarter revenue of $36 million to $41 million, and we expect adjusted EBITDA margin to be in the 7.5% to 8.5% range. We are creating stability across the business, the team is aligned and committed, and we are executing with a greater sense of urgency. While there is still work ahead, we are confident in our ability to improve performance and deliver a stronger, more resilient AstroNova. Operator, let's open the line for questions. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, please press 1 from your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to withdraw your question from the queue. For those using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's 1 for a question. We will pause a moment to assemble the queue. Thank you. Once again, it is 1 to ask a question. Thank you. Our first question comes from the line of thank you. And, actually, we did have no questions at this time. I'll turn the floor back to management for closing remarks. Yorek Itmann: Thank you, everyone, for participating in this call. We appreciate it. There are no questions today. Thank you for your time. Operator: Thank you, gentlemen. This will conclude today's conference. You may now disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
Nicola Gehrt: Good morning, ladies and gentlemen. A very warm welcome to our 2025 results presentation here in pleasantly mild London. My name is Nicola, and I'm Group Director of Investor Relations, and I'm here with our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to present a financial year with record results, and we will give an update on our strategic progress. We will also unveil our new dividend policy and give an update on current trading as well as on our outlook, expectations for the next year. And as always, after the presentation, we will open the floor for your questions. And with that, I have the pleasure to hand over to Sebastian. Sebastian Ebel: Thank you, Nicola. And it's not only pleasantly mild, it's also sunny outside. Nicola Gehrt: Definitely. Sebastian Ebel: So, a very warm welcome from all of us. We are happy to present our results this time again from London. You are familiar with the agenda. I will talk about the operational highlights to give an update on the strategy, and Mathias will go into the details of the numbers and the trading outlook, and I will summarize our presentation at the end. It was an excellent year for us, a record performance with a strong increase in EBIT. The integrated strategy delivered these strong results. The distribution made sure that our assets are full. And we used also the time to accelerate our M&A transformation. We put a lot of effort into it, and I will talk a little bit more in details about that. And now we can monetize the M&A transformation to show you the way to the 3% EBIT margin we want to achieve. We have very clear growth targets for '26, supported by a positive trading momentum. And that convinced us and we were convinced to start with a dividend policy. We know that our shareholders for a long time haven't seen dividends, and it's more than fair and the basis we have led with a good result to start immediately with a dividend and to give you some more information on the dividend policy. If you look into the results, very, very strong Hotels & Resorts business, strong increase. We had not a real increase in bed nights that will slightly change next year because of closure of renovation. We had an outstanding occupancy all over the year, 84%, and we had an increase in the daily rate. Outstanding Cruise result. And not only TUI Cruises, but also Marella. We are extremely happy about the development of Marella. And therefore, we could not only in the fourth quarter, but in total, achieve a significant improvement. We had a significant growth, and we will see more growth this year of the available pax days, 100% occupancy and an increase in the daily rate. A good development also from Musement. And if you remember where Musement, which is a marketplace for experiences, was at a couple of years ago and where it is today, it's a great development. And we put more efforts in selling the right products into the customer base than acquiring new customers, which would cost us in the beginning investment and money. What we do is, we focus on own products, building their own product base and grow with this. So, a very good development. Holiday Experiences, EUR 191 million versus prior year. A different picture on Markets & Airlines, where we had a roughly EUR 100 million decrease in results. As said, we invested heavily into the transformation, IT investment, marketing investment. We had some extraordinary impacts, some provisions we had to make. We had the peak of IT investment. For the first time, we will see reduced IT investments in this year. As said, a lot of investment into transforming the business. This impacted all major markets, and we think we are now over the negative development, and we can see a positive development. And again, it is so important that we have the strong distribution to fill our assets. And by the way, if I look at Marella, it's a U.K. business with two operator and flights. So the picture is two coins and the two sides of the same method. And I will talk about the transformation a little bit later. And what drives the superior Holiday Experiences' performance? We have now a customer base of 35 million. This now for the first time, includes our unique customers in Cruise, in Hotels. And this customer base, we use for all the marketing activities to make sure that our 463 hotels are full. Our Cruise ships have a great occupancy and the Tours & Activities business is improving. And if you look at the numbers, if you -- fourth quarter hotel occupancy, 88%. This is significantly higher than what you see with others. The return on Cruise is with 22% and 17%, very, very high and attractive if you compare it. And the take-up rate, Musement owned products, that means 30% of our market customers buy a Musement product is very high, and it's very important because there, the distribution costs are low or not existing. So, this funnel model drives the great result in holiday experiences, and we try to broaden the funnel to support the growth in Holiday Experiences. On the other side, it's very, very important to have our own products, because with our own products, we achieve great customer satisfaction, which is superior and at the top end of products and a very high retention rate. Customers who come back, you don't need to buy in the market again. And to have a retention rate of 40 years, we calculate on 2 years. If you were to do it on 3 or 4 years, it would be significantly higher. It's important, and they come again to us, because we have curated products they trust in. So, this is the driver for our superior Holiday Experience performance. If I look at our strategy, the market is growing. It's growing stronger outside Europe, but also Europe is a resilient market. There are areas in Europe where growth is significantly higher like Eastern Europe. You know we are in Poland. We went last year into Czech, doing very well. Now we have the soft launch at the moment in Romania. And there is significant growth in Southern Europe. We grow nicely in Spain, now in Portugal, but also have started to enter the Italian market, all on the same platform we had. And the good thing is that the demand is especially there for unique brand-led leisure products. So, strong brands with great product quality lead the market and the profitability. TUI, you have seen that before. We have now the fourth consecutive year with significant profit growth, and we want to deliver this also in this year. And time is running so quickly. We are now in the third month of the year, time is flying by. And this is not only the ambition for this year, but for the foreseeable future. Today, more than 80% of the profit come from Holiday Experiences and only 15% from Markets & Airline. And this gives us two opportunities to grow nicely and solid in the asset-light model with Holiday Experiences and to take the big opportunities on Market & Airlines, because if we compare with best of breed, there is a lot what we can achieve and what we can win in the market. And therefore, we want to deliver not only growth, but profitable growth in Hotels & Resorts and Cruises and in TUI Musement and in Market & Airlines. And this is based on what we call the TUI ecosystem, what we have built for all our customers, our database to get better marketing, to have higher customer retention and to lower significant distribution costs. This is also supported by what we do with AI. We have seen and we do see AI as a disruptive technology, which supports us in producing better products, new products, which we can distribute on global platforms. You may recall that TUI was a company where we had own production, Markets & Airlines, per country. We had five Airlines. We took a lot of effort, a lot of investment to bring this together, and now it's the time to get the benefits from it. This is only possible if we have a performance orientated organization. This has been a big, big task to get the organization aligned with the new org design we have. And last point, sustainability was not something which was on work with TUI. We very much believe it. It's important for the customer, but we also see the commercial benefits, and that's why it's as important on the agenda than it has been before. If I look at the Hotel division, 18 new hotels, the return, excellent, the CSAT, so the customer satisfaction or the NPS are outstandingly good. We have 70 hotels in the pipeline, mainly management. Again, when sometimes we got the question, why is our revenue not growing bigger, because we get the management fee, not the revenue, especially growth in Asia. It has now got a momentum, and we are really proud of what the team there has achieved. But it's not only Asia, it's also Africa and in other areas. We have very distinct, with proven brands. We put effort in building upper luxury brands. We have the global mass market or mainstream brands, and we have strong regional brands. And we are less strong on the price consciousness market. There is something where we can catch up. 70 new hotels in the pipeline and with a big momentum there. And by the way, a lot of these hotels are building new distribution facilities, which also supports the future growth. We have talked about the Oman partnership. This is going according to plan. We have started to not wait to build up the business when the hotels are there, but started to promote the country. By the way, it's in a great country. I could recommend -- I can only recommend to go there. And it's very strategic for us. We have had the proven cluster in the Caribbean. We have it in Cape Verde. We built it in Zanzibar, and now Oman and maybe others to come. If we look at Cruises, 18 ships, great return on investment, very, very strong NPS. So, the product is loved and what we deliver is great. There is one ship, which came into the market last March, where we see now an incremental Summer effect. And there is one ship also from Fincantieri coming in early Summer next year '26, which will support our growth. And also because we never talked about it so much, Hapag-Lloyd is doing very well. They had some impact when there was the rerouting. There is no routing this year, hopefully. And that's why they also have significantly improved. And you know that we have two ships on order, '31, '33. And we are very, very happy that we also have options which we can decide on in the coming months. And it's a great business and with a great prospect, and Mathias will show it later. If we do see that we have overall a 45% capacity increase if I look at 2 years and the load factor is 5% ahead, only give me one conclusion we could have sold for higher prices. But that's a luxury problem. TUI Musement, as I said, the transfer part is not growing and that the growth comes with third party. But there are two areas where we are growing: one, enhancing our multi-day offering. We are just at the start. We talked about new products. We just brought this product into the German market. I got the figures from last week. It's accelerating. The U.K. market will follow soon. We have high expectations about the growth we can achieve there. So, it's the production facility for multi-day Tours offering a huge market also in Southern Europe. And of course, the offering and experiences. Yes, Sun & Beach is dominant, but we are increasing city footprint. For the first time, I could book the Heathrow Express yesterday and I haven't booked theater or restaurants yet, but the offering goes into the city. The focus is on own experiences because that's where the value is in the TUI collection offers, and it's about up and cross-selling. And that's why we think about significant growth also in the midterm. If we look at the market, and it was a -- maybe it was a painful process when you do local production, local organizations, you centralize, you bring together one selling platform, one buying platform. It was a huge investment with things to overcome with time delays. At the end of '26, we will have every country on the same selling platform, and we do see the first markets when look -- when it comes to efficiency, marketing efficiency, a huge increase. You do things once and not five or six times. And that is why we can talk about efficiency and cost optimization. And it's the same with the Airline side. We had five airlines, which was not the good setup. Now we have -- we are only talking about one airline with a commonality in all aspects. Before we had five different hand luggage rules and so on. Now it's one. All the things where you would say you should have done it before, but it was quite a challenging thing to bring everything onto one system. Operationally, it has helped us a lot. I would say, if I look at reliability, I look at it every day, the reliability and therefore, the denied boarding compensation is at historical low in the first weeks of this year. So a lot of benefits. And now it's about the commercialization to make sure that we lead the airline as you would lead a commercial independent airline without giving up the synergies we get from the market. So, that's why you see the two wheels combined for net, but business in it means. And we have the clear target to increase the underlying EBIT margin, and we expect to get a good step forward this year. What are the building blocks, the levers? And these are examples, but the main -- the most important ones. Of course, the Risk Right. A good example was Nordic, which we turned around, has been profitable for the -- since a longer time last year, and we see a good development. This year, we had to define the Risk Right capacity and the growth should more and more come from Dynamic. You know the Ryanair case, which really -- which went live last December, but took momentum in Summer, which is now rolled out to other destination. We have a lot of NDC carriers, which we bring into our ecosystem even before. Now Christmas should have a significant impact on our -- positive impact on our business. Others were ahead of it. Product Differentiation. It's key. We want to increase, and we are in the process of increase from 45% to 60%. We do a big step forward, because we do see this is the reason to buy with TUI and these differentiated products give us higher margin. Customer Lifetime Value Management. It's something where we put a lot of effort in to bring customers into the same database to define the methodology, how we not play with the customer, but how we use the opportunities and we are -- and to optimize distribution costs. Airline Growth and Airline Commercialization. One thing was very clear that we have a network and a -- network which gives us a lot of opportunities to improve. We had a fleet which were due to all the delays, not optimal. Like last year, we had, again, a significant cost on not having the Boeing as we wanted to have. There is now the clear expectation that for this year, we can add the promised amount of aircraft. But again, last year was not what we had anticipated to get. Airline optimization, very important point. Operational Excellence, and this is now where I'm really getting excited. We put a lot of efforts into the system to push direct sales to get free traffic to make the customer buy more often. And for the first time, we not only can tick mark that we have taken the actions into place, but it started to be commercial beneficial. And it's very clear. If you have a 10%, 15% share of app, you see how big the opportunity is looking forward to decrease the distribution profit. What helps us a lot, and I will put some more information -- give some more information later is AI. AI is a game changer when it comes to production, when it comes to product quality, when it comes to how we sell products. And this only works well when we take the opportunities of global platforms also into the cost arena. And therefore, we are now able to deliver and to talk about cost improvements. The cost improvements will hit us for the first time this year '26. Last year, again, we had some extraordinary still like the Boeing effect, but we have had all the investments for the first time, we can reduce IT investment and to harvest what we have done. One thing is clear, we will stay and we need to get even a more IT-led company. And the earlier and the quicker and the more drastic we change, the better it is for us. We have -- the plan is EUR 250 million cost reduction, 60% on overhead cost reduction, so where we -- you can count, I've saved this or that. 40% operational excellence. These are things which we also can, of course, count and measure like the optimization in marketing, online marketing cost, of course, we can count, but there are thesis which we have to prove that we are on a good way there. We have these two buckets, and we want to have this realized in the next 3 years, and we try to even bring it forward to be prepared whatever happened in the market. AI is changing it, a lot, the world, but it's also changing a lot the travel business, moving into Agentic search, improving how we produce the content and to have better content to improve the customer experiences, which is amazing in Nordic. You have customers who want to talk to an AI agent and not to a personal agent anymore because they rely more, trust more the AI answer, hyper-personalization with all the data we have. It's a huge amount, but to get the right conclusion, AI helps a lot, and it further reduces cost. And therefore, TUI is changing into an AI-powered organization. And we want to be in all front doors with all the LMMs. We have made you programs. We now sometimes wait for the LMMs to connect us, because they have to do some more homework than they had thought. But the Mindtrip example is something to see and to show how ready we are, and we will benefit from our strong brands and the unique products. What does it mean? Concrete? We are working with main key partners where there are big communities like in social media, like selling platforms, but all LMMs and Mindtrip is a good example of how this could look like. That's a huge opportunity to move away from being very much dependent on Google and others to more spread to others and to get into new segments. We have not been strong in the Generation Z, which is using this very much, and that gives us huge opportunities. But it's tough and a lot to do. AI for our customers, how the customer search on our app, what he gets as content, what he gets not only when it comes to pictures, videos, translation, trip planning, a lot of enhancements we deliver 2 weeks -- by 2 weeks. I remember times when there was a release once in 3 months and in -- yes, per quarter, then per month. Now we are releasing every week something a new, including voice, chat agents and so on. And customers, our customers love it. It only works if we get the support and the excitement I have, the management team have with our colleagues. So, we spent a lot of effort to bring this new world to our colleagues so that they are all excited and they are, because we have seen the huge demand of, for example, Microsoft Copilot, and we, of course, support that very much. What do we see when distribution is changing? And we do see that there is a split of customers which go more and more brand specific. Therefore, differentiation is so important and the exclusivity is so important. And on the other hand, customers who go through LMMs, and sometimes they come from one side to another. Therefore, to have the TUI AI concierge agent who supports the customer is so important, and it's about a partnership, but it's also about optimizing the search, how we search the optimization of engines who answers. This only works if we have an end-to-end view on customer data -- on our customer data. And it only works, I think that is still underestimated if the data -- not the data, the content the customer sees is trustworthy and can be verified, one of the benefits of the direct contact to suppliers we have. I would recommend that you look at Mindtrip that has been the first showcase and it has been -- not it has been -- it is a successful -- not showcase anymore, a successful case. As I said, sustainability is in our hearts. We have made good progress last year. Of course, it gets always more challenging in the next year, but we are well on track to deliver our 2030 targets. So overall, strategy is very clear, growth on the assets filled outstanding well through our markets and monetizing the investments we have made in Market & Airline. And now to the hard numbers. Mathias? Mathias Kiep: Thank you, Sebastian. Very good morning from my side. Thank you for joining the call. And how does '25 look in detail? We've already published our numbers mid of November, where we upgraded our guidance and for the full year '25. And so, let me just share a couple of key items for P&L, cash flow and of course, the balance sheet. Then as Sebastian said, we have announced a new dividend policy going forward. I'll come to that in a minute before I come to trading and outlook, short term and midterm, how does this strategy translate into building blocks for our future growth. Highlights '25, very clearly, revenue growth, again, 4% plus. This shows the high commitment of our customers, the high priority of spending for holidays. Underlying EBIT, as we announced in November, increased by 12.6% on constant currency rates and 9% on actual rates. Our net debt, as a result, improved by EUR 0.3 billion down to EUR 1.3 billion, and the leverage came down again towards 0.6x, which is one of the lowest rates the company ever had and the lowest rate that the company had over the last decade. So that's something we want to continue going forward. And while we think we expect the business to grow another 7% to 10% as a result of the strategy, which just been explained, there are clear building blocks to get there. We think it's also now time to start with the dividend policy and already start with paying this for '25 on the back of the strong results. And we think this 10% to 20% going forward thereafter, that's a very good balance of investing into future growth, deleveraging the business going forward and having an attractive capital return for our shareholders. Now in detail, what is the summary for '25 P&L, cash flow and balance sheet. Again, you see here the footprint of our '25 result, strong contribution from Hotels, from Cruises and from Musement. Musement is also very attractive in terms of scaling into all products and also being more efficient in how to deliver the service to our customers. You see Markets & Airlines. It's with the decrease. I mean, this is very important to put into this context of investing into the transformation and making sure we get the benefits going forward, and we are in a competitive situation. We've talked about the Boeing delays. We also talked about the one-offs that we saw EUR 20 million alone from covering maintenance related to the re-fleeting already in '25. So I think that's how we would like to put this into context, strong cost discipline in our central operations and then the result of EUR 1,413 at actual rates and EUR 1,459 at constant currency. Now details to P&L. What is of interest? I think there's two elements. One is EPS, the key number for the dividend policy going forward, improved by 25% year-on-year reported and more than 30% on an underlying basis. This is really a strong result and is absolutely key for us that we translate our operational growth also in growth on a per share basis. Second is, and that's something we will see on the cash side. This has supported really well is the strong improvement on the interest side, well beyond our expectations that we had 12 months ago, a lot of optimization work, and we'll come to that. This is a cornerstone of our new dividend policy, because we see that all the investment into financial discipline, they track to gain traction. And on the back of that, we get really competitive terms, and that's really supportive to our interest result. On the cash side, very solid and robust performance, again, a key pillar for the future dividend policy and for starting to pay this already for 2025. When you look at this, strong improvements in the dividend received, more than EUR 200 million more than in the year before. That's as we discussed, in particular, coming from TUI Cruises, and it's very important for us that the strong performance in Cruises also translates into cash payments to us as a shareholder. Second is the strong improvements on financial costs. So interest result went down, but also pension costs started to decrease. You may remember that we have been able to fund the U.K. pension schemes, and we expect '26 that we don't have further payments into that. These are key pillars to also fund our future investments. Because more investments that we need, one for, to grow our Hotel business further, really strong profits, the second on the delivery of the Boeing portfolio, that's something where we need some funding for and structurally, we worked hard to get this from these two items, plus, and that's the other point you see here investments and lease and asset financing amortization. This is in line within guidance. But we expect that in particular, lease and asset financing, all the investments that we did structurally in '25 will pay out -- pay off in '26. And on that basis, we'll have a strong improvement of that number, which is then the final pillar to look at our increased investment for '26 and going forward. Now on resulting balance sheet, as I said, improvement by EUR 0.3 billion. What is important and what is great for the further structure of the balance sheet is that some improvements we did also in November. We paid back the remaining outstanding amount of the older convertible, that's EUR 120 million repayment that we did out of existing cash resources that will help our gross debt, something which is important for the rating agencies, but also, of course, something which is important for interest result. And interest result, we need to manage because a year ago, we still had a higher interest income level, and that's something that we need to work against. Second point is that because of the Schuldscheindarlehen that we did earlier this year and the agreement that we did with TUI Cruises on the refleeting and the access to the U.K. market, we ended both finance leases that we had for Marella and now both ships are in ownership, which will remove the debt amortization in the future and gives us full operational flexibilities on these two ships. And so, no indebtedness on the fleet of Marella anymore, which is also structurally a very strong improvement compared to some years ago. Now looking forward, financial strategy, it's not only dividend policy, but it's also deleverage target. As I said, this is something which is equally important to us. And from the 0.6x, while this is historically really strong, we still want to reduce this further. And on the midterm, we want to go below 0.5x, because we think the continuously deleverage something that's really helpful for the structure of the business. And as I just explained, this also helps us to fund further investments. Now moving forward in terms of capital allocation, I think there are three steps to look at. One is what have we delivered. And '25 record results, very strong cash flow, good results from this high financial discipline. We can start and we started to really optimize our terms, our balance sheet. And that's something we will continue to work on. This is the right basis to look at the next phase for the company's development. And what is it? It's one, it's investments, because we have seen the strong yield, Sebastian, you mentioned this. And I think one is on the results '25, but also if you look at the strategic pillars, what is there is super attractive. A lot of investors come to us and say, can't you do more. But I think we need to find a balance. So, more investments at the same time, deleverage and capital allocation to shareholders, but there will be more investments into Hotels also in '26. At the same time, we have seen a delay in the Boeing portfolio, which has been operationally really a challenge, one less efficient aircraft, but also renewals when you don't want to do them and all of this. So, this seems to have improved a lot. So, we expect now in '26, around 20 deliveries, which is a significant step up from '25 and all the related investments will also be reflected in our guidance, which is now towards EUR 900 million -- EUR 860 million to EUR 900 million for investments net in 2026. And on the back of that, we have come forward with a dividend policy. We always said we will communicate this in December 2025. What was unclear, and we had a lot of discussions with our Board on this is when to start effectively with this dividend payments. Would it start with '26 for '26? Or would it already start in '26 for '25? And we have decided to bring forward to the AGM in February the proposal of a starter dividend of EUR 0.10 for 2025 on the back of the strong results, the solid cash flow structure and the improvements on the balance sheet that we have achieved. And we think this is a very good balance overall also with this corridor of 10% to 20% going forward of underlying EPS payments of investing into further growth, deleveraging the company going forward, making sure we continue to be in a strong way and dialogue with our rating agencies and financing partners and then have the right capital allocation to our shareholders. We have summarized that on the next chart, but the more important thing is going forward, what is directly ahead of us and what's ahead in the midterm. And let me come to trading and the respective details of guidance now. Sebastian already mentioned it, we have a good trajectory on the Hotel side, on the Cruise side and the Musement. And I think if you look at the trading stats, the KPIs for the next 6 months, effectively, each single KPI is higher than it was a year before. So, the strong track record that we saw in '25, all the investments that we've done, the yield really attractive, and we expect that this trend continues. If you look at the Hotels, for the first time since quite some time, we also see net additions. That's something to look forward on the portfolio. You see a slight reduction in occupancy. This is a bit of the ramp-up, which is super normal. You've mentioned the 88%. Sebastian Ebel: Jamaica. Mathias Kiep: Yes. It's also Jamaica, but effectively, this vertical integration, this is what really drives this, and this shows how strong the model works, combination of having a two-operator with the Airline plus the Hotel footprint. Same on Cruises. And another year with 13% increase of capacity, which you don't see in your occupancies even goes up. This is a really strong, strong sector. And then, on Musement, the same. We continuously see the scaling into own products and really good development on the transfer side, both key cornerstones of the profitability of the business. In Markets & Airlines, we see a solid winter. I think the trading pattern remains unchanged. At the same time, the early signs and signals for the Summer are also, I would say, sound and encouraging. At the same time, Summer, we will publish not now, but when we have more tangible data with Q1, which is mid of February. At the same time, again, what is important, because a lot of investors and partners have asked us to change this, we now will report revenues going forward to make us more comparable with other players in the sector. Now how does this translate into our guidance? As we said, we expect the business to grow another 7% to 10% in profitability in 2026. What are the pillars, before we come to the modeling assumptions on the other P&L and cash flow items? It's growth in Hotels, it's growth in Cruises. And if you consider the investments that we've done, the pipeline in Cruise, the pipeline in Hotel side that we just looked at and also the trajectory of both businesses over the last 24 months, 36 months, I think this is a clear cornerstone where we already see the KPIs today that will deliver that growth slight. It's also in context of the really strong and high absolute amounts that you already see here. So that's something where we look really -- we're really pleased with. Musement, we expect that the trajectory that we saw in '24, in '25 continues. And again, the KPIs are supporting another year of additional growth there. In Markets & Airlines, Sebastian explained how we look at this. We have a market where customers continue to prioritize holidays. This is still a #1 investment and something to spend for, for everyone, and I personally can only share this view. And secondly, for us, it's key to deliver this in the most efficient way to our customer possible. So, a lot of focus on costs, a lot of focus on initiatives, and that's why we expect this business segment to deliver strong growth in 2026. In detail to the rest of the P&L, what I would like to highlight is interest. As I said, the benchmark is 2025. We had a higher income environment at the start of the year. That's something where we work against. At the same time, we've done a lot of optimization measures, which should help us so that broadly in line with 2025, we expect 2026 and which is significantly below historic levels. We see investments, I talked about that going towards EUR 860 million to EUR 900 million. And at the same time, offsetting this, we see a strong improvement in lease and asset financing. As I said, at the same time, we expect that we don't have to continue to fund the U.K. pensions, which already stopped in Q4 2025. And as a result, we expect another slight improvement, our net debt aside, and this should all help us to move constantly towards this target of moving net debt leverage towards below 0.5x. And midterm, I think this is important to us, because we've seen a very strong '25, 2x, we increased our guidance. We have seen on the back of that, the ability and opportunity to start paying dividends now. And we have a strong guidance, and we expect profits of 7% to 10% increase in 2026, and we expect further growth to happen. And this is how the strategy that Sebastian explained will also translate into numbers. You see further growth in hotels alone the investments, the increased investments will yield. You have the protection and the -- from a vertical integration and the ability to have strong occupancies in all of these investments. We have a ship pipeline, another ship in TUI Cruises in '26. We'll see the annualization of this in '27. And then again, new ships, '31, '33 and with the expansion in the U.K. market, the opportunities there. Then in Musement, we see this digital growth, which really works in a way and plus all the initiatives to do this in the most efficient way versus our customers. So that's the sector we're really pleased with the development and we expect profits to not only continue to grow '26, but also beyond. And then, there's Markets & Airlines transformation, and we have really said set this profit target of 3% and look forward to the initiatives to contribute towards that. And on that basis, we think we have a package which is '25 delivered capital allocation defined and building blocks for growth beyond '26 and in '26. And with that, Sebastian, back to you. Sebastian Ebel: Thank you, Mathias. Short summary from my side. In the middle, what we call the Unique Synergy Fly Wheel of TUI, it's not to business Market & Airline and Holiday Experience, it's the same coin with two methods. The one are the distribution, strong distribution sector. The other one is the lighthouse products, the differentiated unique products and both areas support each other. The broad customer base that supports the asset utilization and the differentiation improves the margin and the customer satisfaction. And with both of this, we are confident to give you the outlook, grow further. The EBIT, not only for next year, but to see it for the longer-term future. And as our shareholders had to be very patient, and I think, it's more than fair that we start to pay a dividend for '25 and that we become very -- well, lastly, very reliable on what we want to do for the future. So, you see us as always carefully optimistic. Nicola Gehrt: Thank you, Sebastian and Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Jamie Rollo from Morgan Stanley. Jamie, your line is now open. Jamie Rollo: Three questions, please. All of them on Markets & Airline actually. I appreciate it's only 15% of your profit. But if you could, first of all, just talk a bit about current trading. It looks like that 1% is quite a big slowdown from the 4% September figure if we add up the volume and ASP back then. I appreciate you're no longer giving the breakdown of that 1%, but could you talk about why it slowed? And also whether the ASP increases you're getting, if that's sufficient to cover cost inflation? Secondly, on the guidance for the full year, if my math is right, you need a minimum 30% EBIT growth in Markets & Airline to hit the group profit increase. And it sounds like it's going to be second half weighted given Jamaica and the Easter shift. Just really wondering about the confidence level in that given so little has been sold for the Summer at this stage. And then finally, just on the strategy in Markets & Airline. Thanks for the bridge on Slide 18. That's very helpful. But it looks like you're getting hardly any margin benefit this year from the first three of those factors, the own products, the airline, commercialization or the operational excellence, all the growth is from overhead costs. So, do you think the strategy is working? Because what you outlined at the CMD was more about revenue growth and you're only doing about 11% growth in Dynamic Packages. So, just really wondering about your strategy overall in M&A. Sebastian Ebel: I'll answer, Mathias, the first questions. Yes, you are right, there is a Jamaica effect, and we very much believe that we can cope with it very well. We would not have needed it, but it is as it is. You're right, there has been only in the markets, not on all the others, there you have seen a strong momentum. And you could, I mean, logically say, Marella is a U.K.