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Operator: Good evening. Welcome to the IDT Corporation's First Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference call is being recorded. I will now turn the call over to Bill Ulrey of IDT Investor Relations. Bill, you may begin. Bill Ulrey: Thank you, John. In today's presentation, IDT's Chief Executive Officer, Shmuel Jonas; and Chief Financial Officer, Marcelo Fischer, will discuss IDT's financial and operational results for the 3 months ended October 31, 2025. After their remarks, they will be happy to take your questions. Any forward-looking statements made during this conference call, either in their remarks or during the Q&A that follows, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those in which the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that IDT files periodically with the SEC. IDT assumes no obligation either to update any forward-looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. In their presentation or in the Q&A session, IDT's management may make reference to non-GAAP measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP earnings per share, NRS's Rule of 40 score and adjusted net cash provided by operating activities. Schedules provided in the IDT earnings release reconcile these non-GAAP measures to their nearest corresponding GAAP measures. Please note that the IDT earnings release is available on the Investor Relations page of the IDT Corporation website. The earnings release has also been filed on a Form 8-K with the SEC. Now I'll turn the call over to Shmuel for his comments on the quarter's results. Samuel Jonas: Thank you, Bill. And thanks, everyone, on the call for joining this evening. IDT delivered consolidated revenue growth and record levels of gross profit, adjusted EBITDA -- and adjusted EBITDA in the first quarter. NRS led top line expansion, while all 3 of our growth segments reported strong bottom line results. Our Traditional Communications segment again provided steady cash generation. NRS recurring revenue increased 22% year-over-year, helping to drive a 35% increase in income from operations and a 33% increase in adjusted EBITDA. This quarter, we continue to launch and build out innovative premium services, delivery integrations, couponing and product data scan programs to name a few. Our premium offerings are becoming important growth drivers and factored into the large increase in average recurring revenue per terminal this quarter. There is tremendous opportunity for additional long-term growth through innovation, both in NRS's current and adjacent markets. At BOSS Money, our digital channel continues to outperform retail and that churn may accelerate as implementation of the new federal excise tax on cash remittances begins on January 1. The Fintech segment's income from operations and adjusted EBITDA nearly doubled year-over-year, aided by BOSS Money's increasing operating leverage and enhanced profitability of other smaller fintech initiatives. Our push to integrate tailored AI and machine learning into BOSS Money customer service and fraud detection activities have helped to significantly improve unit economics. Looking ahead, we will soon introduce the first integration of the BOSS Wallet, enabling our U.S. customers to share money and receive rewards. During the quarter, net2phone began offering its AI agent to both our existing and new customers and added our Coach AI solution at quarter's end. Increasingly, our customers are ordering multiple net2phone offerings to enhance their operations and streamline workflows. As a result, we have pivoted from stand-alone product offerings to holistic solutions comprised of multiple offerings tailored to customers' communications and workflow needs. This approach plays net2phone's product and distribution -- plays to net2phone's product and distribution strengths and we are very excited about the potential as we continue to add new AI solutions. On a final note, the Delaware Supreme Court in a ruling issued yesterday affirmed the decision of the Court of Chancery dismissing all claims against IDT in the Straight Path class action suit, and we are very pleased that this case has now been favorably resolved. I don't usually do this, but I would like to thank a couple of people in particular. I would like to thank Jason Cyrulnik and Paul Fattaruso and Rudy Koch, as well as our own, Menachem Ash. I would also, on a sad note, like to remember our esteemed colleague, Suzy Sillman, who led the data division of NRS and worked tirelessly for NRS even while very sick and in lots of pain and unfortunately, has departed. I will wrap up by thanking everyone on the IDT team for their hard work and another great year and wishing them and all of you on the call a very joyous holiday season. Now Marcelo will discuss our financial results. Marcelo Fischer: Thank you, Shmuel. My remarks on the fourth quarter of our fiscal year 2026 will focus on the year-over-year comparisons to set aside seasonal impacts on our business. From a financial perspective, this was a terrific quarter, highlighted by good top line growth, record gross profit and record adjusted EBITDA and adjusted EBITDA margin. Consolidated revenue increased 4% to $323 million, driven by our 3 growth segments: NRS, Fintech and net2phone, which together grew by 16%, with particularly strong contributions from NRS and Fintech. Consolidated gross profit increased 10% to a record $118 million for a gross margin of 37% as we continue to benefit from the increasing contributions of our 3 higher-margin growth segments relative to that of our low-margin Traditional Communications segment. Consolidated income from operations increased to $31 million, a 31% year-over-year increase. Adjusted EBITDA and adjusted EBITDA margin also hit record levels at $37.9 million and 11.7%, respectively. EBITDA less CapEx totaled $32.1 million in the first quarter, a 30% year-over-year increase and also an IDT all-time high. EPS increased by 31% or $0.21 to $0.89 per share on both the basic and diluted basis. Non-GAAP diluted EPS also climbed by 32% to $0.94 from $0.71. As Shmuel pointed out, the big driver in the first quarter was again our 3 growth segments. Together, they contributed $103 million in revenue, equal to 32% of our consolidated revenue compared to 29% a year earlier. But because the average gross margin is 66% compared to 18% in our Traditional Communications segment, they provide tremendous operating leverage as the revenue contribution increases and the cost structures continue to be optimized. Adjusted EBITDA from NRS, Fintech and net2phone combined totaled $21.4 million in the first quarter, a 50% increase from the first quarter of fiscal 2025. Together, they now represent 57% of our consolidated adjusted EBITDA compared to only 48% 1 year ago. And because these segments still generate less than 1/3 of our revenue, that rotation from low-margin businesses to higher ones still has a long way to run. This being said, given the quite solid and consistent profitability results delivered by our Traditional Communications segment, we believe that the largest segment of ours will continue to be a major contributor to our adjusted EBITDA generation for years to come. Now let's take a closer look at each of our segments. At NRS, results were highlighted by the very strong increase in the monthly average recurring revenue per terminal to $313 from $295 in the year ago quarter as a result of the strong revenue growth in merchant services, which is up 38% and SaaS fees up 30% that more than offset the 15% decline in advertising and data revenue. Merchant services revenue this quarter continued to benefit from consumer and retailer trends that we believe will drive long-term increases in payment processing revenue per account. Overall, NRS's recurring revenue climbed 22% to $35 million. Income from operations in the first quarter increased 35% to $9 million, primarily reflecting a 21% increase in gross profit, while adjusted EBITDA increased 33% to $10.3 million. In our BOSS Money remittance business, revenue growth at our dominant digital channel, which generated 84% of our transactions during the quarter, was 20%. Although revenue growth has slowed, we continue to take market share from our peers, many of whom, especially the retail-centric providers have seen revenues from U.S.-based remittances decrease in recent quarters. Income from operations in the Fintech segment, which includes also our Gibraltar-based bank and other smaller financial businesses and offerings increased 97% to $6 million, and adjusted EBITDA climbed 87% to $7.5 million. These exceptional increases reflect the reduction in our transaction cost structure that machine learning and AI are providing, the increasing operating leverage of the business and the improving profitability of the other businesses within our Fintech segment. Fintech's adjusted EBITDA margin climbed to 18%, and BOSS Money as a stand-alone entity would likely have achieved several percentage points above that, an impressive accomplishment that stacks up favorably in comparison to the larger, long-established players in the remittance industry. With the recent launch of its AI offerings, net2phone is transitioning its focus away from the per-seat metrics we have traditionally used as a key indicator of the performance of this business. As Shmuel just noted, net2phone customers are now increasingly looking for communications and operating solutions comprised of multiple offerings. So in order to better capture and report this new dynamic, over the next year, net2phone will begin reporting new customer-based KPIs that more meaningfully track the performance of customers -- of customer economics as opposed to per-seat economics. For now, however, seat growth remains a key performance indicator. And this quarter, seats increased 7% to 432,000, while revenue increased 10% on a net reported basis and 9% on a constant currency basis. Revenue growth outstripped seat growth in part because of some nice win for our higher-value CCaaS offering. Income from operations increased 94% to $2 million in the first quarter, while adjusted EBITDA increased 44% to $3.6 million. EBITDA less CapEx increased 104% to $1.9 million. Net2phone was able to achieve all of this, while at the same time ramping up its investment in strategic AI technologies. Looking ahead, net2phone expects to further increase its investment in technology development as it build out integrations and features for new verticals, such as health care. For our Traditional Communications segment, this was another very good quarter, exceeding our expectations. Income from operations again increased, up 1% year-over-year to $16 million. Adjusted EBITDA increased 2% year-over-year to $18.9 million as modest decreases in gross profit were more than offset by our ongoing efforts to reduce OpEx in our legacy paid minutes