-dominated company, and therefore, the revenue is there U.K.-based. What was important for us to make sure that we keep the margin at a good level in Winter. You remember that last Winter, we had a very, very strong second quarter. And therefore, we said volume is less important than the margin because we can cover our risk capacity. There is an interesting development on inflation. I mean, you may recall that it was difficult for us in the last years to cover the inflation in the ASP. What we do see is that the -- like in other sectors of consumer spend, the inflation has normalized. We even see that sometimes, yes, there is still a 2% or 3% increase, but we also see that there is 0 increase, that we can buy some products, beds or especially on the Airline side cheaper than we did before. So therefore, for Winter, it was very much steering towards margin and the inflation and what we get from the customer are very much more in line what we have seen before. For the Summer, we need the cost reduction, and we put a lot of effort into achieving this cost reduction. Nicola gave me the advice not to be too bullish because that would increase too many expectations. But what we do see is very encouraged what we do see. But we also see that there is market pressure. I would not be right to say that. So, it's very much important that the cost reduction can not only offset anything what is in the market, but can get into a positive increase in Market & Airlines. And I'm not sure if the 30% are rightly calculated, but we want to be -- see a significant growth in Market & Airlines as well. And is the strategy working? One thing is, this is -- and you know it, because you're so much in the detail. On the revenue growth, the TUI Cruises revenue growth is not a TUI growth, because we just get the results into it. The joint ventures on the Hotel side: The Atlantica or TUI BLUE Hotels, we get the result, but we don't get the revenue. So, if we would add up the customer revenue increases, it would be a very different picture than the consolidated numbers. Because the U.K. last year has increased the share, the sales into Rio significantly, but this is not a revenue increase only slightly, because it's in the consolidation. It's not 1 plus 1, it's 1 plus 1 is equals 1.2. So therefore, it's something which doesn't really reflect from a customer perspective, the revenue growth. And that would be my answer to the question, Mathias. Was it right? Mathias Kiep: I think -- As Always. Operator: Our next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you explain what changed with the decision to take the new boats into the TUI Cruises rather than this time last year when you were expressing confidence that you would keep them at Marella. Can you explain what happened to the Marella fleet as it ages and perhaps explain how you expect to serve the U.K. market on the cruising side? And then, a second question would be around the growth in Dynamic. I mean, it's growing 11%. Therefore, the non-Dynamic is shrinking, I guess, about 10%. How did the economics work? How strong are the economics on Dynamic? And what does that tell us about the economics of non-Dynamic? And how should we expect the share of Dynamic to evolve going forward? Sebastian Ebel: So, with the Cruise part, the synergies we do see on the new builds with TUI Cruises are huge. We always said when we put something into the joint venture, the 50% should add more value to us than keeping the 100%. And you may recall that the new two ships are on the same series like the TUI Cruises: Mein Schiff Flow and Mein Schiff Relax. So a lot of synergies also with the Royal Caribbean on operating these ships. By the way, we have three options, which have a high value. There are no building slots available till '30 something. So we are very happy to also have three options. And the question is absolutely right. What does it mean for Marella? Marella is performing outstandingly well. You've seen all the prices they have received. We believe that there is even room for more tonnage in the U.K. or put it also into North Europe, including the Nordic countries. And this is -- by the way, we have the Board meeting with the Royal Caribbean later today in London. There are opportunities which we will explore. But it was important for us that we have the right vehicle where we get all the synergies. And one thing is also clear, it would have been a significant stretch to our balance sheet and financing, and we wanted to be very much on the safe side. But the rationale is 50% should be more valuable than 100%. Dynamic, non-Dynamic, that's a good question as well. We very much believe in the non-Dynamic -- in the Dynamic, in the risk-free product. And we also believe in the wholesale product. The question is, what is the risk right we have. In the past, we have had sometimes too much risk capacity that we have now have found a good solution. That is a definition that we -- of the risk capacity, which we think we can sell well and the growth should come from Dynamic. It's not an or, it's an end. And it was very clear that the focus is on selling the risk capacity, even if that lowers the Dynamic of the selling of the non-Dynamic. Now we have Risk Right, we do see significant more opportunities to grow there. And of course, we had also to do some technology homework. We haven't had all the carriers, the third-party carriers. We haven't had too many NDC connections. We have now connected British Airways. Others will come even before Christmas. So, we had to do -- to lay the foundation with significant IT divestments on Dynamic. And I would say that the growth should come from -- in TUI from Dynamic, which means that it would equally translate into growth into growth with Dynamic. Andrew Lobbenberg: Can I just ask, I mean, on the U.K. on -- I mean, the existing Marella fleet is older than the TUI Cruises fleet. How long can it go? Or is there a time when you refurb the old vessels and they can just keep going into the future? Or are there technology or environmental issues that put a defined time line -- time -- lifetime on them? Sebastian Ebel: We very much believe with all the investment, and we are refurbishing. And we are doing a lot of sustainability investment. But compared to cash flow, it's a very nice picture, so that they can stay in service until the '30, '35. There are now -- and I don't want to elaborate too much because this is just brainstorming what I said. There is also a life for refurbished tonnage, and we do see as the new build slots are very, very limited or you can't get any at the moment for the next 10 years or 7, 8 years, but I would say, 10 years, it could make sense to have also some reasonable investments there. And that's what I said. That's something we have to develop. For the time being, we had assumed that having new ships, which are double the size of Marella, we will see significantly improvements even with our 50% share with our development in Cruise, there might be opportunities which we haven't seen half a year ago, because if we have seen Mathias showing 5% higher occupancy in our load factor or booking in TUI Cruises, I mean, with 45% higher capacity, it clearly shows that we sold too cheap, but it's more than a luxury problem. So, there is something to do with us, but more on the opportunity side than on the risk side. Really like what they have achieved is really amazing. Operator: [Operator Instructions] Our next question comes from Kate Xiao from Bank of America. Kate Xiao: I have a few questions on AI. In your presentation, you mentioned that your products are open to all LLMs. I wonder what that means. Are your products kind of bookable directly on the kind of AI agent level? Or is it through your own apps? I think through by your example, it looks like it's kind of more through your own app. Then I wonder if there's scope to kind of integrate further, hence, bookable directly at the AI agent level. And then the other question is, are you seeing increased demand right now already from the AI front? Can you quantify the benefits you have seen so far? And finally, on the cost front, any numbers we can share by implementing AI, say, what would the contribution be in your Markets & Airline business to that 3% EBIT margin target? Sebastian Ebel: As said, we believe that AI is changing the tourism, how we distribute. And our own brands are very, very important because we want to get as many of our customers direct on our app into our product. And that's why we have increased and changed the split of performance marketing into brand marketing. And apparently, it works well. Maybe we -- most likely, we have been under-invested in brand. So, we -- marketing, so therefore, we shift. If you look at LMMs, it's really exciting. For the first time, TUI is ready and the LLMs are not ready. And why are we ready? You have seen it with Mindtrip. It's working. We do see it where we use it internally and the LMMs are still optimizing what they do. It was interesting what ChatGPT or the owners said what they have to do first before they start with the sales shops. For us, it's important to be directly bookable so that the customer says, I want to go 2 weeks to Mayoka with this and that. And then he gets the TUI offers and then he's in the TUI ecosystem to book it. Technically, it is possible. We are waiting to get connected. And you could argue, but that is then open for many. I mean, there is a first-mover advantage, but our advantage is we have the Robinson Club, others don't have. We have the TUI BLUE, others don't have. We have the service component, which is very, very important, especially in our customer segment with also customers at the -- with different age pattern. So, we very much believe that this exclusive content, differentiated content is a difference. When you talk about where can we use AI to have lower cost, one, to increase the conversion rate in the app. That's something we have started to see. And a good example is for us when it comes to service. I mean, people calling -- asking a question. Today, a big, big share is done by AI. And then you could ask, what does it mean, because we got the question before on the workforce. In these areas, we work with a lot of service companies. And there, we were able to reduce that a lot. The next step will be content production. A lot of things will be automized with better quality, pricing. We still have a lot to do to improve our pricing. Maybe others are superior there. AI is supporting that a lot. So it's both things to get better outcome, better content, better prices and on the other side, to decrease -- to improve processes and to decrease cost for that IT development is a great example. I remember 2 years ago, we had thousands of external people. Today, we have maybe 30 or 50. And we really lowered -- almost vanished the number of external people and we do it with us. And I would say, today, it is -- you have the factor of 5 if you develop something with AI systems in IT, and there's even more to come. This is a way, and it needs education. It needs a very clear target. But the organization is really, really excited about it. And it's for us the opportunity to maybe overtake the one or the other, and that's why we put so much effort into it. And it sounds by far easier than it is. Right, Nicola? Nicola Gehrt: Right, as always. Operator: Our next question comes from Karan Puri from JPMorgan. Karan Puri: I have two questions, if that's okay. The first one is on the balance sheet and cash generation. Just wondering with leverage not too far from your midterm target and with cash generation picking up nicely as well. Wondering if the 10% to 20% dividend payout ratio is more so a floor with potential for an increase if you continue to delever. That's question one. Maybe we can start with that and I'll come back to question two after. Mathias Kiep: Yes, exactly. But they say cash flow breakeven at some point at the start of the next phase, very clearly. So as I said, one is we need to bring leverage further down, and this is below 0.5x. As of today, 0.6x. At the same time, when we look at leverage, what will be, of course, what we need to consume at the same time is the order book of Boeing, which is peaking '26 and '27. So, this is something where we expect that we can, of course, work on leverage, but at the same time, something that we still need to consume. And this is some -- so I think on the back of that, we've decided to propose a starter dividend and we are -- have defined this 10% to 20% of underlying EPS as a dividend strategy going forward. Again, it's to be defined in each year where we are. But at the same time, I think we really balance with that deleveraging, consuming of investments and good basis for shareholder returns. That's the idea behind it. Karan Puri: Perfect. The second question is actually on the newly announced EUR 250 million cost savings. Despite this sort of incremental EUR 250 million, you've kept the midterm EBIT guidance unchanged. What is the best way to think about this? Does this imply that the underlying momentum across the other buckets of Dynamic Packaging, Airline Commercialization, et cetera, is tracking a bit behind? Or it's you just being conservative? What -- how should we think about this, please? Sebastian Ebel: It's important to achieve what we have promised. And -- I mean, we haven't had in mind the Jamaica incident, which was a significant hit. We want to make -- to do as much as possible to fulfill what we promise to the market. If times are great, like last year, we are able to overachieve. There might be times where they are even getting more challenging because the economy is the war and so on. I think reliability is a very high value for us. And I mean, it's better to fulfill with a very high certainty what we promised or what we outlined, what we are achieving then to add up all the opportunities we have. Operator: Our next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two related questions, please. In terms of the travel environment in Europe, how would you frame that right now? You referenced the competitive nature of the environment. Is that pure competitive tension? Or is that in the context of some kind of caution from consumers? And obviously, there was the later profile of bookings over the Summer. And then looking forward, for the ASP growth you've referenced for Winter and Summer, is this mostly like-for-like pricing? Or is there mix or duration effects that are also moving this metric? Sebastian Ebel: I mean we are lucky that, for example, in the Hotel business, whatever is the impact from Europeans or U.K. customers, it doesn't hit us, because we -- I was on Lanzarote last week, absolutely packed. I've never seen so many French people, so many Spanish people, and I've never seen so many Asian people. So, we benefit from the global distribution we have built up. On Cruise, it's the product. And therefore, it is very much sold out. If I look at the European or if I look at Musement, they have now a lot international customers, which are not Central European ones. But also the European market is not homogeneous. If I look, there's strong growth in Eastern Europe. So you know about our successful Polish business who went -- they went into Czech, doing very well. At the moment, they go into Romania, soft launch, a real launch in February. Spain, which was always a challenge for us. Outgoing Spain, for the first time turned positive, and it's growing significant in Portugal, Latin America. So it's important these markets outside the core markets. Because, if I look at Germany, if I look at the U.K., I would say at least there is no tailwind. And with the political uncertainty, and I know it, of course, better in Germany than in the U.K., there might be even effects. We are -- and looking at Germany, we are maybe less impacted, because we are in the customer segment, which has a higher income and the lower segment, and that's why we had the one or the other insolvency, which the company who were at the lower end, they suffer more. For us, it's important to be as resilient and to have the broadest distribution we have to make sure that the Cruise, the Hotels, the Musement products are having the highest possible occupancy. And if you look into the seasons, we had a good start, but we quite often had a good start. And even if you are now 10% or whatever percentage up, you can lose that in a week, in turn of the year season. So that's why it's so difficult to give a good and solid outlook. But we -- the resiliency we got is making sure that we can fill our assets. And at the end, if it's 10% or minus or 10% on Markets & Airlines, it's very important, and we need the growth, and we are envisaging the growth, but we can -- could lose the game on the Holiday Experience. And as we don't do that and we win there, it's so important that we get from markets -- the customers into our assets. And this works well, and it works even better now than it worked a month ago or a year ago. Operator: [Operator Instructions] Our next question comes from Richard Clarke from Bernstein. Richard Clarke: Just starting on Cruise. Are you seeing any benefit in Europe from maybe less capacity some of the other Cruise companies have redirected capacity to the Caribbean? Is that helping yields? Are you thinking about your planning for where you're going to run your Cruises based on that? And maybe in that context, why are you only seeing prices flat, particularly where you've got new ships, why are prices not growing in the Cruise business? Second question, I think this year or next year, I guess, you're saying the bigger contributor to the 7% to 10% will be the Markets & Airlines business. How should we think about -- I know, you've got a useful slide at Slide 42, but just the shape of that 7% to 10%, would you expect beyond '26 that we would see the Hotels and the Cruise business being the majority contributor to that 7% to 10%? And then thirdly, I know you sort of explained the dividend sizing. But in the past, you used to at least be able to return the TUI Cruise dividend back as a dividend. It looks like your dividend is going to be below the TUI Cruise dividend to you. So, just wondering why at least that isn't being able to pass back to TUI shareholders. Sebastian Ebel: On Cruise. I don't know if we benefit from less capacity. What I know is that the value proposition of TUI Cruises, Hapag-Lloyd and Marella is superior. TUI Cruises new ships, the well-being approach, the all-inclusive approach, amazingly great product. Hapag-Lloyd, the same. Marella, and that for me has been the biggest surprise, and therefore, I'm so really grateful to the management and the team there. If you look at the prices they win at the food concept. It seems to be that they do a lot of things right. And then the right question is, why are prices not better. And that is a question we put to the management there. To be fair, no one and especially not me anticipated that the demand would be stronger than the capacity increase. So there is something more to be done on the prices. On the other hand, and we know it from markets very often, the customers you don't get in the beginning, you have to pay a lot to get them late. And therefore, we are really grateful to the capacity there. Do you want to say a few -- and maybe last before Mathias goes into the detail, I think it's very clear, and that's why we always stress so much the business model, having strong distribution, which fills our assets. Yes, we want to have a significant increase in Market & Airline profitability, but the majority, I would -- I mean, I couldn't assume that this would be the other way around. Mathias Kiep: Yes. And maybe just on the dividend. To be fair, I think we developed the dividend looking forward. Again, as I said, balancing deleverage targets, investment and consumption of the investments -- and please do not forget that the Aircraft delivered by Boeing directly move on balance sheet if they are leased or asset financed and that the CapEx is primarily related then to the adjacent engines, et cetera, maintenance events that we need to move through CapEx. And then thirdly, to have a decent returns to shareholders and to have a good dividend yield in line with as what we get as comments from investors and business partners. I think in the past, the dividend policy was really on different pillars, and that's why I think it's not really comparable. Just a few words on the guidance growth. I think the 7% to 10%, if you -- I think they have 2 elements indeed. One is what are the building blocks in terms of investments that you can already see today that, in particular in HEX will then deliver a certain earnings growth going forward. And that's one element. The other element is the benefits from Markets & Airlines. And naturally, I mean, there's a kind of overall improvement that we expect. But also if you go to the regions, and Sebastian, you mentioned the success that we had in Nordics. We reduced capacity there to the right capacity. We have an issue in the Belgium, Netherlands model, which is similar. I think that's something you need to put into context. But what is for the guidance, very important, this is more back-ended very naturally. So, this is more towards the Summer where we expect then the profit growth in that area. Operator: Our next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one about the German market and the reinvestment plan, which has been presented by the government. Could you give us some more color about your feeling on the one consequences of this reinvestment plan and the trend that we could see and potential good news that we could see in the consumer and the travel and leisure sector. Second question about the booking trend. You are relatively cautious on the Winter, partly because of the negative base effect. But what do you see in terms of trends on the last booking? And do you see any significant evolution on upgrades or downgrades in terms of segmentation of the bookings? Sebastian Ebel: You mean the investments of the -- increased investment of the government? Andre Juillard: Yes. And the consequence it could have on the consumer side. Sebastian Ebel: How should I phrase it politically correct? I think, Germany is in a very difficult situation, and we would need significant more rigid changes. And at the moment, we try to have a debt-related investment program, which may work or may not work. At least it will not change the sentiment as long as not main questions are solved. So, I don't see any positive impact to any business in Germany. And coming back to your booking trends question. As I said, it's very difficult to predict. On Winter, we said margin is very important and another 1 or 2 volume with lower margin doesn't help us, because the risk capacity is set right. We had strong Black Friday 2 weeks, which personally surprised me a little bit. But of course, as I said, whatever we have today, it is important, but the main important season is the change of the year -- a season, and then we will know. I think, it's very important to protect margin and where we cannot protect the margin to make sure that the cost element is more than what the market would see. So, the prediction is more difficult than it has been in recent years. And it's important that we are cautious that we are not going into a risk strategy, but in a well-balanced strategy. And is it a late booking pattern? What we do see, I don't see that too many things has changed. There have been change that some of the consumer segments like the families, which is luckily not so much the TUI business with two or three kids, they don't have the money too much anymore to spend in travel. They are more a segmented oriented change or Egypt because there's a great price value for the customer is growing significantly and other countries are losing. So it's important to be resilient, to be dynamic, to change quickly and to live with these changes. Operator: We currently have no further questions. So I'd like to hand back to Sebastian Ebel for any further remarks. Sebastian Ebel: Team, and I always say thank you to the whole team is working very hard. Transformation is not easy, and it only works if our people work with us, if we get the right products to the customer. And as we do see that day-by-day, we see progress, we are confident about TUI's future. We have huge opportunities. We have significant risk, which we have to manage. And therefore, I very much believe investment in TUI is a great thing, because we not only work hard, that's a lot of people doing, but we are seeing that we can give great offers to our customers and to support trends we do see in the market. So, thank you for being with us and asking your questions and challenging us. Mathias? Mathias Kiep: Thank you so much. Nicola Gehrt: Thank you so much. And the only thing remains, have a good festive season ahead of you. Sebastian Ebel: And go with TUI. We still have some seats available. Mathias Kiep: Excellent. Nicola Gehrt: Thank you. Sebastian Ebel: Thank you. Bye-bye. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Nicola Gehrt: Good morning, ladies and gentlemen. A very warm welcome to our 2025 results presentation here in pleasantly mild London. My name is Nicola, and I'm Group Director of Investor Relations, and I'm here with our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to present a financial year with record results, and we will give an update on our strategic progress. We will also unveil our new dividend policy and give an update on current trading as well as on our outlook, expectations for the next year. And as always, after the presentation, we will open the floor for your questions. And with that, I have the pleasure to hand over to Sebastian. Sebastian Ebel: Thank you, Nicola. And it's not only pleasantly mild, it's also sunny outside. Nicola Gehrt: Definitely. Sebastian Ebel: So, a very warm welcome from all of us. We are happy to present our results this time again from London. You are familiar with the agenda. I will talk about the operational highlights to give an update on the strategy, and Mathias will go into the details of the numbers and the trading outlook, and I will summarize our presentation at the end. It was an excellent year for us, a record performance with a strong increase in EBIT. The integrated strategy delivered these strong results. The distribution made sure that our assets are full. And we used also the time to accelerate our M&A transformation. We put a lot of effort into it, and I will talk a little bit more in details about that. And now we can monetize the M&A transformation to show you the way to the 3% EBIT margin we want to achieve. We have very clear growth targets for '26, supported by a positive trading momentum. And that convinced us and we were convinced to start with a dividend policy. We know that our shareholders for a long time haven't seen dividends, and it's more than fair and the basis we have led with a good result to start immediately with a dividend and to give you some more information on the dividend policy. If you look into the results, very, very strong Hotels & Resorts business, strong increase. We had not a real increase in bed nights that will slightly change next year because of closure of renovation. We had an outstanding occupancy all over the year, 84%, and we had an increase in the daily rate. Outstanding Cruise result. And not only TUI Cruises, but also Marella. We are extremely happy about the development of Marella. And therefore, we could not only in the fourth quarter, but in total, achieve a significant improvement. We had a significant growth, and we will see more growth this year of the available pax days, 100% occupancy and an increase in the daily rate. A good development also from Musement. And if you remember where Musement, which is a marketplace for experiences, was at a couple of years ago and where it is today, it's a great development. And we put more efforts in selling the right products into the customer base than acquiring new customers, which would cost us in the beginning investment and money. What we do is, we focus on own products, building their own product base and grow with this. So, a very good development. Holiday Experiences, EUR 191 million versus prior year. A different picture on Markets & Airlines, where we had a roughly EUR 100 million decrease in results. As said, we invested heavily into the transformation, IT investment, marketing investment. We had some extraordinary impacts, some provisions we had to make. We had the peak of IT investment. For the first time, we will see reduced IT investments in this year. As said, a lot of investment into transforming the business. This impacted all major markets, and we think we are now over the negative development, and we can see a positive development. And again, it is so important that we have the strong distribution to fill our assets. And by the way, if I look at Marella, it's a U.K. business with two operator and flights. So the picture is two coins and the two sides of the same method. And I will talk about the transformation a little bit later. And what drives the superior Holiday Experiences' performance? We have now a customer base of 35 million. This now for the first time, includes our unique customers in Cruise, in Hotels. And this customer base, we use for all the marketing activities to make sure that our 463 hotels are full. Our Cruise ships have a great occupancy and the Tours & Activities business is improving. And if you look at the numbers, if you -- fourth quarter hotel occupancy, 88%. This is significantly higher than what you see with others. The return on Cruise is with 22% and 17%, very, very high and attractive if you compare it. And the take-up rate, Musement owned products, that means 30% of our market customers buy a Musement product is very high, and it's very important because there, the distribution costs are low or not existing. So, this funnel model drives the great result in holiday experiences, and we try to broaden the funnel to support the growth in Holiday Experiences. On the other side, it's very, very important to have our own products, because with our own products, we achieve great customer satisfaction, which is superior and at the top end of products and a very high retention rate. Customers who come back, you don't need to buy in the market again. And to have a retention rate of 40 years, we calculate on 2 years. If you were to do it on 3 or 4 years, it would be significantly higher. It's important, and they come again to us, because we have curated products they trust in. So, this is the driver for our superior Holiday Experience performance. If I look at our strategy, the market is growing. It's growing stronger outside Europe, but also Europe is a resilient market. There are areas in Europe where growth is significantly higher like Eastern Europe. You know we are in Poland. We went last year into Czech, doing very well. Now we have the soft launch at the moment in Romania. And there is significant growth in Southern Europe. We grow nicely in Spain, now in Portugal, but also have started to enter the Italian market, all on the same platform we had. And the good thing is that the demand is especially there for unique brand-led leisure products. So, strong brands with great product quality lead the market and the profitability. TUI, you have seen that before. We have now the fourth consecutive year with significant profit growth, and we want to deliver this also in this year. And time is running so quickly. We are now in the third month of the year, time is flying by. And this is not only the ambition for this year, but for the foreseeable future. Today, more than 80% of the profit come from Holiday Experiences and only 15% from Markets & Airline. And this gives us two opportunities to grow nicely and solid in the asset-light model with Holiday Experiences and to take the big opportunities on Market & Airlines, because if we compare with best of breed, there is a lot what we can achieve and what we can win in the market. And therefore, we want to deliver not only growth, but profitable growth in Hotels & Resorts and Cruises and in TUI Musement and in Market & Airlines. And this is based on what we call the TUI ecosystem, what we have built for all our customers, our database to get better marketing, to have higher customer retention and to lower significant distribution costs. This is also supported by what we do with AI. We have seen and we do see AI as a disruptive technology, which supports us in producing better products, new products, which we can distribute on global platforms. You may recall that TUI was a company where we had own production, Markets & Airlines, per country. We had five Airlines. We took a lot of effort, a lot of investment to bring this together, and now it's the time to get the benefits from it. This is only possible if we have a performance orientated organization. This has been a big, big task to get the organization aligned with the new org design we have. And last point, sustainability was not something which was on work with TUI. We very much believe it. It's important for the customer, but we also see the commercial benefits, and that's why it's as important on the agenda than it has been before. If I look at the Hotel division, 18 new hotels, the return, excellent, the CSAT, so the customer satisfaction or the NPS are outstandingly good. We have 70 hotels in the pipeline, mainly management. Again, when sometimes we got the question, why is our revenue not growing bigger, because we get the management fee, not the revenue, especially growth in Asia. It has now got a momentum, and we are really proud of what the team there has achieved. But it's not only Asia, it's also Africa and in other areas. We have very distinct, with proven brands. We put effort in building upper luxury brands. We have the global mass market or mainstream brands, and we have strong regional brands. And we are less strong on the price consciousness market. There is something where we can catch up. 70 new hotels in the pipeline and with a big momentum there. And by the way, a lot of these hotels are building new distribution facilities, which also supports the future growth. We have talked about the Oman partnership. This is going according to plan. We have started to not wait to build up the business when the hotels are there, but started to promote the country. By the way, it's in a great country. I could recommend -- I can only recommend to go there. And it's very strategic for us. We have had the proven cluster in the Caribbean. We have it in Cape Verde. We built it in Zanzibar, and now Oman and maybe others to come. If we look at Cruises, 18 ships, great return on investment, very, very strong NPS. So, the product is loved and what we deliver is great. There is one ship, which came into the market last March, where we see now an incremental Summer effect. And there is one ship also from Fincantieri coming in early Summer next year '26, which will support our growth. And also because we never talked about it so much, Hapag-Lloyd is doing very well. They had some impact when there was the rerouting. There is no routing this year, hopefully. And that's why they also have significantly improved. And you know that we have two ships on order, '31, '33. And we are very, very happy that we also have options which we can decide on in the coming months. And it's a great business and with a great prospect, and Mathias will show it later. If we do see that we have overall a 45% capacity increase if I look at 2 years and the load factor is 5% ahead, only give me one conclusion we could have sold for higher prices. But that's a luxury problem. TUI Musement, as I said, the transfer part is not growing and that the growth comes with third party. But there are two areas where we are growing: one, enhancing our multi-day offering. We are just at the start. We talked about new products. We just brought this product into the German market. I got the figures from last week. It's accelerating. The U.K. market will follow soon. We have high expectations about the growth we can achieve there. So, it's the production facility for multi-day Tours offering a huge market also in Southern Europe. And of course, the offering and experiences. Yes, Sun & Beach is dominant, but we are increasing city footprint. For the first time, I could book the Heathrow Express yesterday and I haven't booked theater or restaurants yet, but the offering goes into the city. The focus is on own experiences because that's where the value is in the TUI collection offers, and it's about up and cross-selling. And that's why we think about significant growth also in the midterm. If we look at the market, and it was a -- maybe it was a painful process when you do local production, local organizations, you centralize, you bring together one selling platform, one buying platform. It was a huge investment with things to overcome with time delays. At the end of '26, we will have every country on the same selling platform, and we do see the first markets when look -- when it comes to efficiency, marketing efficiency, a huge increase. You do things once and not five or six times. And that is why we can talk about efficiency and cost optimization. And it's the same with the Airline side. We had five airlines, which was not the good setup. Now we have -- we are only talking about one airline with a commonality in all aspects. Before we had five different hand luggage rules and so on. Now it's one. All the things where you would say you should have done it before, but it was quite a challenging thing to bring everything onto one system. Operationally, it has helped us a lot. I would say, if I look at reliability, I look at it every day, the reliability and therefore, the denied boarding compensation is at historical low in the first weeks of this year. So a lot of benefits. And now it's about the commercialization to make sure that we lead the airline as you would lead a commercial independent airline without giving up the synergies we get from the market. So, that's why you see the two wheels combined for net, but business in it means. And we have the clear target to increase the underlying EBIT margin, and we expect to get a good step forward this year. What are the building blocks, the levers? And these are examples, but the main -- the most important ones. Of course, the Risk Right. A good example was Nordic, which we turned around, has been profitable for the -- since a longer time last year, and we see a good development. This year, we had to define the Risk Right capacity and the growth should more and more come from Dynamic. You know the Ryanair case, which really -- which went live last December, but took momentum in Summer, which is now rolled out to other destination. We have a lot of NDC carriers, which we bring into our ecosystem even before. Now Christmas should have a significant impact on our -- positive impact on our business. Others were ahead of it. Product Differentiation. It's key. We want to increase, and we are in the process of increase from 45% to 60%. We do a big step forward, because we do see this is the reason to buy with TUI and these differentiated products give us higher margin. Customer Lifetime Value Management. It's something where we put a lot of effort in to bring customers into the same database to define the methodology, how we not play with the customer, but how we use the opportunities and we are -- and to optimize distribution costs. Airline Growth and Airline Commercialization. One thing was very clear that we have a network and a -- network which gives us a lot of opportunities to improve. We had a fleet which were due to all the delays, not optimal. Like last year, we had, again, a significant cost on not having the Boeing as we wanted to have. There is now the clear expectation that for this year, we can add the promised amount of aircraft. But again, last year was not what we had anticipated to get. Airline optimization, very important point. Operational Excellence, and this is now where I'm really getting excited. We put a lot of efforts into the system to push direct sales to get free traffic to make the customer buy more often. And for the first time, we not only can tick mark that we have taken the actions into place, but it started to be commercial beneficial. And it's very clear. If you have a 10%, 15% share of app, you see how big the opportunity is looking forward to decrease the distribution profit. What helps us a lot, and I will put some more information -- give some more information later is AI. AI is a game changer when it comes to production, when it comes to product quality, when it comes to how we sell products. And this only works well when we take the opportunities of global platforms also into the cost arena. And therefore, we are now able to deliver and to talk about cost improvements. The cost improvements will hit us for the first time this year '26. Last year, again, we had some extraordinary still like the Boeing effect, but we have had all the investments for the first time, we can reduce IT investment and to harvest what we have done. One thing is clear, we will stay and we need to get even a more IT-led company. And the earlier and the quicker and the more drastic we change, the better it is for us. We have -- the plan is EUR 250 million cost reduction, 60% on overhead cost reduction, so where we -- you can count, I've saved this or that. 40% operational excellence. These are things which we also can, of course, count and measure like the optimization in marketing, online marketing cost, of course, we can count, but there are thesis which we have to prove that we are on a good way there. We have these two buckets, and we want to have this realized in the next 3 years, and we try to even bring it forward to be prepared whatever happened in the market. AI is changing it, a lot, the world, but it's also changing a lot the travel business, moving into Agentic search, improving how we produce the content and to have better content to improve the customer experiences, which is amazing in Nordic. You have customers who want to talk to an AI agent and not to a personal agent anymore because they rely more, trust more the AI answer, hyper-personalization with all the data we have. It's a huge amount, but to get the right conclusion, AI helps a lot, and it further reduces cost. And therefore, TUI is changing into an AI-powered organization. And we want to be in all front doors with all the LMMs. We have made you programs. We now sometimes wait for the LMMs to connect us, because they have to do some more homework than they had thought. But the Mindtrip example is something to see and to show how ready we are, and we will benefit from our strong brands and the unique products. What does it mean? Concrete? We are working with main key partners where there are big communities like in social media, like selling platforms, but all LMMs and Mindtrip is a good example of how this could look like. That's a huge opportunity to move away from being very much dependent on Google and others to more spread to others and to get into new segments. We have not been strong in the Generation Z, which is using this very much, and that gives us huge opportunities. But it's tough and a lot to do. AI for our customers, how the customer search on our app, what he gets as content, what he gets not only when it comes to pictures, videos, translation, trip planning, a lot of enhancements we deliver 2 weeks -- by 2 weeks. I remember times when there was a release once in 3 months and in -- yes, per quarter, then per month. Now we are releasing every week something a new, including voice, chat agents and so on. And customers, our customers love it. It only works if we get the support and the excitement I have, the management team have with our colleagues. So, we spent a lot of effort to bring this new world to our colleagues so that they are all excited and they are, because we have seen the huge demand of, for example, Microsoft Copilot, and we, of course, support that very much. What do we see when distribution is changing? And we do see that there is a split of customers which go more and more brand specific. Therefore, differentiation is so important and the exclusivity is so important. And on the other hand, customers who go through LMMs, and sometimes they come from one side to another. Therefore, to have the TUI AI concierge agent who supports the customer is so important, and it's about a partnership, but it's also about optimizing the search, how we search the optimization of engines who answers. This only works if we have an end-to-end view on customer data -- on our customer data. And it only works, I think that is still underestimated if the data -- not the data, the content the customer sees is trustworthy and can be verified, one of the benefits of the direct contact to suppliers we have. I would recommend that you look at Mindtrip that has been the first showcase and it has been -- not it has been -- it is a successful -- not showcase anymore, a successful case. As I said, sustainability is in our hearts. We have made good progress last year. Of course, it gets always more challenging in the next year, but we are well on track to deliver our 2030 targets. So overall, strategy is very clear, growth on the assets filled outstanding well through our markets and monetizing the investments we have made in Market & Airline. And now to the hard numbers. Mathias? Mathias Kiep: Thank you, Sebastian. Very good morning from my side. Thank you for joining the call. And how does '25 look in detail? We've already published our numbers mid of November, where we upgraded our guidance and for the full year '25. And so, let me just share a couple of key items for P&L, cash flow and of course, the balance sheet. Then as Sebastian said, we have announced a new dividend policy going forward. I'll come to that in a minute before I come to trading and outlook, short term and midterm, how does this strategy translate into building blocks for our future growth. Highlights '25, very clearly, revenue growth, again, 4% plus. This shows the high commitment of our customers, the high priority of spending for holidays. Underlying EBIT, as we announced in November, increased by 12.6% on constant currency rates and 9% on actual rates. Our net debt, as a result, improved by EUR 0.3 billion down to EUR 1.3 billion, and the leverage came down again towards 0.6x, which is one of the lowest rates the company ever had and the lowest rate that the company had over the last decade. So that's something we want to continue going forward. And while we think we expect the business to grow another 7% to 10% as a result of the strategy, which just been explained, there are clear building blocks to get there. We think it's also now time to start with the dividend policy and already start with paying this for '25 on the back of the strong results. And we think this 10% to 20% going forward thereafter, that's a very good balance of investing into future growth, deleveraging the business going forward and having an attractive capital return for our shareholders. Now in detail, what is the summary for '25 P&L, cash flow and balance sheet. Again, you see here the footprint of our '25 result, strong contribution from Hotels, from Cruises and from Musement. Musement is also very attractive in terms of scaling into all products and also being more efficient in how to deliver the service to our customers. You see Markets & Airlines. It's with the decrease. I mean, this is very important to put into this context of investing into the transformation and making sure we get the benefits going forward, and we are in a competitive situation. We've talked about the Boeing delays. We also talked about the one-offs that we saw EUR 20 million alone from covering maintenance related to the re-fleeting already in '25. So I think that's how we would like to put this into context, strong cost discipline in our central operations and then the result of EUR 1,413 at actual rates and EUR 1,459 at constant currency. Now details to P&L. What is of interest? I think there's two elements. One is EPS, the key number for the dividend policy going forward, improved by 25% year-on-year reported and more than 30% on an underlying basis. This is really a strong result and is absolutely key for us that we translate our operational growth also in growth on a per share basis. Second is, and that's something we will see on the cash side. This has supported really well is the strong improvement on the interest side, well beyond our expectations that we had 12 months ago, a lot of optimization work, and we'll come to that. This is a cornerstone of our new dividend policy, because we see that all the investment into financial discipline, they track to gain traction. And on the back of that, we get really competitive terms, and that's really supportive to our interest result. On the cash side, very solid and robust performance, again, a key pillar for the future dividend policy and for starting to pay this already for 2025. When you look at this, strong improvements in the dividend received, more than EUR 200 million more than in the year before. That's as we discussed, in particular, coming from TUI Cruises, and it's very important for us that the strong performance in Cruises also translates into cash payments to us as a shareholder. Second is the strong improvements on financial costs. So interest result went down, but also pension costs started to decrease. You may remember that we have been able to fund the U.K. pension schemes, and we expect '26 that we don't have further payments into that. These are key pillars to also fund our future investments. Because more investments that we need, one for, to grow our Hotel business further, really strong profits, the second on the delivery of the Boeing portfolio, that's something where we need some funding for and structurally, we worked hard to get this from these two items, plus, and that's the other point you see here investments and lease and asset financing amortization. This is in line within guidance. But we expect that in particular, lease and asset financing, all the investments that we did structurally in '25 will pay out -- pay off in '26. And on that basis, we'll have a strong improvement of that number, which is then the final pillar to look at our increased investment for '26 and going forward. Now on resulting balance sheet, as I said, improvement by EUR 0.3 billion. What is important and what is great for the further structure of the balance sheet is that some improvements we did also in November. We paid back the remaining outstanding amount of the older convertible, that's EUR 120 million repayment that we did out of existing cash resources that will help our gross debt, something which is important for the rating agencies, but also, of course, something which is important for interest result. And interest result, we need to manage because a year ago, we still had a higher interest income level, and that's something that we need to work against. Second point is that because of the Schuldscheindarlehen that we did earlier this year and the agreement that we did with TUI Cruises on the refleeting and the access to the U.K. market, we ended both finance leases that we had for Marella and now both ships are in ownership, which will remove the debt amortization in the future and gives us full operational flexibilities on these two ships. And so, no indebtedness on the fleet of Marella anymore, which is also structurally a very strong improvement compared to some years ago. Now looking forward, financial strategy, it's not only dividend policy, but it's also deleverage target. As I said, this is something which is equally important to us. And from the 0.6x, while this is historically really strong, we still want to reduce this further. And on the midterm, we want to go below 0.5x, because we think the continuously deleverage something that's really helpful for the structure of the business. And as I just explained, this also helps us to fund further investments. Now moving forward in terms of capital allocation, I think there are three steps to look at. One is what have we delivered. And '25 record results, very strong cash flow, good results from this high financial discipline. We can start and we started to really optimize our terms, our balance sheet. And that's something we will continue to work on. This is the right basis to look at the next phase for the company's development. And what is it? It's one, it's investments, because we have seen the strong yield, Sebastian, you mentioned this. And I think one is on the results '25, but also if you look at the strategic pillars, what is there is super attractive. A lot of investors come to us and say, can't you do more. But I think we need to find a balance. So, more investments at the same time, deleverage and capital allocation to shareholders, but there will be more investments into Hotels also in '26. At the same time, we have seen a delay in the Boeing portfolio, which has been operationally really a challenge, one less efficient aircraft, but also renewals when you don't want to do them and all of this. So, this seems to have improved a lot. So, we expect now in '26, around 20 deliveries, which is a significant step up from '25 and all the related investments will also be reflected in our guidance, which is now towards EUR 900 million -- EUR 860 million to EUR 900 million for investments net in 2026. And on the back of that, we have come forward with a dividend policy. We always said we will communicate this in December 2025. What was unclear, and we had a lot of discussions with our Board on this is when to start effectively with this dividend payments. Would it start with '26 for '26? Or would it already start in '26 for '25? And we have decided to bring forward to the AGM in February the proposal of a starter dividend of EUR 0.10 for 2025 on the back of the strong results, the solid cash flow structure and the improvements on the balance sheet that we have achieved. And we think this is a very good balance overall also with this corridor of 10% to 20% going forward of underlying EPS payments of investing into further growth, deleveraging the company going forward, making sure we continue to be in a strong way and dialogue with our rating agencies and financing partners and then have the right capital allocation to our shareholders. We have summarized that on the next chart, but the more important thing is going forward, what is directly ahead of us and what's ahead in the midterm. And let me come to trading and the respective details of guidance now. Sebastian already mentioned it, we have a good trajectory on the Hotel side, on the Cruise side and the Musement. And I think if you look at the trading stats, the KPIs for the next 6 months, effectively, each single KPI is higher than it was a year before. So, the strong track record that we saw in '25, all the investments that we've done, the yield really attractive, and we expect that this trend continues. If you look at the Hotels, for the first time since quite some time, we also see net additions. That's something to look forward on the portfolio. You see a slight reduction in occupancy. This is a bit of the ramp-up, which is super normal. You've mentioned the 88%. Sebastian Ebel: Jamaica. Mathias Kiep: Yes. It's also Jamaica, but effectively, this vertical integration, this is what really drives this, and this shows how strong the model works, combination of having a two-operator with the Airline plus the Hotel footprint. Same on Cruises. And another year with 13% increase of capacity, which you don't see in your occupancies even goes up. This is a really strong, strong sector. And then, on Musement, the same. We continuously see the scaling into own products and really good development on the transfer side, both key cornerstones of the profitability of the business. In Markets & Airlines, we see a solid winter. I think the trading pattern remains unchanged. At the same time, the early signs and signals for the Summer are also, I would say, sound and encouraging. At the same time, Summer, we will publish not now, but when we have more tangible data with Q1, which is mid of February. At the same time, again, what is important, because a lot of investors and partners have asked us to change this, we now will report revenues going forward to make us more comparable with other players in the sector. Now how does this translate into our guidance? As we said, we expect the business to grow another 7% to 10% in profitability in 2026. What are the pillars, before we come to the modeling assumptions on the other P&L and cash flow items? It's growth in Hotels, it's growth in Cruises. And if you consider the investments that we've done, the pipeline in Cruise, the pipeline in Hotel side that we just looked at and also the trajectory of both businesses over the last 24 months, 36 months, I think this is a clear cornerstone where we already see the KPIs today that will deliver that growth slight. It's also in context of the really strong and high absolute amounts that you already see here. So that's something where we look really -- we're really pleased with. Musement, we expect that the trajectory that we saw in '24, in '25 continues. And again, the KPIs are supporting another year of additional growth there. In Markets & Airlines, Sebastian explained how we look at this. We have a market where customers continue to prioritize holidays. This is still a #1 investment and something to spend for, for everyone, and I personally can only share this view. And secondly, for us, it's key to deliver this in the most efficient way to our customer possible. So, a lot of focus on costs, a lot of focus on initiatives, and that's why we expect this business segment to deliver strong growth in 2026. In detail to the rest of the P&L, what I would like to highlight is interest. As I said, the benchmark is 2025. We had a higher income environment at the start of the year. That's something where we work against. At the same time, we've done a lot of optimization measures, which should help us so that broadly in line with 2025, we expect 2026 and which is significantly below historic levels. We see investments, I talked about that going towards EUR 860 million to EUR 900 million. And at the same time, offsetting this, we see a strong improvement in lease and asset financing. As I said, at the same time, we expect that we don't have to continue to fund the U.K. pensions, which already stopped in Q4 2025. And as a result, we expect another slight improvement, our net debt aside, and this should all help us to move constantly towards this target of moving net debt leverage towards below 0.5x. And midterm, I think this is important to us, because we've seen a very strong '25, 2x, we increased our guidance. We have seen on the back of that, the ability and opportunity to start paying dividends now. And we have a strong guidance, and we expect profits of 7% to 10% increase in 2026, and we expect further growth to happen. And this is how the strategy that Sebastian explained will also translate into numbers. You see further growth in hotels alone the investments, the increased investments will yield. You have the protection and the -- from a vertical integration and the ability to have strong occupancies in all of these investments. We have a ship pipeline, another ship in TUI Cruises in '26. We'll see the annualization of this in '27. And then again, new ships, '31, '33 and with the expansion in the U.K. market, the opportunities there. Then in Musement, we see this digital growth, which really works in a way and plus all the initiatives to do this in the most efficient way versus our customers. So that's the sector we're really pleased with the development and we expect profits to not only continue to grow '26, but also beyond. And then, there's Markets & Airlines transformation, and we have really said set this profit target of 3% and look forward to the initiatives to contribute towards that. And on that basis, we think we have a package which is '25 delivered capital allocation defined and building blocks for growth beyond '26 and in '26. And with that, Sebastian, back to you. Sebastian Ebel: Thank you, Mathias. Short summary from my side. In the middle, what we call the Unique Synergy Fly Wheel of TUI, it's not to business Market & Airline and Holiday Experience, it's the same coin with two methods. The one are the distribution, strong distribution sector. The other one is the lighthouse products, the differentiated unique products and both areas support each other. The broad customer base that supports the asset utilization and the differentiation improves the margin and the customer satisfaction. And with both of this, we are confident to give you the outlook, grow further. The EBIT, not only for next year, but to see it for the longer-term future. And as our shareholders had to be very patient, and I think, it's more than fair that we start to pay a dividend for '25 and that we become very -- well, lastly, very reliable on what we want to do for the future. So, you see us as always carefully optimistic. Nicola Gehrt: Thank you, Sebastian and Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Jamie Rollo from Morgan Stanley. Jamie, your line is now open. Jamie Rollo: Three questions, please. All of them on Markets & Airline actually. I appreciate it's only 15% of your profit. But if you could, first of all, just talk a bit about current trading. It looks like that 1% is quite a big slowdown from the 4% September figure if we add up the volume and ASP back then. I appreciate you're no longer giving the breakdown of that 1%, but could you talk about why it slowed? And also whether the ASP increases you're getting, if that's sufficient to cover cost inflation? Secondly, on the guidance for the full year, if my math is right, you need a minimum 30% EBIT growth in Markets & Airline to hit the group profit increase. And it sounds like it's going to be second half weighted given Jamaica and the Easter shift. Just really wondering about the confidence level in that given so little has been sold for the Summer at this stage. And then finally, just on the strategy in Markets & Airline. Thanks for the bridge on Slide 18. That's very helpful. But it looks like you're getting hardly any margin benefit this year from the first three of those factors, the own products, the airline, commercialization or the operational excellence, all the growth is from overhead costs. So, do you think the strategy is working? Because what you outlined at the CMD was more about revenue growth and you're only doing about 11% growth in Dynamic Packages. So, just really wondering about your strategy overall in M&A. Sebastian Ebel: I'll answer, Mathias, the first questions. Yes, you are right, there is a Jamaica effect, and we very much believe that we can cope with it very well. We would not have needed it, but it is as it is. You're right, there has been only in the markets, not on all the others, there you have seen a strong momentum. And you could, I mean, logically say, Marella is a U.K.-dominated company, and therefore, the revenue is there U.K.-based. What was important for us to make sure that we keep the margin at a good level in Winter. You remember that last Winter, we had a very, very strong second quarter. And therefore, we said volume is less important than the margin because we can cover our risk capacity. There is an interesting development on inflation. I mean, you may recall that it was difficult for us in the last years to cover the inflation in the ASP. What we do see is that the -- like in other sectors of consumer spend, the inflation has normalized. We even see that sometimes, yes, there is still a 2% or 3% increase, but we also see that there is 0 increase, that we can buy some products, beds or especially on the Airline side cheaper than we did before. So therefore, for Winter, it was very much steering towards margin and the inflation and what we get from the customer are very much more in line what we have seen before. For the Summer, we need the cost reduction, and we put a lot of effort into achieving this cost reduction. Nicola gave me the advice not to be too bullish because that would increase too many expectations. But what we do see is very encouraged what we do see. But we also see that there is market pressure. I would not be right to say that. So, it's very much important that the cost reduction can not only offset anything what is in the market, but can get into a positive increase in Market & Airlines. And I'm not sure if the 30% are rightly calculated, but we want to be -- see a significant growth in Market & Airlines as well. And is the strategy working? One thing is, this is -- and you know it, because you're so much in the detail. On the revenue growth, the TUI Cruises revenue growth is not a TUI growth, because we just get the results into it. The joint ventures on the Hotel side: The Atlantica or TUI BLUE Hotels, we get the result, but we don't get the revenue. So, if we would add up the customer revenue increases, it would be a very different picture than the consolidated numbers. Because the U.K. last year has increased the share, the sales into Rio significantly, but this is not a revenue increase only slightly, because it's in the consolidation. It's not 1 plus 1, it's 1 plus 1 is equals 1.2. So therefore, it's something which doesn't really reflect from a customer perspective, the revenue growth. And that would be my answer to the question, Mathias. Was it right? Mathias Kiep: I think -- As Always. Operator: Our next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you explain what changed with the decision to take the new boats into the TUI Cruises rather than this time last year when you were expressing confidence that you would keep them at Marella. Can you explain what happened to the Marella fleet as it ages and perhaps explain how you expect to serve the U.K. market on the cruising side? And then, a second question would be around the growth in Dynamic. I mean, it's growing 11%. Therefore, the non-Dynamic is shrinking, I guess, about 10%. How did the economics work? How strong are the economics on Dynamic? And what does that tell us about the economics of non-Dynamic? And how should we expect the share of Dynamic to evolve going forward? Sebastian Ebel: So, with the Cruise part, the synergies we do see on the new builds with TUI Cruises are huge. We always said when we put something into the joint venture, the 50% should add more value to us than keeping the 100%. And you may recall that the new two ships are on the same series like the TUI Cruises: Mein Schiff Flow and Mein Schiff Relax. So a lot of synergies also with the Royal Caribbean on operating these ships. By the way, we have three options, which have a high value. There are no building slots available till '30 something. So we are very happy to also have three options. And the question is absolutely right. What does it mean for Marella? Marella is performing outstandingly well. You've seen all the prices they have received. We believe that there is even room for more tonnage in the U.K. or put it also into North Europe, including the Nordic countries. And this is -- by the way, we have the Board meeting with the Royal Caribbean later today in London. There are opportunities which we will explore. But it was important for us that we have the right vehicle where we get all the synergies. And one thing is also clear, it would have been a significant stretch to our balance sheet and financing, and we wanted to be very much on the safe side. But the rationale is 50% should be more valuable than 100%. Dynamic, non-Dynamic, that's a good question as well. We very much believe in the non-Dynamic -- in the Dynamic, in the risk-free product. And we also believe in the wholesale product. The question is, what is the risk right we have. In the past, we have had sometimes too much risk capacity that we have now have found a good solution. That is a definition that we -- of the risk capacity, which we think we can sell well and the growth should come from Dynamic. It's not an or, it's an end. And it was very clear that the focus is on selling the risk capacity, even if that lowers the Dynamic of the selling of the non-Dynamic. Now we have Risk Right, we do see significant more opportunities to grow there. And of course, we had also to do some technology homework. We haven't had all the carriers, the third-party carriers. We haven't had too many NDC connections. We have now connected British Airways. Others will come even before Christmas. So, we had to do -- to lay the foundation with significant IT divestments on Dynamic. And I would say that the growth should come from -- in TUI from Dynamic, which means that it would equally translate into growth into growth with Dynamic. Andrew Lobbenberg: Can I just ask, I mean, on the U.K. on -- I mean, the existing Marella fleet is older than the TUI Cruises fleet. How long can it go? Or is there a time when you refurb the old vessels and they can just keep going into the future? Or are there technology or environmental issues that put a defined time line -- time -- lifetime on them? Sebastian Ebel: We very much believe with all the investment, and we are refurbishing. And we are doing a lot of sustainability investment. But compared to cash flow, it's a very nice picture, so that they can stay in service until the '30, '35. There are now -- and I don't want to elaborate too much because this is just brainstorming what I said. There is also a life for refurbished tonnage, and we do see as the new build slots are very, very limited or you can't get any at the moment for the next 10 years or 7, 8 years, but I would say, 10 years, it could make sense to have also some reasonable investments there. And that's what I said. That's something we have to develop. For the time being, we had assumed that having new ships, which are double the size of Marella, we will see significantly improvements even with our 50% share with our development in Cruise, there might be opportunities which we haven't seen half a year ago, because if we have seen Mathias showing 5% higher occupancy in our load factor or booking in TUI Cruises, I mean, with 45% higher capacity, it clearly shows that we sold too cheap, but it's more than a luxury problem. So, there is something to do with us, but more on the opportunity side than on the risk side. Really like what they have achieved is really amazing. Operator: [Operator Instructions] Our next question comes from Kate Xiao from Bank of America. Kate Xiao: I have a few questions on AI. In your presentation, you mentioned that your products are open to all LLMs. I wonder what that means. Are your products kind of bookable directly on the kind of AI agent level? Or is it through your own apps? I think through by your example, it looks like it's kind of more through your own app. Then I wonder if there's scope to kind of integrate further, hence, bookable directly at the AI agent level. And then the other question is, are you seeing increased demand right now already from the AI front? Can you quantify the benefits you have seen so far? And finally, on the cost front, any numbers we can share by implementing AI, say, what would the contribution be in your Markets & Airline business to that 3% EBIT margin target? Sebastian Ebel: As said, we believe that AI is changing the tourism, how we distribute. And our own brands are very, very important because we want to get as many of our customers direct on our app into our product. And that's why we have increased and changed the split of performance marketing into brand marketing. And apparently, it works well. Maybe we -- most likely, we have been under-invested in brand. So, we -- marketing, so therefore, we shift. If you look at LMMs, it's really exciting. For the first time, TUI is ready and the LLMs are not ready. And why are we ready? You have seen it with Mindtrip. It's working. We do see it where we use it internally and the LMMs are still optimizing what they do. It was interesting what ChatGPT or the owners said what they have to do first before they start with the sales shops. For us, it's important to be directly bookable so that the customer says, I want to go 2 weeks to Mayoka with this and that. And then he gets the TUI offers and then he's in the TUI ecosystem to book it. Technically, it is possible. We are waiting to get connected. And you could argue, but that is then open for many. I mean, there is a first-mover advantage, but our advantage is we have the Robinson Club, others don't have. We have the TUI BLUE, others don't have. We have the service component, which is very, very important, especially in our customer segment with also customers at the -- with different age pattern. So, we very much believe that this exclusive content, differentiated content is a difference. When you talk about where can we use AI to have lower cost, one, to increase the conversion rate in the app. That's something we have started to see. And a good example is for us when it comes to service. I mean, people calling -- asking a question. Today, a big, big share is done by AI. And then you could ask, what does it mean, because we got the question before on the workforce. In these areas, we work with a lot of service companies. And there, we were able to reduce that a lot. The next step will be content production. A lot of things will be automized with better quality, pricing. We still have a lot to do to improve our pricing. Maybe others are superior there. AI is supporting that a lot. So it's both things to get better outcome, better content, better prices and on the other side, to decrease -- to improve processes and to decrease cost for that IT development is a great example. I remember 2 years ago, we had thousands of external people. Today, we have maybe 30 or 50. And we really lowered -- almost vanished the number of external people and we do it with us. And I would say, today, it is -- you have the factor of 5 if you develop something with AI systems in IT, and there's even more to come. This is a way, and it needs education. It needs a very clear target. But the organization is really, really excited about it. And it's for us the opportunity to maybe overtake the one or the other, and that's why we put so much effort into it. And it sounds by far easier than it is. Right, Nicola? Nicola Gehrt: Right, as always. Operator: Our next question comes from Karan Puri from JPMorgan. Karan Puri: I have two questions, if that's okay. The first one is on the balance sheet and cash generation. Just wondering with leverage not too far from your midterm target and with cash generation picking up nicely as well. Wondering if the 10% to 20% dividend payout ratio is more so a floor with potential for an increase if you continue to delever. That's question one. Maybe we can start with that and I'll come back to question two after. Mathias Kiep: Yes, exactly. But they say cash flow breakeven at some point at the start of the next phase, very clearly. So as I said, one is we need to bring leverage further down, and this is below 0.5x. As of today, 0.6x. At the same time, when we look at leverage, what will be, of course, what we need to consume at the same time is the order book of Boeing, which is peaking '26 and '27. So, this is something where we expect that we can, of course, work on leverage, but at the same time, something that we still need to consume. And this is some -- so I think on the back of that, we've decided to propose a starter dividend and we are -- have defined this 10% to 20% of underlying EPS as a dividend strategy going forward. Again, it's to be defined in each year where we are. But at the same time, I think we really balance with that deleveraging, consuming of investments and good basis for shareholder returns. That's the idea behind it. Karan Puri: Perfect. The second question is actually on the newly announced EUR 250 million cost savings. Despite this sort of incremental EUR 250 million, you've kept the midterm EBIT guidance unchanged. What is the best way to think about this? Does this imply that the underlying momentum across the other buckets of Dynamic Packaging, Airline Commercialization, et cetera, is tracking a bit behind? Or it's you just being conservative? What -- how should we think about this, please? Sebastian Ebel: It's important to achieve what we have promised. And -- I mean, we haven't had in mind the Jamaica incident, which was a significant hit. We want to make -- to do as much as possible to fulfill what we promise to the market. If times are great, like last year, we are able to overachieve. There might be times where they are even getting more challenging because the economy is the war and so on. I think reliability is a very high value for us. And I mean, it's better to fulfill with a very high certainty what we promised or what we outlined, what we are achieving then to add up all the opportunities we have. Operator: Our next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two related questions, please. In terms of the travel environment in Europe, how would you frame that right now? You referenced the competitive nature of the environment. Is that pure competitive tension? Or is that in the context of some kind of caution from consumers? And obviously, there was the later profile of bookings over the Summer. And then looking forward, for the ASP growth you've referenced for Winter and Summer, is this mostly like-for-like pricing? Or is there mix or duration effects that are also moving this metric? Sebastian Ebel: I mean we are lucky that, for example, in the Hotel business, whatever is the impact from Europeans or U.K. customers, it doesn't hit us, because we -- I was on Lanzarote last week, absolutely packed. I've never seen so many French people, so many Spanish people, and I've never seen so many Asian people. So, we benefit from the global distribution we have built up. On Cruise, it's the product. And therefore, it is very much sold out. If I look at the European or if I look at Musement, they have now a lot international customers, which are not Central European ones. But also the European market is not homogeneous. If I look, there's strong growth in Eastern Europe. So you know about our successful Polish business who went -- they went into Czech, doing very well. At the moment, they go into Romania, soft launch, a real launch in February. Spain, which was always a challenge for us. Outgoing Spain, for the first time turned positive, and it's growing significant in Portugal, Latin America. So it's important these markets outside the core markets. Because, if I look at Germany, if I look at the U.K., I would say at least there is no tailwind. And with the political uncertainty, and I know it, of course, better in Germany than in the U.K., there might be even effects. We are -- and looking at Germany, we are maybe less impacted, because we are in the customer segment, which has a higher income and the lower segment, and that's why we had the one or the other insolvency, which the company who were at the lower end, they suffer more. For us, it's important to be as resilient and to have the broadest distribution we have to make sure that the Cruise, the Hotels, the Musement products are having the highest possible occupancy. And if you look into the seasons, we had a good start, but we quite often had a good start. And even if you are now 10% or whatever percentage up, you can lose that in a week, in turn of the year season. So that's why it's so difficult to give a good and solid outlook. But we -- the resiliency we got is making sure that we can fill our assets. And at the end, if it's 10% or minus or 10% on Markets & Airlines, it's very important, and we need the growth, and we are envisaging the growth, but we can -- could lose the game on the Holiday Experience. And as we don't do that and we win there, it's so important that we get from markets -- the customers into our assets. And this works well, and it works even better now than it worked a month ago or a year ago. Operator: [Operator Instructions] Our next question comes from Richard Clarke from Bernstein. Richard Clarke: Just starting on Cruise. Are you seeing any benefit in Europe from maybe less capacity some of the other Cruise companies have redirected capacity to the Caribbean? Is that helping yields? Are you thinking about your planning for where you're going to run your Cruises based on that? And maybe in that context, why are you only seeing prices flat, particularly where you've got new ships, why are prices not growing in the Cruise business? Second question, I think this year or next year, I guess, you're saying the bigger contributor to the 7% to 10% will be the Markets & Airlines business. How should we think about -- I know, you've got a useful slide at Slide 42, but just the shape of that 7% to 10%, would you expect beyond '26 that we would see the Hotels and the Cruise business being the majority contributor to that 7% to 10%? And then thirdly, I know you sort of explained the dividend sizing. But in the past, you used to at least be able to return the TUI Cruise dividend back as a dividend. It looks like your dividend is going to be below the TUI Cruise dividend to you. So, just wondering why at least that isn't being able to pass back to TUI shareholders. Sebastian Ebel: On Cruise. I don't know if we benefit from less capacity. What I know is that the value proposition of TUI Cruises, Hapag-Lloyd and Marella is superior. TUI Cruises new ships, the well-being approach, the all-inclusive approach, amazingly great product. Hapag-Lloyd, the same. Marella, and that for me has been the biggest surprise, and therefore, I'm so really grateful to the management and the team there. If you look at the prices they win at the food concept. It seems to be that they do a lot of things right. And then the right question is, why are prices not better. And that is a question we put to the management there. To be fair, no one and especially not me anticipated that the demand would be stronger than the capacity increase. So there is something more to be done on the prices. On the other hand, and we know it from markets very often, the customers you don't get in the beginning, you have to pay a lot to get them late. And therefore, we are really grateful to the capacity there. Do you want to say a few -- and maybe last before Mathias goes into the detail, I think it's very clear, and that's why we always stress so much the business model, having strong distribution, which fills our assets. Yes, we want to have a significant increase in Market & Airline profitability, but the majority, I would -- I mean, I couldn't assume that this would be the other way around. Mathias Kiep: Yes. And maybe just on the dividend. To be fair, I think we developed the dividend looking forward. Again, as I said, balancing deleverage targets, investment and consumption of the investments -- and please do not forget that the Aircraft delivered by Boeing directly move on balance sheet if they are leased or asset financed and that the CapEx is primarily related then to the adjacent engines, et cetera, maintenance events that we need to move through CapEx. And then thirdly, to have a decent returns to shareholders and to have a good dividend yield in line with as what we get as comments from investors and business partners. I think in the past, the dividend policy was really on different pillars, and that's why I think it's not really comparable. Just a few words on the guidance growth. I think the 7% to 10%, if you -- I think they have 2 elements indeed. One is what are the building blocks in terms of investments that you can already see today that, in particular in HEX will then deliver a certain earnings growth going forward. And that's one element. The other element is the benefits from Markets & Airlines. And naturally, I mean, there's a kind of overall improvement that we expect. But also if you go to the regions, and Sebastian, you mentioned the success that we had in Nordics. We reduced capacity there to the right capacity. We have an issue in the Belgium, Netherlands model, which is similar. I think that's something you need to put into context. But what is for the guidance, very important, this is more back-ended very naturally. So, this is more towards the Summer where we expect then the profit growth in that area. Operator: Our next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one about the German market and the reinvestment plan, which has been presented by the government. Could you give us some more color about your feeling on the one consequences of this reinvestment plan and the trend that we could see and potential good news that we could see in the consumer and the travel and leisure sector. Second question about the booking trend. You are relatively cautious on the Winter, partly because of the negative base effect. But what do you see in terms of trends on the last booking? And do you see any significant evolution on upgrades or downgrades in terms of segmentation of the bookings? Sebastian Ebel: You mean the investments of the -- increased investment of the government? Andre Juillard: Yes. And the consequence it could have on the consumer side. Sebastian Ebel: How should I phrase it politically correct? I think, Germany is in a very difficult situation, and we would need significant more rigid changes. And at the moment, we try to have a debt-related investment program, which may work or may not work. At least it will not change the sentiment as long as not main questions are solved. So, I don't see any positive impact to any business in Germany. And coming back to your booking trends question. As I said, it's very difficult to predict. On Winter, we said margin is very important and another 1 or 2 volume with lower margin doesn't help us, because the risk capacity is set right. We had strong Black Friday 2 weeks, which personally surprised me a little bit. But of course, as I said, whatever we have today, it is important, but the main important season is the change of the year -- a season, and then we will know. I think, it's very important to protect margin and where we cannot protect the margin to make sure that the cost element is more than what the market would see. So, the prediction is more difficult than it has been in recent years. And it's important that we are cautious that we are not going into a risk strategy, but in a well-balanced strategy. And is it a late booking pattern? What we do see, I don't see that too many things has changed. There have been change that some of the consumer segments like the families, which is luckily not so much the TUI business with two or three kids, they don't have the money too much anymore to spend in travel. They are more a segmented oriented change or Egypt because there's a great price value for the customer is growing significantly and other countries are losing. So it's important to be resilient, to be dynamic, to change quickly and to live with these changes. Operator: We currently have no further questions. So I'd like to hand back to Sebastian Ebel for any further remarks. Sebastian Ebel: Team, and I always say thank you to the whole team is working very hard. Transformation is not easy, and it only works if our people work with us, if we get the right products to the customer. And as we do see that day-by-day, we see progress, we are confident about TUI's future. We have huge opportunities. We have significant risk, which we have to manage. And therefore, I very much believe investment in TUI is a great thing, because we not only work hard, that's a lot of people doing, but we are seeing that we can give great offers to our customers and to support trends we do see in the market. So, thank you for being with us and asking your questions and challenging us. Mathias? Mathias Kiep: Thank you so much. Nicola Gehrt: Thank you so much. And the only thing remains, have a good festive season ahead of you. Sebastian Ebel: And go with TUI. We still have some seats available. Mathias Kiep: Excellent. Nicola Gehrt: Thank you. Sebastian Ebel: Thank you. Bye-bye. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Operator: Hello, and welcome to the Chewy Third Quarter 2025 Earnings Call. My name is Emily, and I will be coordinating your call today. [Operator Instructions] I will now hand over to our host, Natalie Nowak, to begin. Please go ahead. Natalie Nowak: Thank you for joining us on the call today to discuss our third quarter results for fiscal year 2025. Joining me today are Chewy's CEO, Sumit Singh; Will Billings, our Chief Accounting Officer and Interim Principal Financial Officer; and [ Chris Depee ], our Head of Commercial Finance and FP&A. Our earnings release, which was filed with the SEC earlier today, has been posted to the Investor Relations section of our website. In addition to the earnings release, a presentation summarizing our results is also available on our website at investor.chewy.com. . On our call today, we will be making forward-looking statements, including statements concerning Chewy's financial results and performance, industry trends, strategic initiatives share repurchase program and the environment in which we operate. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve certain risks, uncertainties and other factors that could cause actual results to differ materially really from our forward-looking statements. We encourage you to review our SEC filings, including the section titled Risk Factors in our most recent Form 10-K for a discussion of these risks. Reported results should not be considered an indication of future performance. Also, note that the forward-looking statements on this call are based on information available to us as of today's date. We assume no obligation to update any forward-looking statements, except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided on our Investor Relations website. A replay of the audio webcast will also be available on our Investor Relations website shortly. And with that, I'd like to turn the call over to Sumit. Sumit Singh: Thanks, Natalie, and good morning, everyone. Chewy continues to outperform the pet category and expand market share with profits once again growing faster than sales. We are delivering consistent year-over-year profitability gains and remain firmly on track toward our long-term objective of 10% adjusted EBITDA margin. Q3 results build on the momentum from the first half of fiscal 2025 and highlight the structural resilience of our model as well as the efforts and execution quality of every team member at Chewy. We exceeded the high end of our net sales guidance, expanded margins and accelerated free cash flow generation. Let's get into the details. Sumit Singh: First, our financial and customer performance. Q3 net sales grew over 8% year-over-year to $3.12 billion, primarily driven by unit volume growth, not price. Growth in Autoship customer sales outpaced total company growth increasing 13.6% to $2.61 billion. As we have discussed before, Autoship revenues are highly predictable and allow operational planning to reduce cost and grow margin in a way that gives Chewy unique structural competitive advantages. We ended Q3 with 21.2 million active customers, up nearly 5% year-over-year and delivered improvements across every part of the active customer funnel. Marketing efficiency continues to strengthen as we deploy spend with greater precision, attracting high-quality customers, driving stronger conversion and improving LTV to CAC ratios. Enhanced mobile app functionality is lifting direct traffic with app customers and app orders up approximately 15% year-over-year. These improvements supported marketing leverage in the quarter while enabling year-over-year growth in both new customers and reactivations alongside lower churn. Net sales per active customer reached $595, up nearly 5% year-over-year. Sumit Singh: Now let's review profitability and free cash flow. After which, I will comment on some of our ongoing initiatives. Gross margin expanded roughly 50 basis points year-over-year to 29.8%, driven by sponsored ad growth, a strong Autoship baseline and favorable category mix. We believe that these gains will structurally enhance our margins going forward. Adjusted EBITDA reached $181 million, up 30% year-over-year. Adjusted EBITDA margin reached 5.8%, representing 100 basis points of year-over-year expansion and flow-through of about 18%. Margin gains reflect strong gross margin execution disciplined SG&A management and continued efficiency in advertising and marketing. And finally, we generated approximately $176 million of free cash flow in the quarter up nearly $70 million sequentially. Our profitability and cash generation enabled us to repurchase $55 million of shares, while self-funding strategic investments that position Chewy for durable long-term value creation. Sumit Singh: Now I would like to provide an update on some of Chewy's ongoing initiatives, starting with Chewy's health offerings. Chewy Vet Care or CVC, continues to exceed expectations, driving strong utilization, supporting ecosystem engagement and strengthening customer loyalty through recurring high-margin services. Each clinic acts as both an acquisition channel and a retention driver supporting deeper Autoship and health program participation. We have opened two additional CVC practices since our last earnings call including our first one in Phoenix, bringing our total to 14 locations across five states. Two more clinics are opening soon keeping us on track with our previously stated plan to open 8 to 10 locations this fiscal year. Staying on the topic of Chewy's health offerings, on October 30, we announced the acquisition of [ Smart Equine ] a leading [ Equine ] Health brand with strong loyalty and repeat purchase behavior. The transaction is expected to be accretive to adjusted EBITDA margins upon closing. [ Smart Equine ] enhances Chewy's premium health and [ nutraceutical ] assortment and strengthens our position in high-value wellness categories. By layering its premium assortment over Chewy's network and scale, we see significant opportunity to enhance our health and wellness mix and expand both net sales within this category as well as margins. Our paid membership program, Chewy+, continues to outperform our expectations, driving higher order frequency, broader category engagement, higher mobile app adoption and stronger auto ship participation. After launching at an introductory price of $49 per year with a 30-day free trial, we raised the annual fee to $79 at the end of October. Early data shows continued growth and strong conversion from free to paid memberships. Paid Chewy+ members are already delivering gross margins in line with the overall enterprise and with higher pricing in place, we remain confident in the program's growth and margin potential. I would now like to turn the call over to Will for a detailed recap of our results and guidance. After which, I will make some final closing remarks about 2026 and Chewy's future. Will? William Billings: Thank you, Sumit. Third quarter net sales grew 8.3% year-over-year to $3.12 billion, above the high end of our Q3 guidance range. Gross margin expanded approximately 50 basis points to 29.8%. Q3 SG&A, excluding share-based compensation and related taxes, was $588.6 million or 18.9% of net sales and includes approximately $2.7 million of onetime transaction costs primarily related to the pending [ Smart Equine ] acquisition. Excluding SBC and these onetime costs, we delivered SG&A leverage of 20 basis points year-over-year. Consistent with our expectations, we returned to SG&A leverage as our newest automated facility in Houston scaled and as we cycle past certain transitory costs related to the Dallas FC and inventory pull forward. Advertising and marketing expense was $197.9 million or 6.3% of net sales, reflecting about 40 basis points of year-over-year leverage. As Sumit noted, this leverage is driven by higher productivity of spend, not reduced investments. We are attracting high-quality customers and are quickly converting them into Autoship, Chewy+ and health programs, which deepens loyalty and increases lifetime value. These efficiencies reflect more discipline, allocation of marketing dollars and stronger flywheel effects that we expect to build as we scale. Q3 adjusted net income was $135.7 million, up 59.6% year-over-year and adjusted diluted earnings per share of $0.32, landed near the high end of our prior guidance range. Third quarter adjusted EBITDA was $180.9 million, representing a 5.8% adjusted EBITDA margin, up 100 basis points year-over-year and adjusted EBITDA flow-through of 17.9%. Free cash flow for the quarter was $175.8 million, driven by $207.9 million of cash from operating activities and $32.1 million of capital expenditures. For full year 2025, we continue to expect to convert approximately 80% of adjusted EBITDA to free cash flow. In addition, based on year-to-date performance, we now expect 2025 capital expenditures to come in around 1.3% of net sales, below the low end of our prior target range of 1.5% to 2% of net sales. During the quarter, we repurchased approximately 1.5 million shares for $55 million. We ended Q3 with $304.9 million of remaining authorization under our existing repurchase program. We closed the quarter with approximately $675 million in cash and cash equivalents, remain debt-free and had total liquidity of approximately $1.5 billion. William Billings: Turning to guidance. Recall that in Q2, we raised our full year net sales guidance by $175 million at the midpoint, reflecting our bullishness to outperform a market which is expected to grow low single digits in FY 2025. Today, we are narrowing our full year 2025 net sales outlook to between $12.58 billion and $12.6 billion, or approximately 8% year-over-year growth when adjusted to exclude the impact of the 53rd week in fiscal year 2024, with even greater confidence in our ability to deliver incremental margins. We are also narrowing our full year 2025 adjusted EBITDA margin outlook [ to 