businesses. Adjusted EBITDA less CapEx for this segment increased 1% year-over-year to $17.3 million, indicating once again the durability of this segment's free cash flows. Turning to our balance sheet. At October 31, 2025, IDT held $220 million in cash, cash equivalents, debt securities and current equity investments. This represents a decrease of $34 million compared to the $254 million held at July 31. This reduction mostly reflects the fact that our first quarter fiscal '26 ended on a Friday compared to last quarter, which ended on a Wednesday. As I have mentioned in previous calls, as part of our weekly process of funding, weekend transactions for our BOSS Money remittance business in any given week, our highest cash balances are typically on Wednesdays and our lowest on Fridays. During the first quarter, IDT also repurchased $7.6 million in stock. We expect to opportunistically buy additional shares during the remainder of our fiscal year and to return cash directly to our stockholders through our quarterly dividends. To conclude, after generating $38 million in consolidated adjusted EBITDA this quarter, representing a 26% year-over-year growth, IDT is extremely well positioned to achieve our full year '26 adjusted EBITDA guidance of $141 million to $145 million, which would represent a 7% to 10% full year-over-year growth rate. For now, we will monitor Q2 performance and update our guidance when we report our next quarterly results, God willing, in early March. Now Shmuel and I would be happy to take your questions. Operator: [Operator Instructions] Our first question comes from Iñigo Alonso with MORAM Capital. Iñigo Alonso: Congratulations on the 26% EBITDA growth and on the resolution of the Straight Path litigation. You have always been a really shareholder-friendly company and now that the risk is gone and as you wait for the M&A market to clear out over the first half of the fiscal year, I was wondering if we could expect any special dividend accelerated buybacks in the second half of the year or do you still think that M&A is the way to go for that capital allocation. Samuel Jonas: I mean, on the M&A front, we're not looking at anything very large right now unless something regulatorily changes in the market, I think we're sort of waiting to see how the effects of the tax on money transfers affect retail businesses in particular. On the NRS front, we're not looking at any major acquisitions, but we do have 1 or 2 small acquisitions in mind for them. And we're continuing to plan sort of our next big move, and we hope that it will be pleasing to our investors. Iñigo Alonso: Okay. Another question, this one on additions of net payment processing accounts exceeding that of the terminal accounts. I was wondering if these additions are coming from businesses that do not require a POS. And if so, how relevant is a percentage of businesses to your revenue? Or is it coming from conversions? Samuel Jonas: No. It's coming from ones that require a POS. Iñigo Alonso: Okay. And then in the prepared remarks, you comment on NRS and you mentioned that there's tremendous opportunities for growth in adjacent markets. I was wondering what those adjacent markets are. Samuel Jonas: I mean there's a bunch of adjacent markets, some of which we've talked about in the past related to food service and related to international markets that we've yet to really launch in with the exception of Canada. And there's lots of adjacent markets inside of the -- that are sort of specialties inside of the businesses that we do already. I mean I can give you a bunch of examples, but you know most of them, whether or not it's hardware stores or CBD shops or there's lots of different verticals. I mean, as I said, I can give you 100 different ones that if we build out a couple of small features for each one of them, they open up tens of thousands of stores each. Iñigo Alonso: In the international market comment, do you think we could see other countries added to the IDT ecosystem in '26? Samuel Jonas: Yes. I mean, again, I can't say 100% that we have decided to go into more countries yet. We're looking at an acquisition outside the country that would accelerate that for us. But it's definitely on the road map. As I said, I'm not sure I can say it will be on the '26 road map, but definitely on the road map. Iñigo Alonso: And the last one, this is on IDT Global. You guys commented Traditional exceeding the expectations, especially on the bottom line front, and you guys commented on the initiatives to expand the bottom line. But you have not commented on the record IDT global top line revenue. I mean, it's a record number for the last 2 years. I know there's some seasonality to it, but if you could provide some color there, I would appreciate it. Samuel Jonas: Yes. I mean I think that they're doing a great job all around bringing lots of new and interesting solution to our carrier partners all around the world, whether or not it's SMS solutions, voice solutions, some of even our new AI solutions that we're using in net2phone are being, I'll say, offered to carriers as well. And they've really done a great job all around. Marcelo Fischer: Yes. And Iñigo, as we maybe have spoken before, when we manage our IDT Global wholesale carrier business, our account managers are incentivized to manage it in terms of generating maximum gross profit. On any quarter, revenues might go up or down depending on whether they chose the opportunities in a high revenue per minute country or a low revenue per minute country by high margin, low margin. So the IDT Global folks are doing exceptionally well in the sense that despite that the minutes business have been in decline now for so many years, they have consistently delivered what we look from a managerial perspective, about $9 million to $10 million of GP or gross profit every quarter for now several years, despite the declines in the minutes, right? So the fact that the revenue has grown in the last 2 quarters, it's just a small indicator, okay, on the resilience of the business. And the revenues could come down, but for us, the focus is really that the gross profit continues to be maximized as much as possible. Operator: [Operator Instructions] As there are no more questions, this concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Aurubis Analyst Call. [Operator Instructions] Let me now turn the floor over to Elke Brinkmann. Elke Brinkmann: Good afternoon also from my side and a warm welcome to the conference call on the full year results of the fiscal year 2024-'25 of Aurubis AG. We, from Investor Relations are here with our CEO, Toralf Haag; and our CFO, Steffen Hoffmann, who will present the figures for the 12 months of 2024-'25 and current developments at Aurubis. After the presentation, the floor will be open for questions. [Operator Instructions] Before we begin, a brief reminder of the disclaimer on forward-looking statements. Today's capital markets presentation contains forward-looking statements about Aurubis plans and expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Let me now turn the floor over to Toralf Haag. Toralf Haag: Thank you, Elke, and welcome, everybody, to our conference call for the full year results for the fiscal year 2024-'25. Aurubis looks back on a successful year in which our competitor strengths have once again been the foundation of our resilience. The past fiscal year was characterized by a highly dynamic market environment with unprecedented shifts in the market. The concentrate market swung into a deficit, motivating Asian smelters, in particular, to substitute copper scrap for concentrate. Developments that send TC/RCs and scrap RCs on a downward trajectory. Thanks to our multimetal excellence, our sustainability leadership but also our closing the loop activities with our customers, we were able to fully supply our primary and secondary recycling smelters. At the same time, demand for metals searched where trade measures redirected material flows and created local deficits. As an integrated copper producer, we were able to reliably supply our customers and ensure the flow of critical metals to strategic relevant industry sectors. Overall, we managed market challenges well, while also achieving key milestones in our strategic growth agenda. One was first melt Phase 1 of Aurubis Richmond. We are well on track and our robust business model was a cornerstone of our resilient performance in the past fiscal year. On the next page, I would like to give you an overview of the key financial highlights for fiscal year 2024-'25. In line with our sharpened guidance range, operating EBT came in at EUR 355 million. As highlighted before, this result was achieved in a challenging economic environment and includes the successfully completed major shutdown in Pirdop. EBITDA was at EUR 589 million versus EUR 622 million in the prior year, reflecting our solid operational performance. Operating ROCE decreased to 8.8% compared to 11.5% a year ago. This is primarily due to our ongoing strategic investment program, which is increasing capital employed until the full earnings contributions come through. Net cash flow was a strong EUR 677 million, significantly above the prior year's EUR 537 million level driven by the robust earnings situation and a clear improvement in working capital. Q4 was outstanding with EUR 319 million net cash generation alone. On the back of a healthy cash generation in Q4, free cash flow, pre-dividend improved by more than EUR 100 million from minus EUR 219 million in the previous year to a minus EUR 95 million. On this basis, we are proposing increasing the dividend to EUR 1.60 per share, up from EUR 1.50, which underlines our confidence in the business and its cash generation. Looking ahead to the next fiscal year, we are confirming our forecast of an operating EBT between EUR 300 million and EUR 400 million, which is expectedly roughly on par with the 2024 and '25 level, as well as free cash flow in a positive territory. Turning on the next page to our production figures. I would like to highlight once again that Aurubis is much more than just copper. We have a wide array of strategically relevant metals. On the input side, we processed around 2.2 million tonnes of concentrate a slight decline of 4% year-over-year, reflecting the planned maintenance shutdown in Pirdop and operational issues in Hamburg at the beginning of the year. At the same time, we increased copper scrap and blister input by about 3%, totaling 510,000 tonnes, demonstrating our ability to source and process secondary raw materials. Other recycling material throughput was down by 6% to 510,000 tonnes. On the output side, copper cathode production was stable at 1.1 million tonnes. In line with concentrate throughput development, we reduced roughly 2 million tonnes of sulfuric acid. The picture for other industrial metals, along with precious and minor metals is mixed. While some quantities exhibited