5.6% to 5.7% ] or approximately 90 basis points of adjusted EBITDA margin expansion at the midpoint year-over-year. Consistent with our comments last quarter, we expect approximately 60% of our adjusted EBITDA margin expansion to be driven by improvements in gross margin. We expect fourth quarter 2025 net sales of between $3.24 billion and $3.26 billion or approximately 7% to 8% on year-over-year growth when adjusted to exclude the impact of the 14th week in Q4 of fiscal year 2024. Our fourth quarter guidance takes into account the strong year-over-year comps of approximately 7% net sales growth in the fourth quarter of last year. We also expect Q4 adjusted diluted earnings per share in the range of $0.24 to $0.27. The which includes an estimated $10 million of closing costs related to the pending acquisition of [ Smart Equine ]. And finally, given our performance in the first 3 quarters of the year, we now expect advertising and marketing expense to come in at approximately 6.5% to 6.6% of net sales for the full year. For the full year, we are also expecting share-based compensation expense, including related taxes of approximately $315 million and weighted average diluted shares outstanding of approximately $430 million. We now expect 2025 net interest income of approximately $15 million to $20 million. And lastly, we expect our effective tax rate to be between 16% to 18% for 2025. I would now like to turn the call back to Sumit for some closing remarks. Sumit Singh: Thanks, Will. Before we take your questions, I would like to make a few important remarks. First, on Chewy's margin expansion and its path cadence and durability as we head into 2026. Chewy has an unmatched position in a uniquely attractive industry. In chewy.com, we have the leading sales engine in our industry, evidenced by the 84% of our sales on Autoship layered on top of a built-out world-class fulfillment network. The best-in-class consumer satisfaction that results from this combination leads customers to trust us with ever-increasing levels of business. As you can see from the growth of our pharmacy business, and our multiyear steadily rising NASDAQ. Q3 shows the result. We delivered both revenue growth and margin expansion even as we made high-return targeted investments in the business. Gross margins continue to expand on a structural basis, supported by sponsored ads, category mix and a growing health ecosystem. SG&A leverage is returning as automated facilities scale and as we cycle through transitory costs. And marketing is becoming more efficient as we increase direct share of traffic and grow our business inside the mobile app. And to be clear, we grew at approximately twice the market rate, taking share again without pricing below inflation or sacrificing margin. In 2026, we intend to press these competitive advantages and continue our pursuit of scalable self-funding initiatives that simultaneously enhance profitability. While we will always prioritize disciplined customer-centric growth, our unique flywheel-like operating model gives us high confidence in our ability to deliver consistent durable EBITDA expansion over the next several years. Our long-term framework is unchanged, and the underlying engines that drive margin expansion are strengthening. We remain firmly on track towards the long-term margin profile of 10% adjusted EBITDA that we outlined at Investor Day. Sumit Singh: Turning to investment levels into 2026 and beyond. What is temporary versus structural? We are highly disciplined in how we deploy capital. A number of the cost impacts you have seen in recent quarters, such as inventory pull forward one-time launch expenses within fresh food, for instance, and early stage Chewy+ incentives are all temporary by design. Our structural investments include automation and health services. And all investments have clear ROI thresholds and measurable payback periods. As we move into 2026 and as we press our unique competitive advantages, we expect the balance of investment to shift towards operating leverage. The framework is simple. Invest where returns are compelling and durable moderate spend where benefits have been captured and drive leverage using our scale across the platform. We look forward to wrapping up 2025 from a position of strength and to a successful 2026. With that, we will now take your questions. Operator: [Operator Instructions] our first question today comes from Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe two, if I can. Curious as the team continues to scale offerings like Autoship and Chewy+ how you continue to evolve your learnings about the lifetime value of customers on the platform. And the second part of the question would be how does those learnings feed back into your strategic initiatives in support of growth given the commentary right there towards the end of the call can submit on some of your priorities over the next 12 to 18 months. Sumit Singh: The way -- first of all, it's a broad question. So I'll try not to ramble and give you some frameworks on how we're thinking about this and why we believe these sort of build on top of each other. Like an intersecting one diagram, there's a strong intersection and strong complementarity between the programs. So I want you to visualize three sort of flywheels, the Autoship, Chewy+, CVC. And I want you to then imagine all of these built onto a closed-loop, highly personalized app mobile app. And so as you envision that these are separate programs that essentially compound NSPAC curves, increased retention, cohort retention, reduced churn and drive both top line as well as greater efficiency in the way that we deliver profitability. Autoship is a rinse-and-repeat product merchandise program that has high reliability and accuracy both in terms of planning, in terms of delivery and high satisfaction rating. Chewy+ is a program that is designed to accelerate the process of discoverability of multiple offerings at Chewy beyond consumables and health, which are sort of top discoverable categories. And in addition to accelerating discovery, it is meant to accelerate NSPAC consolidation. Chewy+ Autoship is applicable to the entire cohort of customers that Chewy. Chewy+ is more propense in our intention to grow NSPAC for customers that spend somewhere between $300 and $700 with Chewy so that there is tremendous incrementality that we can extract from them. A proof point of Chewy+ now that we've continued to run the program, another 6 or 7 weeks since the last time we spoke to you, penetration in categories like hard goods and specialty is running higher than the average penetration for Chewy+ indicating the power of Chewy+ to consolidate discretionary categories, build AOE and provide larger basket sizes. And then CVC, as the -- as we've spoken in the past, and as I spoke on the script, is a lever that essentially expands TAM to incremental $40 billion of health services but also creates an entire health ecosystem where the customer can start the journey online or offline, and ultimately, their Chewy is better off for it and the customer is better off for it. The mobile app, obviously, is a closed-loop system that pushes more and more direct traffic, much more personalized interactions, repeat purchase rates and apps are stronger, AOEs are stronger Autoship subscriber rates, there's a lot of complementarity of Chewy+ and Autoship inside the app, et cetera. So if you think about the way that we're making investments at the top level, we have multiple top line and margin driving initiatives. Then comes the automation and the power of scale that we are -- and in the future, not too long, not too far out the power of AI to compound those gains across our fulfillment, customer care and the rest of the company. And then at the bottom, it built on a really strong unified data layer and modern architecture built around a world-class fulfillment network. So I'm not sure if I hit kind of exactly what you were looking for, but happy to take a follow-up. Operator: Our next question comes from Doug Anmuth with JPMorgan. Douglas Anmuth: Sumit, the active customer growth was the strongest it's been in a few quarters. Can you just talk about some of the drivers there and then just how you're thinking about that in 4Q and into '26 along with just health of the industry. And then just a follow-up on the investment levels in '26. Is there a way to frame just kind of how you're thinking about that relative to what we've seen in '25? Sumit Singh: Doug, thank you for the questions. So let's start with the active customers. So yes, so Q3 active customer performance exceeded our expectation and was driven by improvements across the customer fund. The strength in active customer reflects sort of both gross adds strengthening as well as churn lowering or improvements in retention as we would call it. . On the acquisition side of gross add side, we're benefiting from higher direct traffic, increasing engagement in the mobile app and improved conversion across our platforms, both app and web. To give you data points, we lowered first time to have conversion. We increased daily active usages. We improved SEO performance by double-digit gains on a year-over-year basis. our traffic was up mid-single digits on a year-over-year basis. So the combination of SEO plus app and overall increased traffic was then met with better experiences on the platforms that drove higher conversion and as such, new customer conversion was better. So these things added up in Q3 and in our opinion, are durable moving forward. Retention at the same time, continues to strengthen as customers deepen their engagement especially across categories like premium consumables, health care, our goods, once again, was strong, I think, 18% year-over-year growth. And as customers increasingly consolidate their spend with us, given that they're finding both value and convenience set. Now moving to the subpart of the same question. So you're asking about how we're thinking about Q4 and then in '26. So '26, we expect durability in net adds file continuing to increase. Let me hit Q4 more directly. So the implied moderation in Q4, if you calculate the fill in the blanks kind of question, you'll end up at the high end of low single digit for Q4. And that perhaps offers some moderation of roughly 150,000 customers from Q3 on a sequential basis, right? So the implied moderation in Q4 is largely comp driven and reflects timing more than anything else. We're cycling a much stronger Q4 from last year in terms of net adds, that naturally creates a tougher comparison. I should also note that when looking at Q4 quarter till date, we like the momentum that we're seeing on net adds, and we're running ahead of our forecast. There's still half the quarter left to go. So for now, it's prudent to hold kind of the conservatism that we're bringing forward here. What else. Okay. Now moving to the second part of your second question, which was investment levels on second let me just read this frame up for. Can you repeat the second question? Douglas Anmuth: Just really just trying to understand your comments towards the end there just on investment levels in '26 relative to what we've seen in '25. Sumit Singh: Yes. Okay. So first of all, I would like to perhaps just say that we've seen 2025 being characterized as an investment year. And the reality is, I mean, we're driving both strong top line growth and meaningful margin expansion. We're growing at more than 2x the market. We've narrowed our margin guidance, delivering 90 basis points of expansion at midpoint. And we're doing this simultaneously growth in margin kind of moving together. '26 going to be better, right? So we expect to take share. And at the same time, investment levels are more structural and durable investment levels moving forward, while we continue to self-fund a bunch of the temporary investments that you've seen us take in kind of Q1 or Q2 of this year. So overall, we're going to be thinking about investments in a much more strategic manner and fund structural investments while pulling back on temporary investments because we feel they can self-fund them. The business is continuing to perform better and better each quarter as we move from '25 into '26, especially as our fulfillment center scale, our customer service skills and our marketing drives greater efficiency into '26. Operator: Our next question comes from Steven Zaccone with Citigroup. Steven Zaccone: I want to follow up on Doug's question there. When you think about '26, can you share a little bit more on your mining outlook for demand you talked about net adds, but how do you think about the overall backdrop of the industry? And obviously, '25 has been an improvement versus '24. So how do you think about '26. And then in that context, pricing, we haven't really seen it in the industry. Do you see that being more of a tailwind as we get into next year? Sumit Singh: Yes, sure. So as of this point, we're looking at '26 more or less like 2025. When we'd entered '25, we were expecting stronger industry normalization by the time we exited 2025. A as defined in terms of net household formation in terms of pricing returning back into the industry and strong demographic growth across the category. As we exit 2025, we -- our current read is to view '26 more or less like '25. So industry growing at low single digit, perhaps the low end of mid-single digit. Net household formation kind of remaining flattish. We are -- if you look at the shelf in adoption numbers, we're running at about 100,000, 150,000 surplus between adoption and returns we would like to see this number probably 5, 6x higher to be able to call it a normalized industry. Pricing, if you look at pricing growth in the industry, typically, you'd see a 1.5%, 1% to 2% pricing improvements on a year-over-year basis. And we'll wait for 2026 to kind of the signals to become a little more clear. I'll address your pricing question here in 1 second. But for the most part, we're viewing '26, much like '25. Underneath of it, as you've heard us comment we plan to bring forward a plan that is very clearly share taking in '26. I'll stay away from guidance and we will come talk to you more in March, when we report Q4 and discuss 2026. In terms of latest perspective on pricing, so pricing has remained rational and stable, with no material benefit or detriment from inflation or deflation in recent quarters, right? And as I alluded, we're maintaining healthy and regular dialogue with our supplier partners, and so far, we're watching this very closely. For the most part, we believe is going to be a structural unit volume growth here, perhaps the pricing benefit is going to be slightly larger than what we've seen in '25, which was nearly muted or 0. So more to come when we talk 2026. Operator: Our next question comes from Nathan Feather with Morgan Stanley. Nathaniel Feather: [indiscernible] my end, first, we talked about the strong net adds, and with that marketing still showing really nice leverage year-on-year. So what's working in the customer acquisition funnel to help you be more efficient in acquiring cohorts should that persist? And then on the margin side, the full year '25 margin guidance does imply 4Q EBITDA margins take a step down on a sequential basis. Can you just help us think through the margin puts and takes at the end of 4Q. Sumit Singh: Sure, Nathan. So on marketing, I think you have to go back 2 years and build from there. And I'm sorry to take you back 2 years. But really, this is the compounding effect of the journey that I have been very transparent and articulating over the last 2 years. If you recall, we started with connecting the funnel all the way from lower middle and upper funnel. And that takes time to sort of build and mature because you have to essentially rev up your creative engine, you've to rev up your concepting and go to market. And so that takes a little bit of time. Underneath of that, we were pushing for -- I came to this call 2 years ago and I said, we're going to be mobile first and mobile is going to be a priority. And so we have continued to see the mobile app become stronger in terms of the percentage of traffic going through a percentage of owners going through it and overall metrics of retention of the customer file that we essentially extract through our mobile ecosystem. Number three, we last year, you heard me come to the call and talk about rebuilding our CRM engines, rebuilding bidding protocols, improving models and connecting these together. And so essentially, if you step back from the details, two things have happened, right? The output of these efforts have been, a, there's increased traffic that we are pulling which is the result of net new assortment programs like Autoship strengthening, much more offerings, [indiscernible] program. So we've continued to innovate and bring new offerings to customers. We've continued to improve the way that we go to market. These two results, we have continued to improve these results in higher traffic. Then we -- underneath of it, there is the power of SEO and the power of apps that actually converts a bunch of the third party into one traffic. Then when traffic hits the website, you're working on improvement and experiences, and our app fundamentally looks different from how it looked 18 months ago. Next year, it is going to look even better than what it looks right now. So we expect continued improved conversion. And so it's basically a calls and clicks and conversion-driven sort of phenomena underneath of it is a lot of activity and built around a lot of innovation that we are bringing to the market in leading as a single category [ captain ]. And then -- so yes, as we do this, marketing is getting more efficient. We've talked about it now for a couple of quarters. This one, this quarter was more definitive than the previous one. Signals are more clear to us. We expect to take these signals into 2026 and come talk to you more in greater detail in March. Was there a follow-up? Unknown Executive: Margin [indiscernible]. Sumit Singh: Yes. So on margin, it's not atypical for us to view Q4 as an investment quarter, right? Multiple things are going on. A, promo levels are higher, pricing is generally not help -- not your friend in Q4. On top of that, structurally, you're essentially pushing a lot more units through your fulfillment center. So leverage that you expect in other quarters, you don't get the same type of leverage in Q4 and then marketing intensity and media rates are elevated in Q4. So it's kind of hard to evaluate Q4 on a sequential basis. We feel very good about the momentum that we have right now and the quality of execution that the team is delivering through. On a year-over-year basis, we're delivering at midpoint 90 basis points, and that equates to roughly 25% profit increase year-over-year on growth that is roughly -- that is at 8% levels. So 3x incremental profit than growth on a rate basis. We're quite pleased with that. Operator: Our next question comes from Shweta Khajuria with Wolfe Research. . Shweta Khajuria: Can I please try to -- first, Sumit, on gross margins, can you please talk about the trends in gross margins and how we should be thinking about it going forward, especially as we think of 2026 and just the puts and takes, how much of 2025 will actually apply for 2026 when we think about gross margin trends? And second, is when you think about the customer adds for '26 and the durability of customer adds, how should we be thinking about how much of retention is a driver versus gross adds? Where do you feel more confident? And which of the two factors do you think will be a bigger contributor. Sumit Singh: So on the first one, gross margin. So again, I'll stay away from specifics on '26. But let's look at the view the forest rather than the trees on this particular call, and we'll come talk to you on the trees in 2026. So the view of the forest is the following, right? At exit of this year, we have less than 450 basis points to go to hit the 10% long-term EBITDA margin. We expect roughly half of that will come from gross margin. The other half will come from OpEx. And so what that tells you is, first of all, there are expansion opportunities, growth opportunities and gross margin that we will continue to bank upon. Now what are the -- now there are several gross margin expanding levers, and these expand gross margin on a structural basis. There is adds that is continuing to grow steadily. There are premium category mixes that we are very well known for and continue to capitalize and consolidate share in private label is strengthening with the launch of fresh. We will have more exciting news on private label to share with you on our March April call, the health ecosystem is continuing to strengthen Chewy+. There were concerns coming into last quarter about margin headwinds. We've kind of clearly articulated our position on it. So there's not a drag from that point of view moving forward. We expect incrementality perhaps. So when we look at our scale, continued growth of Autoship, there are so many different vectors that are on different arcs. Now there will be a few years where these vectors will compound and you will see amplified gross margins for that particular year. On other years, we might essentially choose to -- in other years, you'll see more similarly focused returns coming from a handful of these vectors versus the cumulative effect. But when you take the long view, when you take a multiyear view, these are compounding vectors that give us confidence on the trajectory of gross margin. As we've continued to educate and earn trust relative to the fact when we came to market in 2018, '19, when gross margins were at 20% levels. So that's how I would characterize gross margin. In terms of customers, as I mentioned, we expect customer adds to be durable. On the backdrop of a market that is going to look very much like '25, we're in the middle of forecasting 2026. And so I'll stay away from guidance, but we do expect the performance that we've shown this year alongside some of the improvements that I've talked about the marketing and the engine and the innovation to be durable as we move into '26. In terms of gross adds versus retention, look, this is actually -- it's not which one is more important. The purpose of a business is to both acquire and to retail customers. So it's an and, it's not an or, in our opinion, but it's a mathematical equation. If you look at the overall market, there is 90 million U.S. households on a normal year when normalizations kicked in, you're seeing 10 million to 15 million new pets incrementally in each sort of household. On top of that, we believe we have roughly 50 more million people that we should be touching out there. Of which 15 million of these are highly propense to online. And the last 5 million, 7 million, 10 million are perhaps not the right type of Chewy customer. So the point is that we have a very large set of households that we can still touch. The refresh rate is not a static refresh rate. So when normalization kicks in, you should only expect tailwind on top of the results that we're delivering. And then our internal engines like Chewy+, like Autoship, like app, CVC, the health ecosystem, et cetera, this helps us continue to improve retention. So it's an and equation to us, and we are squarely focused on both, not just one. Operator: Our next question comes from Anna Andreeva with Piper Sandler. Please go ahead. Anna Andreeva: Let me add my congrats. Nice quarter. Curious on Chewy+, can you talk about if you've seen any changes in retention when you raised the fee to $79 from $49 previously. And great to hear about expectations that the program is no longer dilutive. How should we think about that penetration into next year? And then we had a follow-up. Sumit Singh: Okay. So in terms of the elasticity, the conversion that we saw once we raised price, conversion has remained quite strong, and has exceeded our internal expectation from an elasticity point of view. So the percentage of price increase and the loss of demand conversion is essentially the ratio that I'm talking about, that is better than what we forecasted. So we like that. . Number two, yes, on the margins, like, look, I mentioned that our paid -- is members are already delivering gross margins that are in line with the enterprise and the higher pricing only strengthens the profile. So from an economic standpoint, we feel good about where the program is today and how it scales. It is early. Another data point that I'll give you is, at this point, 80% of our member mix is now paid right? So you can kind of see that as the program scales, right, it will continue to become more efficient, right? So the initial investments get recouped very quickly even quicker with the increased pricing and then the conversion is holding better than expected. Obviously, it's slightly lower than what it was at 49%, but nothing that we're too concerned about at this point. Let me see. How should we think about penetration next year? So I'll stay away from comments on next year. In terms of what we've said about last quarter, our expectations for the program haven't changed since we've spoken last quarter. Another data point that I shared on this call today was we're seeing strong member penetration in categories like hard goods and specialty that aid basket building and drive NSPAC consolidation. So we kind of like all the signals that we're getting. It's acting as a complementary program driving discovery across platform especially across some of the discovery discretionary categories. Anna Andreeva: That's really great. And just as a follow-up, on the 4Q guide, you mentioned that a running ahead of plan. Just anything else you can share what are you seeing in the business quarter-to-date? Just any learnings from the Black Friday and Cyber Week. I think you had mentioned previously that Chewy might lean into promotions in the fourth quarter. So far, I don't think we've seen that any update on that thinking? Sumit Singh: Yes. So we were pleased with the performance during this important peak period, the Black Friday, Cyber Monday week. The week came in, in line, very much in line with our expectations. The team performed really well. Execution was strong. Supply chain backlogs were healthy in-stock levels were maintained at really healthy levels. So overall, we were very pleased with it. The discipline around promotional spend and marketing efficiency we talked about in the call continued through this important holiday event. So your observation is spot on. Net sales in Engage sessions were up year-over-year, while total event spend and customer acquisition costs were down year-over-year. right? Overall, we've built this -- as I answered Doug's question, we are running ahead of plan currently. So I don't want to get into revised guidance given that we just gave guidance, but yes, quarter-to-date, we like the momentum that we're -- that we've headed into December with still sort of a lot of the quarter left to go. So we'll come talk to you about this in April. And all of our scenarios are built into the guidance that we've just provided for a few minutes ago. Operator: We have time for one final question. And our last question today comes from Dylan Carden with William Blair. Dylan, please go ahead. Dylan Carden: Really appreciate that. I'm curious the interaction between Chewy+ and Autoship is the idea that the number of auto ship customers could equate to the number of plus customers and it's just expanding the basket, reaching into more discretionary categories. And to the extent the scalability of that, you've provided numbers on box productivity, which, given your current scale, it doesn't move the needle much. But can you provide -- you kind of mentioned some of the broader ecosystem implications, Kind of where are you seeing the benefits and maybe some of the markets where you have those open. Sumit Singh: In, so the interaction of Chewy+ and Autoship. So I think I was trying to articulate this at the beginning of the call with Eric's question, let me take a crack at it again. So these two are complementary programs. Autoship to us is a merchandise product level membership program. It's free in nature, and it delivers, it works like -- it works like a quasi subscription, very much predictable and highly reliable. It's sort of a rinse and repeat, fill it, shut it, forget it kind of a model. What we like about Autoship is it's not a dormant program. So we see continued activity on customers from customers that participate in core seasonal events and attach rates. At the same time, Chewy Plus, right, the purpose of launching Chewy+ is multifold. A, it is a discoverability driver given that Chewy has so much more to offer than just consumables and health. So it is a discoverability offering. Number two, it accelerates NSPAC consolidation. And number three, we're early, so the data is still sort of building for us. But hopefully, next year, we're going to come and talk to you about this when the cohorts are large enough, it should aid in a very healthy way in improving our retention from already strong levels that we are seeing currently. So those are the three sort of net purposes. As you can see, the purpose is kind of aligned back and forth between Chewy+ and Autoship. The difference is live here Chewy+ is targeted and propense to members that are spending $300 to $600, $700 with us so that there is incrementality of spend. Number two, it's driving consolidation of basket. So faster discoverability of hard goods, the toy that you have to add, you don't have to think about kind of reaching shipping thresholds. So it's improving order frequency, the repeat sort of traffic that we've seen on the website is multifold increase from customers, et cetera, et cetera. So those are the two -- and they layer on because if you combine the two, the value and convenience essentially increases multifold, and so underneath of it, we'll make sure that the program retains economic sensibility. But from a customer end point of view, these are very good programs to go to market with. On CVC wet, you said box productivity not overly material. Can you expand on the ecosystem benefits. So I mean recall, again, at the end of the year, we will come forward with a detailed review memo on how CVC is performing and our expectations for the future. So we are going to open up a look under the hood in the next few months. For now, I'll stick to the commentaries that we provided. We're seeing customer incrementality, 4 out of 10 customers that are walking into CVC, our net new to Chewy. In a very short time, we see 50% of customers in CVC reach out and expand their connection to chewy.com by adding many more categories. Our Retention rates are running high. Our CSAT has continued to run at 4.8%, and these are not internal metrics. These are Google ratings that I'm quoting. So overall, the product is resonating really well. Wet recruiting and retention has remained really well for us, and we continue to expand. At the end of this year, we expect to be in the 16% to 18% range that we have originally forecasted. Dylan Carden: Great. I'll wait for that. I guess the question on Autoship versus plus -- I mean, is it simple math to think that all Autoship customers are available to become plus numbers and therefore, expanding you mentioned sort of net bet consolidation? . Sumit Singh: Yes. Yes. But remember, the comments that I'm making now, Chewy+ affords us the ability to be targeted and segmented. And that's the power of running programs on digital platforms. We can consume unified data signals in a much more accurate and precise way and target and segment the program to customers who we believe will benefit from the programs or who will find the program attractive, but also Chewy will benefit equally well from those type of sign-ups. So while Autoship is applicable to 100% of customers, Chewy+ may or may not be and the overlap, you have to sort of combine my two statements in terms of NSPAC thresholds. And penetration in X categories, ex being nonconsumer and health categories to be able to find the intersection there. Operator: Those are all the questions we have time for today. And so this concludes our call. Thank you all for your participation. You may now disconnect your lines.
Operator: Thank you for standing by. My name is Jill, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill, Inc. Third Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your question, please press 1 again. 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, Inc.'s SEC filings. The forward-looking statements made in this recording are as of December 10, 2025, and J.Jill, Inc. does not undertake any obligation to update these forward-looking statements. Finally, J.Jill, Inc. may refer to certain adjusted or 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 December 10, 2025. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. That's jjill.com. I would now like to turn the conference over to Mary Coyne, CEO. You may begin. Mary Coyne: Good morning, everyone, and thank you for joining us today. As seen in our press release this morning, we had a solid third quarter. We delivered better than expected earnings results with top line at the high end of our expectations for the period and drove healthy cash generation, a hallmark of our operating model. During the third quarter, we saw a positive response to newness in the assortment, particularly in jackets and bottoms, including our fashion denim, faux suede, and faux leather outerwear. We also took opportunities to test and rebalance our marketing mix, pulling back on catalog circulation while leaning into digital channels where we know customers are increasingly transacting. Within digital, we saw success especially in prospecting where growth in new-to-brand customers delivered a healthy return. We also refreshed our imagery in store windows, digital, and catalog leading to positive responses with customers noticing the more compelling displays and presentations. From a retail expansion perspective, we opened two new stores in Q3, one in Chicago, a reentry market, and one in Houston, an existing and growing market for us, and are pleased with the early results they are driving. As we exited October and entered November, however, we saw a change in trend. The competitive market became very promotional very early. The customer demonstrated increasing price sensitivity, and our holiday product assortments did not resonate as well as we had planned. Importantly, we are not standing still. Our entire team is collaborating, bringing fresh perspectives and new ideas as we focus on reinvigorating the customer file and driving growth. As we talked about previously, our goal for the second half of this year was to test and learn and inform our plans for 2026 when we will have the ability to more fully influence the product assortment. We remain focused on our three strategic priorities. First, evolving our product assortment. Our merchandising and design teams are now in place and working together to eliminate redundancy, incorporate new styles that serve more of our customers' lifestyle needs, and focus on areas where we see opportunities for scale. We recently introduced very small capsules in sleep, travel sets, and cashmere. We were able to chase into for the holiday season and are seeing strong full-price results despite the promotional trends I mentioned earlier. We have also begun testing a more localized merchandising and planning strategy with promising early results from our New York store pilot where we tailored the assortment to local customer preferences. Second, enhancing the customer journey. We will continue to rightsize our catalog circulation while reinvesting spend across channels and marketing funnels. Building on our small, localized television advertising pilot last quarter, we are now testing a small national linear and streaming broadcast pilot as we continue to assess and learn how best to expand our reach. Our stores continue to serve as powerful marketing vehicles, driving brand awareness while maintaining strong economics and profitability. We are excited for the new stores that will open before the end of the fiscal year, including our most recent opening in Pinehurst, North Carolina in November and our anticipated reopening in Asheville this month. We look forward to continuing to capitalize on the long-term opportunities for store growth ahead. Lastly, we are enhancing the customer experience with plans to launch a non-tender loyalty program toward the end of this fiscal year. Third, improving how we work. We recently took decisive cost actions to streamline our organization and improve operational efficiencies. These changes, while difficult, position us to operate more nimbly while investing in growth initiatives. We also created a new chief growth officer role, welcoming experienced consumer executive Viv Redke to our team to lead our e-commerce business, advance our AI initiatives, and drive our longer-term strategic roadmap. In summary, while we are focused on managing through the remainder of the year, the progress we are making on our initiatives today is building the foundation for our next chapter of growth focused on expanding our customer file. We are modernizing our brand presentations, maintaining the loyalty of our core demographic as we welcome new customers, and leveraging technology to work smarter and faster. The foundation is solid, the opportunity is clear, and the execution is underway. Now I'll turn it over to Mark Webb for detailed financial results. Mark Webb: Thank you, Mary Ellen, and good morning, everyone. Before I dive into our results and outlook, I want to reiterate Mary Ellen's confidence in the foundation of the business and the progress we are making toward the opportunities ahead. Over the past several years, we have developed and executed a disciplined operating model that generates dependable, strong cash flow that we have been investing into the business and distributing to shareholders through our ordinary dividend and share buyback programs. While we are focused on executing the fourth quarter and 2025, we are also sharpening and evolving our product and marketing efforts to position the business for 2026 and beyond. Now I'll review results for the third quarter in detail. Total company comparable sales for the third quarter decreased 0.9% compared to negative 0.8% last year. Total company sales for the quarter were about $151 million, in line with the higher end of our expectations, down 0.5% versus Q3 2024. Total company sales performance was driven by our direct channel, as direct sales were up 2% compared to the prior year, while store sales were down 2.6% compared to the prior year. The difference in channel performance was largely driven by traffic trends as our direct channel saw positive traffic and some benefit from ship-from-store, while store traffic was soft in the quarter. In both channels, we saw lower conversion trends. However, our teams did a nice job managing promotions and markdowns to yield higher average unit retails. Q3 total company gross profit was about $107 million, down about $1 million compared to Q3 2024. Q3 gross margin was 70.9%, down 50 basis points versus Q3 2024 and included approximately $2.5 million of net tariff pressure in the quarter. This tariff pressure was less than originally expected due to timing and mix of sales and was partially offset by positive average unit retails compared to last year. SG&A expenses for the quarter were about $92 million compared to approximately $89 million last year. The increase was driven by nonrecurring costs and shipping expenses associated with ship-from-store. Importantly, at the end of the quarter, we took decisive actions to rightsize our organization and better prepare our teams to support future growth more efficiently. These actions will positively impact SG&A in the fourth quarter and into 2026, helping to offset expense pressure from new store growth and inflation. Adjusted EBITDA was $24.3 million in the quarter, compared to $26.8 million in Q3 2024. Interest expense was $2.7 million in Q3 compared to $2.8 million last year. Adjusted net income per diluted share was $0.76 compared to $0.89 last year, which reflected an average weighted diluted share count of 15.4 million shares this year, versus 15.5 million shares last year. We repurchased 115,612 shares for approximately $2 million in the third quarter, bringing year-to-date repurchases to about 371,000 shares for $6.5 million, resulting in approximately $0.02 benefit to reported third quarter adjusted diluted EPS. As of November 1, we have approximately $18 million remaining on the $25 million share repurchase authorization. We also paid our quarterly dividend of $0.08 per share on October 1, and as announced on December 3, our Board approved payment of the Q4 dividend on January 7, to shareholders of record as of December 24. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Turning to cash flow. For the quarter, we generated about $19 million of cash from operations, resulting in ending cash of about $58 million. End of quarter inventory was up 8.4% compared to the end of Q3 last year. Excluding approximately $6 million of net tariff costs, inventory was down 1% compared to the end of the quarter last year. Capital expenditures for the quarter were $3.3 million compared to $5.5 million last year, with investments focused primarily on store-related projects. With respect to store count, we ended the quarter with 249 stores compared to 247 stores at the end of the third quarter last year. We opened two new stores at the end of the third quarter, the first, a new store in the existing Houston, Texas market in Kingwood, and the second, a reentry in Orland, Illinois in the Chicago market. Turning now to our outlook for the fourth quarter and full year. As Mary Ellen mentioned, there is tremendous opportunity to evolve our product and marketing to broaden the appeal of the assortments, drive awareness, and ultimately drive growth. We have already been making small tweaks with encouraging results. The full impact of this opportunity will be felt more meaningfully next year. With respect to Q4, the competitive promotional environment elevated with many going early and deep with Black Friday deals. While our Black Friday, Cyber Monday weekend showed some strength, overall, November was challenging, and we believe the elevated promotional environment will continue through the quarter, which is assumed in our guidance. For the fourth quarter, we expect sales to be down approximately 5% to 7% and total comparable sales to be down 6.5% to 8.5%. Regarding adjusted EBITDA, we expect Q4 adjusted EBITDA to be in the range of $3 million and $5 million, reflecting significantly more gross margin pressure than experienced in Q3 given the elevated promotional environment, and the expectation that the full impact of approximately $5 million of net tariffs will hit the cost of goods sold in Q4. These pressures will be partially offset by slightly better year-over-year freight costs. In addition, while we expect SG&A dollars to be relatively flat compared to the fourth quarter last year, we expect it to deleverage given lower sales. Our year-to-date performance and expectations for the fourth quarter would imply that for the full year, we expect sales to be down about 3% and comparable sales to be down about 4% compared to fiscal 2024. For full-year adjusted EBITDA to be between $80 million and $82 million. Regarding store count, we expect to open seven new stores in the fourth quarter, including one opened in November in Pinehurst, North Carolina, a new market for us. We do not expect to close any additional stores this year, resulting in four net new stores for fiscal year 2025. With respect to total capital expenditures, we expect to spend about $20 million in reported CapEx during fiscal 2025. In closing, we are focused on continuing to operate the business with discipline, which, as demonstrated in the third quarter, generates strong free cash flow and supports the investments we are making into the business. Our commitment to distributing excess cash to shareholders is evidenced by our continuing dividend and share repurchase programs. We are energized by the work we have underway and confident that the strategies we are developing are setting the foundation to further support long-term profitable growth. Thank you. I'll now hand it back to the operator for questions. Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking a question. Your first question comes from the line of Jonna Kim of TD Cowen. Your line is open. Jonna Kim: Just curious on how you are thinking about next year as you think about merchandising and also marketing, how you are prioritizing some of your initiatives there. And then just how would you characterize the softness that you saw in the fourth quarter? Is that more macro-driven in your view? I know you also mentioned the holiday products did not resonate. But what changes you could have made potentially to have better resonance with the consumer there? Would love additional color. Thank you so much. Good morning, Jonna, and thanks for the question. As we had mentioned earlier, entering Q2, we knew that we could not influence much with respect to the product. So we are very pleased at how the team navigated and delivered Q3. That being said, towards the end of the quarter, and moving into Q4, we have seen a soft start particularly in response to the assortments. But there is very heavy promotion out there, which started much earlier and deeper than usual. And the customer is demonstrating increased price sensitivity. So I think that, in conjunction with the softer assortment, led to the results that we are seeing today. What we are very encouraged by as we think about 2026 are the learnings that we have had coming out of this quarter. And, you know, to your question about product and marketing, we will be able to influence product assortments as we get toward the end of Q1, and those will be continuing to evolve as we go through the year. We have also done some marketing tests, as we mentioned in the script, about really evaluating digital, rebalancing, and seeing some of those successes. We believe we are poised to make adjustments to our marketing mix next year that will really resonate, bringing in new-to-brand customers, but also maintaining our loyal customer base, which is so critical for us and increasing retention and spend on that front. Mark Webb: And, Jonna, I would just add on to Mary Ellen's comments regarding Q3 into Q4. That Q4 is really never our favorite quarter here. It is different than many other retailers in that our holiday is not our biggest quarter. It is always promotional, and it is the least sort of aligned with our full-price model just given that level of promotion. The sort of macro versus our own product, I think it is both. To the points that Mary Ellen just made. And, really, coming into November, a quarter that is heavily front-loaded right up until the holidays and Christmas and then becomes very sale-focused in smaller weeks for the rest of the quarter sort of leads us to the guidance to really put out there our expectation that it appears that, you know, with those macro factors in November, with the fact that the competitive environment is very promotional, we expect that that promotional level will continue. And we will do what is necessary to manage through this Q4, like we kind of always do, but manage through this Q4 to then enter 2026 clean and really start to see what we are all excited about, what Mary Ellen just talked about with respect to the product and the marketing adjustments that we are making along the way. Jonna Kim: Thank you. I appreciate the color. Operator: Your next question comes from the line of Corey Tarlowe of Jefferies. Your line is open. Corey Tarlowe: Hi, and good morning. Mary Ellen, I was just wondering if you could talk about from a high level what worked well in the third quarter and maybe quarter to date as well where you have seen some green shoots and from a product perspective, that would be good to get an understanding of so much. Mary Coyne: Sure. Thanks, Corey. Yes. In Q3, we saw particular strength in product categories, bottoms, and jackets and outerwear. And we are encouraged as we have seen jackets and outerwear continue to perform in Q4. What we are most encouraged about are some of the categories where we have done some testing. We have seen newness work in Q3, which is very exciting. Again, particularly sort of leather, faux leather, faux suede. And the percent of newness really outpacing sales outpacing inventory was very encouraging. As we look forward, some of the tests that we have done where we mentioned where we put cashmere back into the business in a very small way, the test has won. Where we have leaned into sleep has won. So we are excited about those things as we move forward. Corey Tarlowe: That is really helpful. And then just for Mark, it sounds like you have really kind of taken cost out of the business. Mary Ellen, I think you mentioned that you also made a new hire in AI and technology. So I am curious about how you see the role of technology evolving the business going forward and where you see opportunities for leverage and further efficiencies. Thanks so much. Mark Webb: Yeah. Corey, hi. Let me start, and Mary Ellen can fill in on some of the exciting news around the new appointment. What I would say is a lot of the heavy lifting on systems that we have done to date, which are large foundational systems, help prepare the tech stack to be ready to take advantage of the new technology AI, just by getting cleaner data, getting cleaner and easier, and easier is maybe not the word, but more modern interfaces and integration layers with our system. So we get excited about capabilities that that presents for us as we go forward. And definitely do view having that sort of foundation wave the opportunity to now continue to push into more front-end business type systems enabled with the newest technologies that we can start to test and get efficiencies from as we go forward. Mary Coyne: Yeah. And I will just jump in and say we are very excited to have Viv join the team and lead our AI and technology initiatives specifically focused on AI. As you know, you know, and as Mark just mentioned, there is so much out there that we can really incorporate into our business process. That will just make us more operationally efficient. It will allow us to move faster. It will allow us to test and learn. So we are very excited about the roadmap that we are building with Viv that incorporates both larger scale projects and then small platforms that we can plug in to see some quick wins. And it is for us, it is very important to have someone here day to day really leading that championing that effort as we are all working on so many different things. Right. Corey Tarlowe: So much, and best of luck. Mary Coyne: Thank you. Operator: Your next question comes from the line of Marni Shapiro of The Retail Tracker. Your line is open. Marni Shapiro: Hey, guys. Congrats on the quarter, and I know it is tough out there, but I have to say, I think your stores have looked very good. And cleaner, I guess, is the best way. Easier to shop. I do not know. They look a little bit more modern, so kudos for that because I think it does look different in there. Can you talk a little bit? Because now I am wondering, have I been in some of the stores in the localized strategy? Can you talk a little bit about the test you are around in the localized strategy? Mary Coyne: Sure. Thanks, Marni. The test that we did in the New York store is interesting. We went in very strategically and thought about the customer and the end use and have really made the assortment more relevant for her lifestyle. So it starts with the products we put in there. Obviously, in New York, we are going to do more black, a little bit more put together. We have taken some of the print mix out. And then really set the store up in a way that we find it very easy for her to shop and shop for outfits. We have changed the window graphics and the mannequins, and we have gotten street traffic based on that. So very encouraging and, you know, with the caveat that this is a test of one to work. This is what we truly believe, though, is that we can have categories of stores that are we are doing allocations by climate, by end use. And so we think that there is a lot more to come in 2026 as we dive into this. Important too, though, local strategies around marketing. So the first one was our broadcast television pilot, which was in three markets where we saw a lift obviously, engagement, but a lift in new-to-brand customers and traffic overall to the site and to the stores. Again, a test of three markets. So we have rolled out a broader test we will be evaluating shortly, and I am encouraged by that. We also in our Chicago market, where we opened a store in Orland Park and went in and did a heavy up where we really leaned into digital social advertising in those markets and saw a really strong return in Q3 as we did that. So again, all of these tests are important as we move into 2026 and really think through how we have a greater impact with these efforts? Both on the product and the marketing side. Marni Shapiro: That is great. And can I also do one quick follow-up just on some of the product? You said you had put cashmere in there. You mentioned that some of what I would call the novelty denim sold out. I have noticed certain things that have sold out, your shirts are sold down very quickly. It seems to be the items that are new, novel, they are not just wardrobe updates. They are kind of something fresh and new. Is your customer passing right now on just a wardrobe update and looking for what is new? And are you able to shift the assortment for the first half of 2026, or is it too late? Like, how are you thinking about all of that? Mary Coyne: Yeah. So what I would say is what we saw particularly as we had ended Q3 and headed into Q4 is we did not have enough newness. That the customer really is looking for that at this moment in time, with the environment the way it is, in promotional with consumer sentiment where it is, she is being very choiceful. So what we are very encouraged by is when we have something new in front of her that she is excited by, she will respond. So as we head into the back half of Q1 and the balance of 2026, that is absolutely the way that we are moving forward, ensuring that we have enough newness for her. Protecting the core items that she has always loved from us, but really making sure we have enough newness on the floor to keep her engaged. Marni Shapiro: Excellent. Thank you. I will leave it for everyone else. Thanks, Marni. Operator: Your next question comes from the line of Janine Stichter of BTIG. Your line is open. Janine Stichter: Good morning. Thanks for taking my question. Mary Ellen, you mentioned pricing sensitivity with the consumer. I think you took some price increases, small in August and I think a little bit more in September. I am curious what you learned when you took those price increases and how that impacts your thoughts on how much you can offset the $5 million tariff headwind? Mary Coyne: Sure. Janine, we took very strategic and measured price increases in Q3, right? So rather than taking prices up across the board, we went in where we really thought the customer would respond and would not have an issue with it. What we saw was an overall AUR increase in Q3, so we are pleased that she has responded well, and she is going with us with those increases. And it was, as we mentioned earlier, you know, it was a single-digit percent that we took prices up. So far, we are pleased with the response. Janine Stichter: Okay. Great. And then maybe just as we think about kind of the right level of promotion for the business, and I know Q4 is a particularly weird time, but how do you think about what the right level of promotion is? And also, I am curious about how you are planning inventory for next year. It sounds like the goal is to end the year fully clean and be off to a fresh start in Q1. But how do you think about the first half purchases just given the volatility out there? Mark Webb: Janine, it is Mark. I will answer the inventory question first. We are going to plan inventory as conservative just knowing that we are evolving the product assortments and that we are exiting this sort of unknown end date of when the consumer sentiment stabilizes and hopefully starts to increase at some point. So we will be relatively conservative on the inventory buys going into the year. Mary Coyne: Yeah. And, Janine, I would say on the promotional front, you know, Q4 is always the most promotional quarter. What we have seen is that our direct peer set started much earlier and much deeper starting back in October. So we are seeing elevated promotions this year across the board. You know? And we will manage our promotions to get out of the fourth quarter clean. As we look to 2026, we are obviously looking to be very measured in how and when we promote. And, obviously, response to product is key there. You know, when we see her respond to good products, we know we do not need to be promotional. Janine Stichter: Perfect. Thanks so much, and I can pass it on. Mark Webb: Thanks, Janine. Operator: Your next question comes from the line of Dylan Carden of William Blair. Your line is open. Dylan Carden: Hi, this is Marcus Belanger. I am on for Dylan. Thank you for taking my question. I was just curious, can you talk a little bit about your pricing strategy going into 2026? Are you planning to be as conservative as you have been thus far? And can you talk a little bit about what you are seeing from your consumer? I know they are sort of at the higher income demo. So that has been the one that has been reported to be driving the economy. So can you provide a little color on that disconnect and just your overall read on the higher income shopper? Mark Webb: Hi, Marcus. It is Mark. I will take the first part on the pricing, and then Mary Ellen can jump in on the second part. Like, I would say that as Mary Ellen just answered in the previous question, we will continue to be very strategic with respect to pricing, and that means not going and spreading peanut butter price increases across the assortment. It means looking strategically with the merchant teams and identifying pockets of opportunity relative to the competitive sets and relative to what we feel is still a great value for money that you get. So that sort of approach that we have already launched with, which Mary Ellen said is in the low single digits, that approach continues. Mary Coyne: Yeah. And what I would add to that, Marcus, is, you know, as we look forward and as assortments evolve, you know, our pricing strategy will be reflected in the assortment. So as we rebalance, we will take the appropriate actions as we move forward. As Mark said, we are going to be very strategic. We are going to be very targeted as to where we believe the consumer will pay the price. This is a brand that has always been known for value and for quality, and we will protect those. That being said, several of the styles that we have tested end of Q3 and into Q4 that are at higher tickets have worked in, you know, small test small product categories but they have worked. So we are encouraged as we move forward we will be very diligent about where we believe the price is worth the value. Marcus Belanger: Thanks. I guess, on gross margin, if you add back the 2.5 tariff better than expected performance, you kind of get to what you previously guided to. Were there any other things embedded in the third quarter performance that surprised you? Mark Webb: Marcus, what I would say is that the offset to the tariff pressure of the 2.5 million, which is straight math, is largely the AUR benefit that we were able to see. And I would just build on what Mary Ellen just said that pricing strategic pricing increases we did see, a lot of that benefit come through can work all the way through the yield curve. And in Q3, in the markdown part of the yield curve with opportunity as we go forward with all the assortment and marketing evolutions we are putting in is to drive more at full price and yield, full price as well. So but in the quarter in Q3, the offset was largely the AUR that we realized in the quarter that helped offset that 2.5 million dollars worth of tariff partially. Then there was a little bit of freight upside in the quarter as well. But the lion's share was the AUR performance. Marcus Belanger: Got it. Thank you. Operator: With no further questions, I would like to turn the conference back over to management for closing remarks. Mary Coyne: Thank you all for joining us today. Look forward to speaking with you again on the fourth quarter call. And we hope that everyone has a happy and healthy holiday season. Operator: This concludes today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Casey's General Stores Second Quarter Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Instructions will be given at that time. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead. Brian Johnson: Good morning, and thank you for joining us to discuss the results from our second quarter ended October 31, 2025. I'm Brian Johnson, Senior Vice President of Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, President and Chief Executive Officer, and Stephen Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of the Fike transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs. The company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores. There are a number of known and unknown risks and uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements. Including, but not limited to, the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10 and quarterly reports on Form 10-Q as filed with the SEC and available on our website. Any forward-looking statements made during this call reflect our current views as of today. With respect to future events. And Casey's disclaims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events, or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the second quarter can be found on our website at caseys.com under the Investor Relations link. With that said, I'd like to turn the call over to Darren to discuss our second quarter results. Darren Rebelez: Thanks, Brian, and good morning, everyone. Before we dive into our excellent second quarter performance, I'd like to congratulate the entire Casey's team for their hard work throughout the quarter to serve our guests and our communities. In addition, I want to highlight the positive impact Casey's is making with veterans and their families. For more than a decade, Casey's has partnered with two veteran-focused nonprofits for our annual roundup campaign: Children of Fallen Patriots and Hope for the Warriors. Each year, it's humbling to see the support from our guests, team members, and partners at PepsiCo, and I'm proud to share that this November, we raised $1.2 million for these two outstanding organizations. As a veteran myself, I'm grateful to those who stand with our military community and support them when shopping at Casey's. Now let's discuss the results from the quarter. Diluted EPS finished at $5.53 per share, and net income was $206 million, both of which are an increase of 14% from the prior year. The company generated $410 million in EBITDA, a 17.5% increase from the prior year. Inside the store, the prepared food and dispensed beverage category saw guests responding well to our innovation and promotional activity within the category. We also saw margin expansion which is primarily driven by the grocery and general merchandise category. This was underpinned by increased guest traffic as effective merchandising along with solid store-level execution is leading to more guests shopping at our stores. Strong execution of our fuel strategy by the fuel team coupled with our robust store offer, resulted in our fourth consecutive quarter of fuel gallon growth. This was accomplished while also growing cents per gallon margin. Stephen Bramlage: I would now like to go over our results and share some of the details in each of the categories. Inside same-store sales were up 3.3% for the second quarter, or 7.5% on a two-year stack basis, with an average margin of 42.4%. The two-year stack was an acceleration from the first quarter. Same-store prepared food and dispensed beverage was quite strong, sales were up 4.8% or 10.3% on a two-year stack basis. With an average margin of 58.6%. Whole pies and hot sandwiches and all dayparts performed well in the quarter. Breakfast performed exceptionally well. With our maple waffle breakfast sandwich highlighting the innovation our culinary team is bringing to the category. Margin was down approximately 10 basis points from the prior year as the lower margin from the Cefco stores was nearly offset by improvement in waste cost of goods management. Same-store grocery and general merchandise sales were up 2.7%, or 6.4% on a two-year stack basis with an average margin of 36%, an increase of approximately 40 basis points from the prior year primarily due to favorable mix shift to higher margin items such as energy drinks and nicotine alternatives within their categories. On the fuel side, same-store gallons sold were up 0.8% with a fuel margin of 41.6 cents per gallon. According to OPIS fuel gallon sold data, the Mid Continent region saw an approximate 2% decline this quarter, so we believe we are continuing to grow market share. Fuel performance remained robust, supported by strong premium and mid-grade demand, stable diesel sales, consistent pricing discipline, and solid gains in fleet volumes. The organization remains mindful of effectively managing operating expenses while maintaining or improving team member engagement and guest satisfaction. In the second quarter, same-store operating expense excluding credit card fees increased 4.5%, lapping a 2.3% increase in the prior year. Same-store labor hours were flat even as we invested more labor hours to the kitchens appropriately to meet the strong pizza demand during the quarter. I would now like to turn the call over to Steve to discuss the financial results from the second quarter. Stephen Bramlage: Thanks, Darren, and good morning. Before I begin, I also want to acknowledge the hard work and the great results from our team members. Total revenue for the quarter was $4.51 billion, an increase of $559 million or 14.2% from the prior year due primarily to higher inside sales, as well as higher fuel gallons sold partially offset by lower retail fuel price. Results were also favorably impacted by operating approximately 9% more stores on a year-over-year basis. Total inside sales for the quarter were $1.66 billion, an increase of $190 million or 13% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $50 million to $468 million, an increase of 12%, and grocery and general merchandise sales increased by $141 million to $1.19 billion, an increase of 13.4%. Retail fuel sales were up $273 million in the quarter as a 16.8% increase in fuel gallons sold was partially offset by a 4.8% decline in the average retail price. Stephen Bramlage: The average retail price of fuel during the period was $2.96 a gallon, and that compares to $3.11 a year ago. We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization. Casey's had gross profit of $1.12 billion in the quarter, an increase of $163 million or 17% from the prior year. Stephen Bramlage: This is driven by both higher inside gross profit of $83.8 million or 13.5% as well as higher fuel gross profit of $65.1 million or 20.9%. Stephen Bramlage: Inside gross profit margin was 42.4%, and that's up 20 basis points from a year ago. Stephen Bramlage: Prepared food and dispensed beverage margin was 58.6%, down 10 basis points from prior year. Stephen Bramlage: Cheese was $2.11 per pound through the quarter, that compares to $2.25 a pound last year, a decrease of 6% or an approximately 35 basis point benefit to margin. Stephen Bramlage: There was an approximate 130 basis point headwind from the Cefco stores that were partially offset by improved waste, accretive mix, and the favorable cheese cost comparison. The grocery and general merchandise margin was 36%, an increase of 40 basis points from the prior year. The change was impacted by a favorable mix shift within the category, as well as cost of goods management, and that includes manufacturer-funded promotional activity, associated with alternative nicotine products. Fuel margin for the quarter was 41.6¢ per gallon. That's up 1.4¢ per gallon from prior year. This is inclusive of an approximately one and