fairly stable development or even increased, other metal quantities such as gold dropped versus the prior previous year, which is, to a large extent, a collection of the feed mix in connection with lower throughput levels. Our output of wire rod and copper shapes was on par with the prior year level. Flat rolled products and specialty wire volumes, however, were down 31%, mainly because of the previous year figures included volumes from the Buffalo plant, which we sold. Overall, our smelter network showed a solid operational performance. Our unique smelter network allows us to supply high-quality products from both primary and secondary sources with a high share of recycled content. As you can see, the share of recycled content in Aurubis copper cathodes has increased by 1 percentage point to 45%. And all of our copper products contain a sizable share of recycled content as well. We recovered 20 different metals and elements that are contained in our raw materials, such as tin. And here, we achieved even 100% recycled content, which highlights our strong position in circular economy solutions. This is the key strength of our network of plants in Europe and North America and is also a clear competitive advantage in securing supply and delivering sustainable products. Let me now run through the market environment of our main products and raw materials. Starting with the downstream side. European copper premiums increased significantly after the U.S. tariff decision. And although they came down from the elevated levels in Q4, they stayed clearly above last year's level. Sulfuric acid prices declined from prior year peaks but stayed stable at a relatively high level, supporting our earnings in the CSP segment. On the raw material side, according to industry reports, treatment and refining charges for copper concentrates on the stock market had fallen into negative territory in the recent quarters. They have now stabilized but remain at very low levels, reflecting the tightness in the concentrate market. This has been strained further by major main disruptions -- mine disruptions towards the end of Q4. Furthermore, tightening scrap markets led to declining refining charges for recycling materials, particularly in Q4. Overall, we saw favorable development on the product side but faced headwinds from raw material markets, especially for concentrates and scrap. However, please bear in mind that there are no direct one-to-one correlation with our P&L. We are actively managing to remain independent for short-term fluctuations. Let me now turn to the price development of -- for key metals in the U.S. dollar. As you are all aware, gold and silver prices increased sharply in Q4 of '24-'25 up 44% year-over-year and at new all-time highs, driven by macro and geopolitical factors. In comparison, copper prices remained relatively stable with a moderate increase towards the end of the quarter. This favorable development of key metal prices positively contributed to our metal result as we will see later. The U.S. dollar euro exchange rate moved into a tight range over the period with the U.S. dollar depreciating from the levels at the beginning of the year. Aurubis long U.S. dollar position remains unchanged at approximately USD 530 million for the fiscal year with 54% of the U.S. exposure hedged at a rate of 1.125 for the fiscal year '26-'27, around 40% of the exposure is hedged at a rate of 1.188. And now I hand over to Steffen Hoffmann for more details on the financials. Steffen Hoffmann: Thank you, Toralf, and a warm welcome from my side too. Let me take you through the financial details of fiscal year '24, '25 and touch on the KPIs in this chart. Our revenues increased by 6% to EUR 18.2 billion, mainly reflecting higher metal prices. Gross profit decreased slightly by 4% to EUR 1.6 billion as did EBITDA, which came in at EUR 589 million, which is minus 5%. Operating EBIT came in at EUR 358 million and operating EBT at EUR 355 million, 14% below the prior year. Compared to the EBITDA, the decrease of the EBT was more pronounced as in '24-'25. Depreciation increased by EUR 20 million as planned due to our strategic projects. A higher metal result significantly increased earnings from sulfuric acid a robust contribution from product sales, as well as lower legal and consulting costs positively impacted the result. However, lower concentrate throughput and reduced TC/RCs lower earnings from processing of recycling materials and the anticipated higher ramp-up costs and depreciation for strategic projects weighed on the results. Net cash flow improved significantly to EUR 677 million from EUR 537 million, underscoring the strong cash generation of our business. Our operating ROCE for fiscal year '24-'25 was 8.8% against 11.5% the year before, reflecting the investment phase we are currently in. Looking on the next chart at quarterly performance. Q4 showed clear improvement over Q3. Our operating EBT increased by 19% to EUR 68 million. Higher concentrate throughput following the successful completion of the Pirdop shutdown in Q3 supported earnings despite lower TC/RCs. Please keep in mind that the shutdown was completed in Q4, so a minor portion of the shutdown still affects Q4. In Lunen, we recognized a EUR 10 million environmental provision in Q4, while Q3 was impacted by EUR 12 million additional depreciation on the at equity investment. Net cash flow almost doubled quarter-over-quarter to EUR 319 million, mainly due to the