a half cent per gallon drag from the CEFCO stores. Other income was $40.9 million and that's an increase of $14.2 million or 53.4%. Increase primarily was due to wholesale fuel gross profit from the Fikes acquisition but it did also include a one-time $8 million benefit which is the result of a prospective change in the way that we will administer our gift card program. Total operating expenses were up 16.7% or $101.9 million in the quarter. Approximately 10.5% of the increase is due to unit growth. Same-store employee expense accounted for approximately 2% of the increase due to increases in labor rates, which were offset by flat same-store labor hours. Higher variable incentive compensation contributed to approximately 1% of the increase. Net interest expense was $24.7 million for the quarter, and that's up $12.1 million versus the prior year, which is primarily from financing the Fikes transaction. Depreciation in the quarter was $109 million, that's up $14.6 million versus prior year. Primarily due to more stores. The effective tax rate for the quarter was 24.7%, nearly comparable to the prior year. Net income was up versus prior year to $206.3 million, an increase of 14%. EBITDA for the quarter was $410.1 million compared to $348.9 million a year ago, and that's an increase of 17.5%. Our financial flexibility remains excellent. On October 31, we had total available liquidity of $1.4 billion. Also, our credit facility debt to EBITDA ratio was 1.7 times. For the quarter, net cash generated by operating activities of $347 million plus purchases of PP&E of $171 million resulted in the company generating $176 million in free cash flow compared to $160 million in the prior year. In December, the Board of Directors voted to maintain the quarterly dividend at $0.57 per share. During the second quarter, we repurchased approximately $31 million shares. And we now expect to repurchase approximately $200 million in fiscal year in total up from our previous expectation of approximately $125 million and that's due to stronger earnings and higher cash flows. Stephen Bramlage: Consistent with our normal second quarter call practice, we are updating certain full-year financial metrics. Fiscal 2026 EBITDA is now expected to increase 15% to 17%. The company now expects inside same-store sales to increase between 3% to 4% and we expect an inside margin of 41% to 42%. The tax rate is now expected to be 24% to 25%. The remainder of our annual guidance provided at the beginning of fiscal 2026 remains unchanged. Results for November were as follows: Same-store volumes, both inside and outside the store, were consistent with our revised annual guidance expectations. Fuel CPG was in the low 40s, and current cheese costs are slightly favorable versus the prior year. As a reminder, we will now have lapped the closing of the Fike's acquisition and therefore the third quarter will have Fike's results in both periods. As such, we expect third-quarter operating expense to be up mid-single digits. I'd now like to turn the call back over to Darren. Darren Rebelez: Thanks, Steve. Throughout the quarter, we built on the momentum from the summer months, and our inside comps accelerated on a two-year stack basis. Whole pies are performing exceptionally well, as we saw a very strong response to our thin crust Thursdays and our college football Saturdays promotions. Whole pies grew faster than the prepared foods category. While the category also printed a strong margin. Which shows we can be creative with our promotional activity and balanced margin performance. We also saw positive traffic to the stores, as guests continue to believe Casey's has a strong value proposition. In the forecourt, we continue to gain market share as our same-store gallons growth outpaced OPUS data in our region again. Our ability to drive guests to the pump with our strong inside offering remains a strategic advantage for the company. I would again like to express my gratitude to the entire Casey's team for an excellent quarter. As we look to close out our three-year strategic plan, I cannot ask for a better team to execute the plan and deliver industry-leading results. We will now take your questions. Operator: To ask a question, please press 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press 11 again. We ask that you please limit yourself to one question and one follow-up. And our first question will come from Ed Kelly with Wells Fargo. Your line is now open. Ed Kelly: Yes. Hi. Good morning, everyone, and thank you for taking my question. Good morning, I've had I wanted to, you know, just start on fuel. I mean, obviously, the backdrop has been challenging. You've been outperforming. Can you just maybe talk a bit about the sustainability of that? And then Q3 is off to a good start. I mean, it seems like rock prices have helped. Do you expect margins to just kind of revert back in short order? And then stepping back on all this, has anything changed fundamentally either with your approach here or the competitive backdrop that we should be aware of? Stephen Bramlage: Yeah. Hey, Ed. Good morning. This is Steve. I'll maybe start on a couple of those. Certainly nothing has changed with our approach. Maybe start with that. I think some of the results that the team has had so much success delivering are directly related to how consistent we have been with our approach of trying to balance profitability and volume to the pad. They've done an excellent job of having a consistent offer available to guests and we firmly believe that contributes for sure to the success that we've had. You know, our fly track around our performance relative to the rest of the market begins with the store. And so the fact that the vast majority of our guests are coming to the store to go inside the store, three out of four of our transactions don't involve a purchase of fuel gives us a lot of stickiness with those guests. Our guests, we believe, are a little less elastic than the average guest because they're already coming to the pad. It's for the inside the store offers, so that is certainly helped our outperformance relative to the market that we're in. As it relates to the seasonality of margins, I guess, is how I would address the question. Generally speaking, the winter for us, the third and fourth quarters, we're going to have seasonally lower margins than we do in the first half of the year. That's been the case for a while. We don't have any reason to expect that that would be significantly different. Beyond the recognition of what happens seasonally, we really don't prognosticate around what's gonna happen with forward-looking margins and beyond what November experience has been. Ed Kelly: And then maybe just a quick follow-up on OpEx. Up 4.5% on a same-store basis. Which is a little higher than maybe what we expected. Can you just maybe speak to that quickly and how we should be thinking about the back half? Stephen Bramlage: Yeah. Listen. Our full-year expectations are unchanged. We did not change the 8% to 10% expectation for full-year total OpEx. And so we are pretty much where we thought we would be exiting the first half of the year related to OpEx. The timing of lapping the Fikes transaction is going to naturally step down the year-over-year change that we'll experience in OpEx in the second half of the year, and we're trying to give some visibility into that with the third-quarter expectation of mid-single digits. We've had a very long success run here quarter-wise of reducing same-store labor hours. In the store, they were flat this year. Or this quarter. I'm sorry. That's very consistent with our expectations as eventually we were going to come to the end of that multiyear effort to literally drop hours to the bottom line with the promotions that we had in the store. Especially the pizza promotions on Saturdays, we prudently added some labor back into the store. And so it's kinda how we ended up flat with the same-store labor hours. Total OpEx very consistent with our expectation beyond what we enumerated in the press release. You know, there were some miscellaneous things higher insurance costs, higher utility costs, Legal was a little bit higher for us. Advertising was a little bit higher. But by and large, I think total OpEx performance very consistent with expectations. Operator: Thank you. And the next question will come from Chuck Grom with Gordon Haskett. Your line is now open. Ryan Bulger: Hey, guys. This is Ryan Bulger on for Chuck here. Thanks for taking the question, and good to talk to you today. Morning. My pleasure. Oh, sorry. Question was gonna be on the mix dynamic as you see these Cefco stores rolling to the base. The comp base next quarter. Obviously, we've been talking about the impact on margins for a while, but was just wondering if you could speak to anything you would expect to see in terms of how that would play out with the mix differences there traffic and ticket, etcetera, and any impact it could have on comps as they roll into the base next quarter? Thanks. Darren Rebelez: Yeah. Ryan, this is Darren. Clearly, Cefco stores are carrying a lower margin than the Casey's stores, both in prepared foods and in grocery and general merchandise. And that's because they're still Cefco stores. They're not Casey's stores yet. Now that effort in terms of rebranding will start to kick off in earnest at the beginning of the calendar year. We'll start converting their larger stores that have kitchens in them already. Those are a little bit easier from a conversion standpoint. And then once we get those done, we'll start to convert the other stores. So we would expect that trajectory will change a bit. On the prepared food side in particular once we get those kitchens in and they're rebranded to Casey's. And they get our full assortment with private label and all the rest. So we expect that margin to accrete over time, but as it stands right now, their margin rate in prepared foods is about half of what the mothership Casey's prepared foods margin is. So it is going to have an impact. I was really proud of the team this quarter in terms of managing the rest of the business whether it's through cost of goods management, waste management, and overall execution so that we mitigated that impact from the Cefco stores onto the overall Casey's portfolio. Ryan Bulger: Yeah. No. I was just curious if there'd be anything on the comp side. As they roll into the comp base. Next quarter. Darren Rebelez: Well, as we roll through, I mean, haven't done that math yet, but I mean, if there will certainly be an impact as a when they blend it in, they blend it in and there was an impact to the margin. So as we cycle over that, we'll see that. It should blend up a little bit, but we'll have to see when we get there. Ryan Bulger: Okay. Got it. Thank you. Operator: Thank you. And the next question will come from Bonnie Herzog with Goldman Sachs. Your line is open. Bonnie Herzog: All right. Thank you. Good morning, everyone. I had a question on your guidance. You did update your EBITDA guidance for this fiscal year, which is great to see, especially considering the strong results in the first half. But your guidance does still imply a sequential deceleration in EBITDA growth in the second half. So just hoping to hear some of the drivers of that. And then as you mentioned, you lapped the Fikes acquisition in November, but is there anything else contributing, I guess, to the implied deceleration in growth? Thank you. Stephen Bramlage: Bonnie, this is Steve. I'll just start with that. It's obviously been a very strong first half of the year for us and that played a part in this. But as it relates to the second half specifically, we've tried to be pretty clear with people just mechanically the way the math has worked. Right? We're not gonna we do not expect the same absolute level of year-over-year EBITDA growth in the second half that we had in the first half just because we already have Fikes sitting in the base now. There's really no change in expectation for us from the mothership performance per se, and the Fikes performance is generally on plan as well. And so I don't we're not trying to message any different expectation for kind of second-half experience vis-a-vis first-half experience other than the mechanically, but the math is naturally gonna come down just because we have a higher number in the prior year. Second half. Period. Bonnie Herzog: Okay. And then maybe just a quick follow-up just because Fikes acquisition has been a year. Can you just remind us your M&A strategy, where you're at and sort of what the market is like right now? Obviously, it's still very fragmented. Just any color there would be would be helpful in terms of what you're seeing and how actively you're potentially pursuing further M&A? Darren Rebelez: Yeah, Bonnie. This is Darren. We're, we really haven't had any change in our strategy or our approach to M&A. As you know, we focus on a small deal kind of tuck-in and that's sort of normal course. We have our dedicated M&A team that is on that full time, and we're seeing good results from that group and very consistent with what we've expected. The larger type of M&A is more opportunistic. And those are fewer and further between. Typically. And you know, for us, it's not just a matter of buying something for the sake of buying it. If we need the right level of asset quality, that we can we're able to put our kitchens into those stores and really run our play. So while we do see a lot more out there than we are willing to buy because they're just not the right quality for us. There is some out there. We are participating in some of those processes, but again, we set a fairly high bar for ourselves in terms of the asset quality. So we'll probably say no to more things than we ever say yes to. Thank you. Operator: And our next question will come from Bobby Griffin with Raymond James. Your line is open. Bobby Griffin: Congrats on a solid first half. Darren, I just wanted to maybe circle back on the OpEx side, in particular, the same-store OpEx. And you guys, as you noted, have done incredible work on the hours basis, but maybe that's in the later innings. So when we look at, like, the year-to-date same-store OpEx of call it averaging out around high threes, is that the right level for this business going forward, with the store growth plans and kind of the expansion opportunities you have across Texas and whatnot? Or you still think there are opportunities to maybe push that down to closer to three or high twos on a same-store basis? Darren Rebelez: Well, Bobby, we haven't guided beyond this year, so I'm not gonna really try to forecast that right now. I would say that like I said the last couple of quarters, I think a lot of the hour reduction work has largely been completed at now having said that, that work is never done. To be clear. We have a team that's dedicated to looking at in-store processes and always striving to become more efficient. But I would say at this stage, a lot of that will be fine-tuning and tweaking as opposed to larger reductions in labor hours. Know, the other thing I'd remind everybody about in this quarter in particular, you know, our traffic was up 1.5%. Our whole pie sales were up 8% in units. And so as we grow the business on a same-store basis, there's a natural inflection point where some more labor needs to get added into stores to meet the demand. At the same time, we've had the highest overall satisfaction scores from our guests that we've ever had. In this most recent quarter. So you know, I don't wanna get overly fixated on the labor number or on the OpEx number per se. We certainly manage it and we keep it close. But I think the combination of driving traffic delivering outsized growth in our highest margin categories, and having really great overall satisfaction scores from our guests is a really winning combination and very hard to do in retail. And we're doing it right now. And so, that's what we're really focused on. And when our gross profit dollar growth is growing at the pace it is, our EBITDA growth is growing at the pace it is, that's how we know we're doing it the right way. And so we're very comfortable with where we are at this point. From an OpEx perspective. Bobby Griffin: Understand. Very helpful. And then maybe just as my follow-up on a different subject, alternate nicotine, you know, there were some obvious manufacturer promotions during the quarter, but just curious, you and the team have set out on the new calendar year, what are your expectations from promo activity in that category? Do you continue to expect it to be, you know, growing from a promotional basis or, you know, see higher promo potential going forward? Darren Rebelez: Yeah. I'm not sure about the promotional activity going forward. I We'll still have more work to do with the manufacturers to understand how they're thinking about that as well. What I would say, though, is that overall, that category has been growing really fast over the last few years. As volumes in combustible cigarettes go down. And so we would expect that that trend will continue. And as combustibles continue to erode and more people seek other nicotine alternatives for them and right now, that business is working well for us. I think we shared a couple quarters ago that we reset all of the back bars in our stores. To reduce the space allocated to combustible cigarettes and increase the space available for those nicotine alternatives really to meet the guests need where they are. And that play is working well for us. We would expect that longer-term trend to continue. Thank you. Operator: And our next question will come from Chuck Cerankosky with Northcoast Research. Your line is open. Chuck Cerankosky: Good morning, everyone. Great quarter. Could you talk about the declining cost of a gallon of gasoline and your customers' behavior in-store? You said earlier that three to four store visits don't include gasoline. But is there an interplay between declining cost of fuel and, say, more prepared food store visits and bigger prepared foods purchases? And also how about the influence of lower gas prices on your in-store promotions? Thank you. Darren Rebelez: Yeah, Chuck. Clearly, anytime we have lower absolute fuel prices, that leaves guests with more discretionary income and dollars to spend. So we always like that scenario. But what I would say more broadly is that I think guests, in general, are just being a little more discerning about where they spend their money because there's a lot of other cost pressures outside of our stores that folks are dealing with right now. And so what we're seeing is people are appreciating the value proposition that they experience at Casey's. And, you know, we see it in a couple of different areas. When you look at our whole pie business, as an example, when we run promotions, we get great uptake on the promotions, which would speak to the value, but we also see that people are trending more towards higher-priced items. So specialty pizzas as opposed to single-topping pizzas. So those are more expensive, but they're getting the right value equation, the quality of the product, and the price. Same with our bakery category where people are trading up to multipacks versus single items. Those cost more. But on a per-unit basis, those are less. So we think that people are really picking and choosing where they're going to spend their money and where the best intersection of quality and value come together is where people are really spending their money. And so low fuel prices certainly help, and I think a more robust in-store offer and getting that value equation right is probably the bigger driver of the results inside the store. Thank you. Good luck in the second half. Operator: Our next question will come from Pooran Sharma with Stephens. Your line is open. Pooran Sharma: Good morning, and thanks for the question here. Good morning. Maybe just wanted to peer more into cheese. Could you maybe update us on how much you have hedged? I think last quarter, you said you were about 70% locked up for the year. Just wondering if there's any update to that. Stephen Bramlage: Yeah, Pooran. Hey. Good morning. This is Steve. We continue to chip away at locking in favorable rates, favorable prices for ourselves. The team is really doing a good job of staying on top of that and being advantageous for us. So as we sit here today, we're about 80% locked for the next four quarters, so the second half of this fiscal year, and the first half of what would be our fiscal '27, and, you know, we only lock something in if it's either favorable on a year-over-year cost basis or neutral. And so we're generally neutral or favorable on 80% of what we think we need to buy here for the next four consecutive quarters. Pooran Sharma: Great. No. I appreciate the color there. I guess on my follow-up, maybe just wanted to peer into guidance here and understand that seasonally second half does step down from first half. But just given your commentary earlier, on how November is trending fuel margin wise would it be fair to assume kind of more of a three Q weighted split for the second half? So, like, maybe let's say, like, a 55, 45 split in 3Q and 4Q just given the favorability in fuel margins. Stephen Bramlage: Listen, I think it would not be wise for me to go there. I think it's fair to assume that we were low forties CPG for the month of November. And we'll probably leave it at that. I think, historically, you can look at kind of a weighting between Q3 and Q4 and that's probably as good of a crystal ball as anybody would have around kinda how those quarters seasonally will behave. Darren Rebelez: Yes. And Pooran, I would just add that, you know, there's a lot that can happen in the fuel market from a commodity standpoint that's 100% out of our control. So you know, what happens in November is really no indicator of what could happen in January. So you know, we kinda play that one month at a time. Thank you. Operator: The next question will come from Benjamin Wood with BMO. Your line is open. Benjamin Wood: Good morning, guys. This is Ben on behalf of BMO and Kelly Bania. Thank you for taking our questions. First, we just wanted to start with could you give us an update on what the last twelve-month EBITDA contribution was from Cefco and maybe how that came in relative to your internal plan. And then following up on kind of Bonnie's question, as we think about the composition of new store growth over the next twelve months, is that more MTIs or acquisitions? And then can you just walk us through how you're thinking about the potential returns more recently on your new to industry builds versus your potential acquisitions? Darren Rebelez: Yes, Ben. I'll go ahead and start with the store growth piece. I'll let Steve talk about Cefco EBITDA. The store growth, we expect always a balance between new to industry and M&A. And so typically, when we set our new store goal for the year, we'll we kind of go into it planning for a fifty-fifty split. Now acquisitions can be a little bit lumpy, so that number is usually wrong, but we go into it with that expectation and that plan and we have the ability to do that. If acquisitions run a little bit hot, then we usually throttle back the new to industry builds and get to our target, and then that allows us to land bank for the situations where maybe acquisitions slow down a little bit. Then we have the ability to flex the other way and accelerate new to industry builds so we can maintain that consistent ratable growth. So that's kinda how we view store growth from a return standpoint. We're always looking to achieve that mid-teens return after a few years when the stores start to mature. We have a long track record of achieving that, and we're really format agnostic, meaning whether that's a new to industry or an acquisition, we still have the same return expectations either way. Stephen Bramlage: Yeah. Listen, what I would say on Fikes is right where we thought we would be. So their own plan for us, the plan is very consistent with kind of the pro forma assumptions that we had at the time we bought them. LTM is a little misleading. I'm not going to go there just because if you think of the first two quarters that we had Fikes, a lot of deal cost there was it was kind of awash from an EBITDA basis for the second half of last fiscal year. But for this fiscal year, we said that would be EBITDA accretive, healthy EBITDA accretion it is. Would not be EPS accretive because of the interest that is still the case. We continue to realize synergies primarily from fuel and SG&A. As we sit here at this point in time, to Darren's earlier comment, the biggest group of the $45 million of synergies we're ultimately trying to get is going to come from inside the stores and you know, that's dependent on the timing with which we can remodel the stores. So we will certainly not fully realize synergies this fiscal year, and that was never the expectation. But right where we thought it would be, on our way to ultimately getting to $8.99 billion of kinda fully synergized EBITDA, but we won't see all of that this fiscal year because of the timing of remodels. Benjamin Wood: Great. Thank you. And then just as a follow-up could you give us an update on what the latest thinking around your wing test. And then, you know, as you're thinking about timing of broader rollout, what are you guys looking for at this point? Are you still trying to refine the ops offering or the labor, or are there calendar events like the Super Bowl or March Madness that might be a little bit more conducive to a broader launch? Darren Rebelez: Yeah, Ben. You know, with the wings we've talked about, we still had some menu refinements that we're working on. Some procedural gaps we're trying to close. I think a lot of that work has been wrapped up where we've got some new flavor profiles that we've just literally in the last week got back into the test stores, and we've broadened that store base a little bit to make sure we've got that right. So I'd say a lot of the development type work we think is largely done. We're validating that as we speak. And then we would proceed to start rolling out. So we haven't really announced a timeline for that just yet. But I think that work is well underway, and so I think we're getting closer to the finish line there. Operator: Thank you. And the next question will come from Brad Thomas with KeyBanc Capital Markets. Your line is open. Brad Thomas: Good morning, and thanks for taking my question, and congrats on a strong quarter here. I want to first ask a big picture question about competition. This is something that comes up a lot in our conversations with investors about the growth of many of the private convenience stores. It seems like your results are clearly very insulated today, but I was wondering Darren, if you could talk a little bit more about your confidence level in your insulation from some of that competition. Darren Rebelez: Yeah. You know, look. I think you know, from a competitive standpoint, we have a little bit of a mixed bag. I You know, and what I mean by that is, yeah, there's certainly some rural areas where we don't face a lot of the larger regional players that you're referring to. We do have some of those larger regional players that we compete with every single day in some of our larger markets. I'll just use our home market of Des Moines, Iowa as an example. It's probably one of the most competitive convenience store markets in the country. And so we face three of those regional competitors as we speak in this market, and we perform exceptionally well here. We have that in a number of different markets. Texas, and Missouri, in Illinois. So I feel very comfortable in our ability to compete at the highest level with the regional players in the industry. And, you know, we have a differentiated offer. You know, they do well at what they do, and we do well at what we do. And those things aren't always the same. But, I think we can look market by market where we have that more intense competition and we do very well there. Brad Thomas: That's helpful. And if I could ask a follow-up on the state of the consumer. This has been an unusual quarter with the government shutdown. And an impact on Snap. Curious if there was anything that you'd seen in your business. A consumer perspective. Darren Rebelez: You know, I shared a little bit before about what we're seeing more broadly with the consumer with respect to Snap, Snap is a very low percentage of our business. It's a little bit less than 2% of our sales. Are SNAP eligible. So we really you know, the government shutdown, while unfortunate, really didn't have much of an impact on our business at all that we could discern from the numbers. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone. And our question will come from Mike Montani with Evercore. Your line is now open. Mike Montani: Yes. Hey. Good morning. Just wanted to ask if you could unpack a little bit further some color, Darren, on state of the consumer and the K-shaped economy and in particular, I guess, with Guide, it seems to imply about 50 bps of d cell for the back half of the year. Even though compares get a bit easier optically into the fourth quarter, and we thought you could have, like, 20 to 40 bps of tailwind from Safeco stores, getting into the comp. So just wanted to understand maybe if you could break out, you know, how the comp progressed over the quarter. A little more color about what you see in November, and then just some high-level commentary about that consumer. Darren Rebelez: Yeah. I guess as we saw the comp progress through the quarter, it was really you know, that trajectory was more a reflection of the comps we were cycling. So it kinda stepped down August, September, October. But when you look at the two-year stack, it really was the other way. It accelerated. So, we had a very tough comp in October, and we cycled that. And that was probably our lowest comp sales month of the quarter from an inside perspective. But like I said, on the two-year stack basis, we were about six and a half last quarter. We were seven and a half this quarter. So I feel really good about the strength of the business and the trajectory it's on. You know, from a consumer perspective, you know, again, I think you know, and we've done some research on this. You know, there's sentiment out there among consumers, and then there's how they behave. And I think broadly speaking, if you look at different income cohorts, the middle and upper-income cohorts are feeling fairly good about the economy. You know, there's some that have a negative view but the majority would have either a neutral or positive view of the economy. The majority in those cohorts would feel at least neutral or more financially secure. The lower income is under more pressure from both of those perspectives, but they also say that they intend to maintain their visit frequency to convenience stores. So that's encouraging for us. And, again, what the actual behavior we're seeing in the stores is that they're still coming as frequently as they were as evidenced by our traffic increasing over the quarter. They're still buying. As evidenced by her same-store sales performance relative to others in the space. But they are being more discerning about where they spend the money and how they spend it. And I think for us, with our prepared food proposition in particular, it represents a really strong value relative to other alternatives out there, particularly in the QSR space. And so we're finding more people gravitate to us because of that strong value proposition and we continue to maintain that. So I feel very good about the spot we're in right now from a guest perspective. Mike Montani: We had just done a deep dive actually on your last point about the share gain potentials for prepared meals. Where you all stood out positively. And I was curious if there's anything you could add, that helps to bridge us to the chicken wings in terms of LTOs or other innovations down the pipeline. Darren Rebelez: Well, we certainly think that the wings have the potential to create another occasion for the guests. And I would expect that from a quality and pricing perspective to really represent a great value proposition for the guests. And that's the feedback we're getting so far in the test market. So I'd expect that to perform well when we go to a broader rollout. And again, our pizza proposition has always been there. People recognize us for that. And as they become more value-conscious, they are gravitating more towards us. And so, again, relative to comparable quality, products out there, and we compete more with QSR from a quality perspective. Our value is much stronger than most out there, and it's resonating with guests. Mike Montani: Great. Thank you, and good luck. Operator: Thank you. I show no further questions at this time. I would now like to turn the call back over to Darren for closing remarks. Darren Rebelez: All right. Thank you for taking the time today to join us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter. I wish them and everyone on the call and listening in a happy holiday season. Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.