significant improvement in net working capital. Moving on to the split of our gross margin, which is a nice representation of our multimetal strategy and the diversification of our earnings drivers. You saw this breakdown at our Capital Market Day, and we decided to provide you with the same breakdown for the 12-month period as well. In total, gross margin was at around EUR 2.077 billion, broadly in line with the prior year level of about EUR 2.1 billion. Please bear in mind that our former FRP site in Buffalo was still included in the overview for fiscal year '23-'24. Compared to the previous year, the metal result share increased mainly on account of strong precious metal prices but the higher copper price contributed as well. Here, we see again that Aurubis is more than just copper. We are multimetal and we will continue to strengthen this profile through targeted investments. However, declining concentrate TC/RCs weighed on the overall gross margin, while the scrap RC share remained stable. Still, our strategy of building on long-term partnerships and more complex materials shielded us to some extent from the extreme developments visible on the spot market. In products and premiums, higher asset prices supported the group's gross margin, partially counteracting the TC/RC decline. And with respect to product premiums, I'd like to reiterate that Buffalo was still included in the previous year. Overall, the balanced mix of these earnings drivers helped us to mitigate volatility in individual markets and once more underpins the resilience of our business. Let me now go into segment performance, starting with Multimetal Recycling. MMR generated an operating EBT of EUR 13 million compared to EUR 79 million in the previous year. Operationally, the throughput of recycling materials was slightly above the prior year level. However, in an environment of declining refining charges for recycling materials. The second half of the fiscal year was characterized by a challenging market environment with an impact on RCs, volume and mix. Additionally, compared to fiscal year '23-'24, the segment's performance was impacted, in particular, by higher ramp-up costs for strategic projects, especially at Aurubis Richmond, and furthermore, as we've alluded to, an impairment on an equity investment in the amount of EUR 12 million and a provision for a planned environmental measure in the amount of EUR 10 million weighed on the segment's performance and can be treated as a one-off. The ROCE declined from 5.6% to 0.9%, reflecting both the lower earnings level and the increase in capital employed, mainly due to Richmond. Overall, we are not happy with this level at MMR and we'll focus on improving the financial performance going forward. Turning to the segment's gross margin. Overall, the gross margin increased slightly to around EUR 640 million versus EUR 623 million in the prior year despite the tightening scrap markets. This increase is attributable mainly to the segment's metal result which benefited from higher metal prices. refining charges for recycling input were stable and contributed roughly 45%, very close to last year's 46%. Contribution of products and premiums in MMR remained flat compared to the previous year. Let's now take a look at the Custom Smelting & Products segment. CSP delivered an operating EBT of EUR 446 million versus EUR 458 million, so almost at the prior year level despite the deterioration of concentrate TC/RCs. The ROCE for the segment was 18.2% compared to 19.6% last year, influenced again by a higher capital base due to investments. Concentrate throughput was at 2.18 million tonnes and sulfuric acid production at roughly 2 million tonnes, both slightly below the prior year due to the major plant shutdown in Pirdop. Cathode output rose slightly to 582,000 tonnes, and rod and shapes volumes remained broadly stable. FRP products and specialty wire volumes declined to 90,000 tonnes mainly due to the sale of the Buffalo plant in the prior year. Overall, CSP showed good operational performance in a challenging market environment and delivered earnings broadly in line with last year, despite the Pirdop shutdown. Looking at the gross margin. This, in CSP highlights the different moving parts. Total gross margin was approximately EUR 1.44 billion, slightly below last year's level, reflecting lower global treatment and refining charges, as well as lower concentrate throughput. Accordingly, treatment charges for concentrate and recycling input contributed around 18% of gross margin, down from 24% in the prior year, mirroring lower TC/RCs and subdued scrap RCs. The metal result increased to 34% from 27% in the prior year, driven in particular by higher precious metal prices and higher copper prices. Products and premiums contributed 48%, roughly in line with last year's figure. This reflects significantly higher earnings from sulfuric acid and robust demand for copper products and here again, the reminder is that last year's figures included Buffalo for 11 months. So while TC/RCs were under pressure and throughput volumes were lower due to the shutdown in Pirdop, we successfully compensated with a stronger metal result and product contributions. Let us now take a look at cost development in the group. Total group costs were around EUR 1.9 billion, slightly below the EUR 1.98 billion in the prior year. Distribution among the cost categories was quite similar to last year. The decrease in total cost is largely