Operator: Good day, and welcome to Uranium Energy Corp.'s Fiscal 2026 First Quarter Results Conference Call. Today's call will be hosted by Amir Adnani, President and CEO. Also joining for the Q&A session of today's call are Josephine Man, Chief Financial Officer; Scott Melbye, Executive Vice President; and Brent Berg, Senior Vice President of U.S. Operations. [Operator Instructions]. Please note this event is being recorded. Today's call will run approximately 15 minutes for prepared remarks followed by Q&A. [Operator Instructions]. I would now like to turn the conference over to Amir Adnani, President and CEO. Please go ahead. Amir Adnani: Thank you, operator, and good morning, everyone. Please note that a presentation accompanying this conference call is available on the Presentations page of our website. Some of the commentary on today's call will include forward-looking statements and I would direct everyone to review Slide 2 of the presentation, which includes important cautionary notes. All right. Let's get started. This quarter was an exciting step change for UEC with major production expansion initiatives and the introduction of a strategic new business line. The launch of United States Uranium Refining & Conversion Corp positions the company to become the only U.S. supplier with both Uranium and UF6 production capabilities. In parallel, we maintained low-cost in-situ recovery production and advanced our growth projects in Wyoming and South Texas, supporting higher output through the balance of fiscal 2026. These developments strengthen our platform as America's largest integrated nuclear fuel supplier aligned with U.S. policy. We continue to enjoy the backdrop of increasingly favorable macroeconomic and policy tailwinds and as such, have continued to increase our Uranium inventory ahead of the Section 232 decision. A year ago at this time, we had just resumed operations at Christensen Ranch. In only 12 months, we have delivered low-cost production at our first mine, are positioned for near-term production at our second mine Burke Hollow and are excited to have commenced development at our third mine, Ludeman. In the first quarter, we maintained low-cost production as we achieved a cash cost per pound of $29.90 based on 68,612 pounds of precipitated uranium and dried and drummed U308 produced. At our Irigaray central processing plant, upgrades were completed to support the transition to 24/7 operations including a full refurbishment of the yellowcake thickener and calciner. After quarter end, drying and packaging operations resumed on November 13, 2025, producing approximately 49,000 pounds of dried and drummed U308, subsequent to that date during the month of November. At Christensen Ranch, the focus has been on expanding ISR production capacity through the construction of 6 additional header houses in new well fields 11 and 12 and 10 extension. Further, we have commenced development at our Ludeman ISR project, the company's second satellite project in the Powder River Basin to our Irigaray hub-and-spoke operations. At Burke Hollow, we are nearing operational status, major construction milestones, including the ion-exchange plant and wellfield are substantially complete, setting the stage for initial operations at South Texas' newest ISR production facility and for Burke Hollow to become America's next producing uranium mine. These advancements position the company for higher production rates through the remainder of the fiscal year as new capacity comes online. Switching gears to our development assets. At Sweetwater, work is progressing under the FAST-41 permitting designation for the project. Planning of initial delineation drilling in the first wellfield area and assessment of the mill refurbishment plans were advanced. At Roughrider, a 34,000 meters core drilling program commenced in October 2025 to target conversion of inferred to indicated uranium resources to support the announced pre-feasibility study for the world-class high-grade Roughrider project in Saskatchewan, Canada and the prolific Athabasca Basin. And finally, the launch of United States Uranium Refining and Conversion Corp, positions UEC to provide end-to-end capabilities of the secure geopolitically-reliable source of uranium hexafluoride, supporting [indiscernible] enrichment. Moving to our financial highlights on Slide 5. Our balance sheet remains strong with $698 million in cash, inventory and equities at market prices and no debt. We completed a $234 million public offering to accelerate the growth of our new business line, while bolstering our balance sheet. Our uranium inventory stands had 1,356,000 U308 held at October 31, 2025, which excludes the additional 199,000 pounds of precipitated uranium and dried and drummed uranium concentrate at the Irigaray CPT produced since we restarted production. We also expect to purchase an additional 300,000 pounds through the end of this month from purchase contracts at below market rates of $37.05 per pound in addition to growing inventory from operations. By remaining 100% unhedged, we maintained full exposure ahead of the results of the U.S. Government's Section 232 investigation, while in a tightening global market with a structural supply deficit, positioning UEC to benefit from expected higher uranium prices. Our financial strength, coupled with the efficiency of our low-cost ISR operations enables us to ramp production responsively as market fundamentals and policy direction evolve. The current uranium price backdrop, underpinned by growing global nuclear demand and supportive U.S. policy provides a compelling setup for value creation. Importantly, the launch of UR&NC positions UEC to be the only vertically integrated American uranium producer. We are moving quickly. During the quarter, we commissioned the detailed feasibility study with Fluor and have begun hiring key technical and project personnel. Federal stakeholder discussions are ongoing and an extensive citing process has been commenced with potential host states and local governments. This initiative builds on UEC's existing uranium platform, advancing a fully American supply chain aligned with U.S. energy policy and defense needs. As a reminder, we are focused on four key pillars of production growth. The Powder River Basin hub-and-spoke operations anchored by our Irigaray Central Processing plant in Wyoming, the South Texas hub-and-spoke operations anchored by our Hobson CPP, the Sweetwater hub-and-spoke operations anchored by our Sweetwater plant in Wyoming and finally, the Roughrider project in Canada. We are actively advancing each of these growth pillars and have provided a detailed update on our quarterly news release. I will now focus on our operating activities in the Powder River Basin and South Texas. Moving to the next slide. We will start with the Powder River Basin hub-and-spoke operations. Since the resumption of operations as of October 31, 2025, accumulated production from Christensen Ranch was approximately 199,000 pounds of precipitated uranium and dried and drummed U308 at our Irigaray CPP. As part of the ongoing production ramp-up, UEC continue to develop new production areas at Christensen Ranch, mine development advanced with active well installation, piloting, casing and under-reading in wellfields 11 and 12 and delineation drilling in wellfield 8 and 10 extensions. Additionally, construction continued on 6 new header houses and wellfields 11, 12 and 10 extension. These new production areas will form the base for UEC's future production plans at Christensen Ranch. In parallel, process upgrades at our Irigaray CPP continued in the first quarter of fiscal 2026, including a full rebuild of 1 of 2 yellowcake thickeners, replacing the rig gearbox and motor along with the repair of replacement of multiple calciner components, together with the refurbishment completed at Christensen Ranch earlier in the year, these timely investments are expected to support higher production rates in addition to improved operational efficiency and performance. We are excited to announce that development plans have commenced at the Ludeman Satellite Project. This is a fully licensed and permitted project that will be constructed as a satellite ion-exchange plant sending uranium loaded resin to the Irigaray CPP for resin elution, precipitation, drying and packaging. Just 10 miles northeast of Glen Rock Wyoming, delineation drilling in the first production area at Ludeman commenced on November 19, 2025, with 200 holes planned. The delineation drilling will assist wellfield pattern design, Ludeman's SK 1300 compliant resources are 9.7 million pounds of measured and indicated and 1.3 million pounds of inferred uranium. 41 monitor wells are already installed for the production area and baseline water quality sampling is planned for these wells in Q4 fiscal '26. Engineering for the satellite plant is in progress using internal technical expertise with external engineering plan to commence in January 2026. Design and procurement of the ion-exchange vessels for the plant is also underway. Just as a reminder that in the Powder River Basin, the Irigaray CPP has a license capacity of 4 million pounds per year, surrounded by 17 satellite projects, 4 of which are fully permitted, including Christensen Ranch and Ludeman. Turning to South Texas. Construction of the Burke Hollow ion-exchange facility and first production area progressed on schedule during the quarter with key advances made across wellfield development and processing infrastructure. All large diameter tanks have been installed at the ion-exchange facility and testing of the disposal world was completed with the state regulatory agency in attendance. The utility provider completed the installation of 3-phase power into the project site, and all facilities have been energized. Well completion and mechanical integrity testing reports are underway following completion of construction. The company's workforce in South Texas has grown to 86 personnel in preparation for the startup of the Burke Hollow project. As we close out calendar 2025, the macro backdrop for uranium has never been dis-encouraging with strong bipartisan support for safe, clean, reliable nuclear energy. We see strong support from the U.S. Government including the recent designation of uranium as critical mineral. Big tech is a key component of new demand and with the largest hyperscalers continuing to invest heavily in the energy sector to secure the necessary power required for their massive data center investments. Overarching all of this is the fundamental supply deficit, which is expected to exceed 1.7 billion pounds by 2025 on a cumulative basis. As I've stated before, we have never seen a more positive policy environment for our industry. In summary, this quarter, UEC has neared an exciting inflection point of growing from a single asset producer towards diversified uranium production while becoming a U.S. origin supply chain from mine to conversion. UEC is uniquely positioned to meet the growing demand for secure domestic uranium supply. We're excited about the opportunities ahead and look forward to delivering further value to our shareholders. Before I turn it back to the operator, a couple of points. First, today's call is scheduled to conclude around noon Eastern. If we don't get to your question, please don't hesitate to reach out to our Investor Relations team, and we'll be happy to follow up directly. Second, please note that I'm joined today by Josephine Man, our Chief Financial Officer; Scott Melbye, our Executive Vice President; and Brent Berg, our Senior Vice President of U.S. Operations. Together, the four of us are backed by UEC team with more than 900 years of combined experience in the uranium industry. That depth of experience is what drives our daily execution across operations finance and strategy. With that, we'll open the call to questions. Operator, please go ahead. Operator: [Operator Instructions] The first question comes from Brian Lee with Goldman Sachs. Brian Lee: I just wanted to first start on the UR&C venture. I know you're making progress there, but just trying to understand a little bit better maybe the next set of milestones in the development of UR&C and maybe the timing of what you're expecting there through the first half of 2026? And then maybe where you'd like to be on that venture by the end of next year? And I had some questions around production as well. Amir Adnani: Okay. With respect to UR&C, we are moving as fast as possible and mobilizing various initiatives around siding study that is now progressing very well. State level discussions and meetings that we've had with stakeholders and state-level governments. We would like to -- and we'll provide more information on this, Brian, but the work has commenced on our feasibility study with Fluor and other consultants that we have involved in that. We really want to be in a position to deliver that inside 2026 calendar year and hopefully towards the midpoint of that. But again, that's the date that we'll be able to speak to with more confidence as we approach fiscal Q2 for UEC. In the meanwhile, we've been very pleased with the way team building has been coming around in terms of building our technical team and technical bench strength around this new initiative. So overall, kind of multiple parallel tracks all moving forward. And we'll have a lot more to share in our fiscal Q2 results when those come out. Brian Lee: Okay. Looking forward to it. And then just second question around production, a lot of moving pieces here. You have the upgrades at Irigaray, you're starting to move forward on Ludeman. Maybe as we zoom out, can you kind of give us a sense of what the production cadence is going to look like here into 2Q and then through the rest of the year? And maybe just specifically on Irigaray, the 49,000 pounds in less than 3 weeks, you sort of run rate that. It looks like it's 0.25 million pounds in a quarter potentially. Is that the right type of run rate that Irigaray is going to be running at now? And what does that mean for the cadence of production overall across the various sites through the rest of the year in the next couple of quarters? Amir Adnani: Thank you, Brian. Just to zoom out again and again for perspective. And as I mentioned during my prepared remarks, 12 months ago, we were sitting in a place where we were just starting to ramp up at Christensen Ranch. We now have 2 solid quarters of results, demonstrating the low cost that we're delivering at Christensen Ranch and Irigaray amongst the lowest in the U.S. We are talking about bringing online Burke Hollow very soon. 6 additional header houses at Christensen Ranch, and now Ludeman is in the development construction pipeline as well. So you're right, there are a lot of moving parts. Brian, as you recall, much of the production that's been reported has come since April of this year from header houses 10-7 and 10-8. And now there are 6 new header houses coming online, which will be most hopefully inside second fiscal quarter. And then with Burke Hollow coming online, most of the production from Burke Hollow really contributing towards fiscal Q3. So to answer your question on cadence, we would expect to see more of a step change in that cadence in fiscal Q3 and Q4 as we see a greater contribution of production coming in from Burke Hollow and from most of the 6 header houses that are currently under construction at Christensen Ranch. Operator: The next question comes from Heiko Ihle with H.C. Wainwright. Heiko Ihle: Just a couple of follow-ups here. With Irigaray, the plant upgrades, obviously, you're done now. I assume the answer is no, but this doesn't really have a ramp-up period, right? In other words, this goes from off to full capacity pretty much at the flip of a button, right? Amir Adnani: Yes, correct, Heiko. So most of that work is basically what we mentioned in the press release since coming online on November 13. So again, just to step back the refurbishment of the yellowcake thickener and calciner were sequential. And so as such, the equipment was offline for much of the quarter, while this repair and replacement of key components were underway. Once online on November 13, we were at steady state operations and had the steady-state operations had resumed basically with the drying and packaging throughput really nearing a rate of almost 1 million pounds per year. Let me just also allow Brent Berg, our Senior VP of Operations, step in on that. Go ahead, Brent. Brent Berg: Yes. Thanks, Amir. I would just add that similar to the refurbishment that was undertaken in fiscal '25 for Christensen Ranch with the ion-exchange plant, we felt that it was an opportune time to do those similar upgrades to the Irigaray central processing plant. And so the refurbishment to the calciner was really centered around increasing throughput of dried yellowcake. And all of the updates that we did were things that included components as recommended by the manufacturer to increase operational efficiency, that work has really led to continuous 24/7 operation and the ability to operate the plant at design capacity. Heiko Ihle: Fair enough. And then with Uranium Refining and Conversion URC, just a couple of follow-ups here. I mean, what would you say the major misconceptions in the market? I mean we've been getting a lot of questions on scalability and time to profitability even. How should analysts like myself show off how this thing can unlock shareholder value? And are there maybe any catalysts that are underappreciated by the market in your opinion? Amir Adnani: Thank you, Heiko. At a strategic level and at a positioning level, clearly, this is an opportunity in a new business line that highly differentiates UEC. There are simply no other companies in the U.S. that have end-to-end capabilities from uranium resources to mining to processing and now the planned refining and conversion that we have in place. So strategically speaking, it's a highly differentiated positioning for UEC to be a true supply chain provider. With respect to the way the financial analysis around that work. The best outcome there is when our feasibility study is completed and reported. And as I mentioned earlier, we're aiming for that to be hopefully around the midpoint of 2026 calendar year, but again, we will firm that up as we report fiscal Q2 results, but we are moving very rapidly. We're capitalized to be able to move rapidly. And of course, as you know, this is work that is building on the last couple of years of prior early work that we completed, that was the foundation of what allowed us to be in a position to announce this UR&C initiative in early September. So it was only early September that we formally announced it and in just 60 to 90 days, we're making incredibly fast progress. And look, this is a very essential piece of the overall value chain and the supply chain for nuclear fuel. This is a serious bottleneck, without another conversion facility in operation, this is the real kind of pinch point right now between connecting mining and enrichment. So it's very integral, and we're very excited by it. And I think, yes, you'll have hopefully much more information to be able to value and assess this by in the coming quarters. Operator: The next question comes from Katie Lachapelle with Canaccord Genuity. Katie Lachapelle: In your prepared remarks, you noted that you've made a positive development decision for the Ludeman project. Can you provide any guidance on the potential production time lines or operating rates that you expect for that wellfield? And then in addition to that, how are you now thinking about the sequencing of the various ISR wellfields in Wyoming? Amir Adnani: Thank you, Katie. I'll go first, and then I'll hand it to Brent Berg as well. So again, for context and as we zoom out, UEC has a very powerful position in the Powder River Basin in Wyoming and the Powder River Basin, have multi-decades of productive history for uranium mining, and we've assembled over the years of M&A and consolidation that we did, a platform that includes our central hub, that's the Irigaray central processing plant and 17 satellite projects. 4 of which are fully permitted and 2 that we're talking about now, Christensen Ranch, that's in operation and now Ludeman that we want to bring online next. So Katie, this is all speaking to the production ramp-up that obviously we have planned and that bench strength that we have and the sheer number of properties that we control, including fully permitted projects. So sequentially, you can see Christensen, obviously, is going to continue to grow. Ludeman, we've commenced the development work. And most likely, again, depending on market conditions, depending on the outcome of Section 232, we may even develop Reno Creek and more in parallel track. Again, we're taking our cues from the market. And when you're in a position where you're already operating, you're already permitted, you have the luxury to be able to make those decisions and respond accordingly. The Ludeman project is very well situated in terms of being just south of previously producing Smith Ranch mines that were in production for a very long time. And I'll let Brent maybe speak to some of the kind of accessibility issues and development plans that are currently underway at Ludeman. Go ahead, Brent. Brent Berg: Sure. Thanks, Amir. Katie, I would just add that at Christensen Ranch, header houses 10-7 and 10-8 accounted for a large percentage of 2025 mine production. And it really highlights the importance of these new mining areas as we continue to ramp up production with mine development now routine at the Christensen Ranch operation. We've continued that development in wellfields 11, 12 and 10 extension where we've got 6 header houses underway with case well installation, nearing completion and surface construction on schedule for start-up of additional fresh production in the coming year. Ludeman of course, is an attractive project for us being fully licensed and permitted and just down the road from our Irigaray central processing plant. And so we will develop that project just as we would our new wellfields at Christensen Ranch and we'll truck loaded rest into Irigaray, for processing, no different than we are doing at Christensen Ranch, but it's a little further out in the next next exciting phase of our development at UEC. Katie Lachapelle: Awesome. And then maybe just one quick follow-up. Just now you referenced the potential for the U.S. strategic uranium reserve as a potential outcome of the Section 232 investigation. Just wondering if you can provide any comments on expected time lines for that release? And then any additional key outcomes that you anticipate from the Section 232 investigation? Amir Adnani: Katie, I'm going to let Scott Melbye, our Executive VP comment on that. And for the benefit of the listeners, Scott is also the President of the uranium producers of America, that's our industry association in Washington, D.C. Go ahead, Scott. Scott Melbye: Great. Thanks, Amir. And Katie, we are optimistic about the potential for the strategic uranium reserve being really expanded over what was done in the first term. The report -- the 232 report has been submitted to the President. He has a statutory timeline to reply to that. Why are we so optimistic? Because none of those details have been released publicly, but we know we have a precedent from the previous 232 investigation. It was a remedy that President Trump chose to institute the first time around. I think the findings of import penetration hasn't changed over what were the conditions back then. In fact, the world has gotten more complicated with geopolitics. So we think the conclusion is the same, and we feel that, that's a remedy the President may go to. Secondly, we've also heard very supportive comments from Secretary Wright and Secretary Bergum, on the need for an expanded uranium reserve, public remarks that they've made in the last weeks and months. Three, I think it's safe to say this was in a very small way in the first term, a successful policy initiative. And speaking on behalf of UEC and I think the broader U.S. domestic industry, reinstituting the strategic reserve would result in advanced development activities at U.S. uranium operations. And then four, don't underestimate the defense needs for U.S. origin, un-obligated uranium for things like the naval propulsion program, if we're building more aircraft carriers and submarines as is President Trump's desire, we need more U.S-origin uranium. And I just direct people's attention to language in current National Defense Appropriations Act Legislation that's before Congress right now does direct Department of War and NSA to report on the status of our stockpiles of U.S-origin uranium and the adequacy of those stockpiles to move forward with further growth in our Naval Propulsion Programs. So we're optimistic we'll see like everyone else, what comes from that. But I think the legislative mandated timelines really kind of come around the end of the year. So we're hopeful we'll hear something in December. But if not, early January, we should hear the President's recommendations. Operator: The next question comes from Joseph Reagor with ROTH Capital Partners. Joseph Reagor: Most of mine are kind of follow-up to other people at this point. I guess first one, just as a follow-up on Section 232. Is it fair for us to assume that you guys are probably withhold for making any spot sales barring a jump in the stock price between now and the Section 232 readout? Amir Adnani: Go ahead, Scott. Scott Melbye: Yes. I mean we're quite content to build that strategic inventory. Of course, to have U.S-origin uranium available to sell into strategic reserve, is one objective. But two, we just believe that this market is in such a structural deficit today, and doesn't seem to be getting -- the gap isn't closing, if anything, with a doubling of nuclear generation now and production lagging. We're quite content to have these new pounds produced and our inventory to sell into stronger markets in the coming year. Joseph Reagor: Okay. Fair enough. And then over at Irigaray, one question I don't think it has been asked yet is, do you guys have a rough estimate of how many pounds of production were held back because of the upgrades during fiscal Q1? Amir Adnani: Joe, nothing was held back because we continue to keep material basically in circuit. So operations kept going, and we -- it was really just the final step of packaging the uranium, that did not occur. And the costs associated with that final step is extremely nominal. So really not that you've seen kind of from mid-November to end of November, things are -- things that have resumed post all those upgrades. It's finishing that final step. But otherwise, everything was working at the plant and supporting the feed that was coming in from Christensen. Brent, would you like to add to that? Brent Berg: Sure. Thanks, Amir. Maybe I'd just add that the upgrades that we did were sequential. So we first tackled the thickener in the precipitation circuit. And this is 1 of 2 storage vessels for storing precipitated yellowcake prior to drying and packaging. So we did a full replacement of the rig, the gearbox and the motor for the rig dry. And then with the calciner, we did a number of upgrades, including all the wear parts like bearings, sand seals. We replaced the rake arms with insulated components and new teeth to increase retention time in the dryer. And additionally, the drive the motor, the gearbox, the bevel pinion were all replaced, but -- as a result, drying and packaging is now running 24/7 two-shift operation and as it should. Joseph Reagor: Okay. One final thing, if I could. Do you guys have a budget, capital budget yet for Ludeman, or if not, when might we be getting them? Amir Adnani: Yes. Joe, we'll look to provide more feedback on that in the next quarter coming up or current quarter that we're in for fiscal. But at the same time, you can expect very similar development cost there, as we've seen with Christensen Ranch and that we're looking basically -- we're utilizing many of the same drilling companies or drilling rigs that we used at Christensen. So one of the key components of our development cost, which is drilling to delineate the wellfields and install the wells. That cost is quite consistent in terms of what we've seen so far. And also Ludeman is much more of an accessible project, that's closer to nearby town. And so we also feel we may have some benefit there in terms of development cost has been moved forward. But again, some good parallels and similarities with what you've seen out of Christensen Ranch exists with Ludeman. Operator: The next question comes from Justin Chan with SCP Resource Finance. Justin Chan: I guess as a follow-up to the questions on Christensen Ranch and Ludeman. So you've got the 6 header houses that are under construction. Do you plan to construct more over the next, let's say, the remainder of this fiscal year? Or will the Christensen Ranch be what you're planning there? And then the new header houses are at Ludeman? Yes. Can you just give us an update on that? And for Texas, can you give a sense of what the milestones are over the next, let's say, next quarter and then the quarter after that so we can judge progress? Amir Adnani: Yes, for sure. Brent, why don't you go ahead on Ludeman and Christensen Ranch? Brent Berg: Sure. Justin, thanks for the question. So at Christensen Ranch, of course, when you were at site, we toured the well development, wellfield development. And we're very much focused on mine unit 11 or wellfield 11 at that time. We've since started development in wellfield 12 as well as 10 extension. But we will continue on with further development and additional header houses at Christensen Ranch. So wellfields 10 extension as well as an extension to wellfield 8 are both quite large, and there are a number of header houses with associated with both. So we will -- you'll continue to see this pace as we progress. In terms of Burke Hollow. Construction is substantially complete. So what the team is very focused on right now is preoperational testing and commissioning of equipment, training key personnel and finalizing as-built drawings mechanical integrity tests and well completion reports. As far as next milestones, the wellfield at Burke Hollow will be brought online gradually and increasing the flow to the satellite ion-exchange plant chemicals, including oxygen, carbon dioxide and bicarbonate will be added to the initial production area to activate the uranium recovery process. And then as the grade increases in the feed to the plant, the uranium content loaded on the resin will subsequently increase. And of course, once that resin is loaded, it will be transported to -- in one of the new resin hauling trailers to Hobson for processing. So that's what I foresee the next few months looking like. Justin Chan: Got you. So at Burke Hollow, let's say, this time next quarter, you'll have solution into the wellfield. Presumably, it will be a target PH, and we'll start to get some information about grades and flow rates and stuff like that? Is that a good way of tracking over the next few months, what I might be asking you in 3 months' time? Brent Berg: Yes. Justin, I think that's exactly right. So as we start adding the chemical to the wellfield. We'll see the uranium grade respond as well as the PH and we'll get a lot better picture of what that production profile is going to look like as we ramp up Burke Hollow and send that uranium loaded resin to Hobson for process. Operator: The next question comes from Mohamad Sidibe with National Bank Financial. Mohamed Sidibe: Most of my ones have been answered. But maybe just on your UR&C, given the work that you're advancing in fiscal year 2026 ahead of the feasibility study, can you maybe provide us with a little bit of color on maybe the spend required to advance some of these initiatives specifically for fiscal year '26? Amir Adnani: Mo, just I heard your question. What was the required part you asked for -- the bandwidth required? Mohamed Sidibe: No, no, the spend. So just trying to understand how much spend to advance the feasibility study, the engineering work, advanced negotiations with host governments? Just to understand a little bit better the impact to your balance sheet use for fiscal year 2026 as you advance work on the conversion facility? Amir Adnani: Thank you for the question. Relative to the size of our balance sheet and relative to the current quarterly cash burn rate Mo, given the sort of study phase that we're at right now with UR&C, the requirements, the capital requirements are still very modest. In the coming quarter or 2, we'll be able to obviously speak to that with more estimates and especially as the feasibility study comes out. But certainly, I would say we are very sufficiently capitalized for the work that needs to happen there. And the current spending is very modest, again, because we're at that study stage and that work you would appreciate is -- is going to be like that. But ultimately, again, there is a serious kind of ramp-up in work and efforts coming and there will be another kind of step change in the work we're doing once the feasibility study is released once the siding work has been completed once site selection has been announced and sort of planned. So again, major milestones ahead. But between now and then, very adequately funded to continue to advance the work. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Amir Adnani: All right. Thank you for that. Thank you for everyone who participated in today's call. We really appreciate it. Again, as we said at the outset that this quarter represents a major step change for UEC both in terms of the strategic initiative that we have launched with our uranium the United States Uranium Refining and Conversion Corp. Again, this highly differentiates UEC as being the only company with U.S. origin supply chain from mine to conversion. The work that has been done in operations, again, we were just a year ago, just resuming at Christensen Ranch and came into this quarter as a single asset producer, and we've laid the groundwork during this quarter to become a multi-asset producer with Burke Hollow coming into production eminently and with Ludeman now in development and construction. The other area in terms of the operating results at Christensen Ranch, we're really pleased with demonstrating the continued low cost production profile that, that project carries between uranium recovered and processed, between Christensen Ranch and Irigaray plant. So again, all in all, a lot happening, a lot of significant progress. We're very excited by it all. But also to highlight that we remain in an incredibly strong balance sheet position. In fact, even stronger than before. We continue to be debt-free and with almost $700 million of cash, physical uranium and liquid assets. Finally, with 1.4 million pounds of uranium in inventory, not including the 199,000 pounds produced and not including another 300,000 pounds that we have the ability to purchase this month. We're sitting also in a very strong inventory position ahead of the Section 232 decision, and hopefully, that will be a positive catalyst as we believe it could be for our industry, particularly the U.S. uranium industry where UEC is the leading company in that space and the fastest-growing and largest U.S. uranium company. Thank you again for your time today and wishing everyone a pleasant December, Merry Christmas and happy holidays. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.