due to the sale of the Buffalo plant and thus a lower asset and cost base. Personnel costs represented about 33% of total cost slightly increasing due to higher headcount, mainly for strategic projects, as well as wage increases. Our energy costs declined mainly on account of the sale of the Buffalo plant. For the remainder of the group, energy costs were stable due to energy management. Consumables and external services, both around 12% and at 22%, other operating expenses like logistics or maintenance were stable versus previous year. Depreciation and amortization increased as expected due to our strategic investments, bringing total D&A to about 12% of the cost base. Excluding D&A, our total cash costs decreased to EUR 1.665 billion from EUR 1.764 billion in the prior year, reflecting our cost discipline and portfolio adjustments. Turning to cash flow. We saw a very strong development in '24-'25. Starting from left to right, operating EBITDA of EUR 589 million is the starting point, reflecting our robust financial performance. Net working capital improved significantly driven by higher liabilities, partly offset by higher inventories. Tax payments, however, increased to EUR 92 million on account of the application of the global minimum tax rate in Bulgaria, as well as deferred taxes. This led to a net cash flow of EUR 677 million, clearly above the prior year's EUR 537 million. Cash outflows for investment activities remained high at EUR 754 million, mainly for Aurubis Richmond, complex recycling Hamburg and the planned Pirdop shutdown. Free cash flow before dividend was at minus EUR 95 million, which is a marked improvement versus the previous year's minus EUR 219 million figure and reflects that the peak of our investment phase is now behind us. In total, we paid dividends in the amount of EUR 66 million, which results in a free cash flow after dividends of minus EUR 160 million. Overall, we focused on strengthening the cash flow profile while executing large strategic projects. I would now like to move on to some of our balance sheet KPIs. Our equity ratio is 53.5%, slightly below almost 56% last year but very comfortably above our 40% target and above. Our net leverage is again very low at 0.5% and well below our maximum target of 3x EBITDA. Please take note that the capital expenditure of EUR 771 million on this slide includes capitalized own work. And for this reason, is slightly higher than the cash figure shown on the previous slide. Capital employed increased to roughly EUR 4.1 billion from around EUR 3.7 billion, reflecting the investment program. The net cash flow, as mentioned before, improved to EUR 677 million. So I think it's fair to say overall that the balance sheet remains very solid despite the high level of investments and the financial leverage remains low, giving us ample flexibility. The next slide is meant as a quick reminder of our updated capital allocation policy and our clear commitment to maintaining a strong balance sheet while pursuing disciplined growth and shareholder returns. Besides aiming to keep the equity ratio above 40% and maintaining a maximum net leverage of 3x EBITDA at the fiscal year-end, we provided guidance on how to allocate available capital among approved growth projects and baseline CapEx, as well as dividends. For the latter, we sharpened our dividend policy at the CMD and foresee a payout ratio of up to 30% of the group's operating consolidated net income in the medium term for fiscal year '24-'25, we stated that we would aim for a 25% payout ratio since the last fiscal year was still marked by high investment activity. So what's now our concrete dividend proposal on the next chart. Our operating EPS was at EUR 5.97 in '24-'25, down from EUR 7.66 in '23-'24. Main reasons for the decline were the lower operating EBT, as well as higher tax payments due in part to the higher corporate tax rate in Bulgaria, which I mentioned before. Despite the lower earnings base, we propose increasing the dividend to EUR 1.60 per share up from EUR 1.50 per share last year, continuing the gradual upward trajectory in absolute terms. This would correspond to a payout ratio of 27% which is above the 25% target for the transition year that I've just mentioned. It once more underscores management's confidence in the business and its outlook. While this would increase the absolute dividend, the dividend yield is lower than in previous years due to strong share price performance. Still, the absolute dividend amount and our policy reflects a clear commitment to shareholder renumeration. Looking ahead to fiscal year '25-'26, the mix picture for our main macro drivers that we presented at the CMD remains largely unchanged. Raw mat supply is not ideal but manageable thanks to our long-term contracts and market position. As many of you are aware, concentrate supply remains tight, and we remain cautious despite some hopeful news flow in recent weeks. Hence, we expect TC/RCs to remain at the low level of the recent months. For RCs for recycling raw mats, we expect a stable outlook, although recent months presented more of a mixed picture. Keep in mind that visibility in these markets is generally limited. The euro-U.S. dollar exchange rate remains affected to watch as it has developed less favorably for us in recent months, but we manage our exposure through our hedging and commercial policies. The sulfuric acid market is of a more short-term nature as well. And prices have normalized from previous peaks but are still at a sound level. We continue to see healthy demand from the chemical and fertilizer sectors, although with more volatility compared to the previous year. Metal prices and demand for our products are expected to remain supportive overall, especially given structural trends such as electrification and infrastructure investments. In total, we expect a challenging raw mat environment, though with positive contributions from metals and products. Despite the somewhat mixed macro picture, we expect a sound '25- '26 fiscal year. We maintain our outlook for operating EBITDA between EUR 580 million and EUR 680 million and an operating EBT in the range of EUR 300 million to EUR 400 million, roughly at '24-'25 level. Bear in mind, please, that the EBT level mentioned includes higher depreciation in the order of EUR 50 million. For CSP, we expect an operating EBT of EUR 280 million to EUR 340 million. On the one hand, this range reflects the lower TC/RC level that affected fiscal year '24-'25 only in part and will now affect '25-'26 on a full year basis. On the other hand, besides headwinds from the euro-U.S. dollar rate we anticipate higher costs for footprint expansion due to strategic projects like CRH or Tankhouse expansion Pirdop. Higher depreciation will weigh on the segment's financial performance as well. On the other side, increased material prices, high demand for copper products and improvement in operational performance will offset the challenges but only partially. Still, considering that we are only 10 weeks into the new fiscal year, there might also be scenarios in which the segment's EBT comes in at the upper end of the guidance. For MMR, our expected operating EBITDA range is EUR 80 million to EUR 140 million. From today's perspective, we do not expect negative one-off items like last year and ramp-up cost in Richmond to impact the segment's performance in fiscal year '25-'26. Furthermore, increased metal prices and high demand for copper, as well as an improvement in operational performance should support the segment's earnings level. Regarding the development of recycling raw mat markets, we maintain a more cautious view and higher depreciation at segment level will partially counteract the positive items. Also here, they are still 40 weeks ahead of us in this fiscal year. We anticipate net cash flow in the range of EUR 640 million to EUR 740 million, driven by a strong operating performance and further working capital management, which would translate to free cash flow before dividend at breakeven, reflecting the combination of reduced investments and cash generation improvements. Operating ROCE is expected between 7% and 9% with CSP at 11% to 13% and MMR at 6% to 8%, mirroring the increased capital employed from the investment activities mentioned. Overall, we confirm our previous guidance and expect another solid year. To help you frame the guidance, this slide, which we presented in detail at the CMD, schematically shows how our price change of 10% versus our assumptions for fiscal year '25-'26 would impact our EBT, a 10% change in concentrate TC/RCs, recycling RCs or sulfuric acid prices. Each translates into a low double-digit million euro impact on operating EBT for '25-'26. A 10% change in the euro-U.S. dollar rate or the copper premium would lead to a low to medium double-digit million change of the EBT. The highest sensitivity is visible in the metal result, a 10% price change across the entire metal portfolio would translate into medium to high double-digit million euro impact. Again, this illustrates that the diversified set of drivers influences our results and the drivers that may have been expected to have a higher weight in the earnings composition I refer to TC/RC turn out to be less dominant. At the same time, we actively manage these exposures. On CapEx, we are now moving beyond the peak of our current strategic investment program. More than 75% of the existing EUR 1.7 billion strategic CapEx program has already been spent. And the remaining strategic CapEx will phase out gradually as shown here, basically almost everything of the remainder in the new fiscal year. You can see that total CapEx peaked in '23-'24, declined in '24-'25 and is expected to decline further in '25-'26 as major projects are completed or enter commissioning. Therefore, we are planning with the strategic CapEx in the amount of EUR 350 million, EUR 100 million lower than in fiscal year '24-'25. At EUR 320 million, our expected baseline CapEx falls at the lower end of the EUR 300 million to EUR 400 million range, reflecting our CapEx discipline and the change in our primary shutdown cycle. As strategic projects come on stream, depreciation and amortization will gradually increase, reflecting the higher asset base. As mentioned before, DNA is anticipated at EUR 50 million above the prior year level. And with this, I'd like to hand back over to Toralf. Toralf Haag: Thank you very much, Steffen, for taking us in detail through the financials. The next slide we presented to you at our CMD at our Capital Market Day, and I would like to briefly repeat our path forward to frame the next slide. The decade of metals has begun and megatrends such as electrification, energy infrastructure, artificial intelligence, and global security are supporting long-term demand for our products and capabilities. Our ambition is to forge resilience and to lead in multimetal delivering impact across five strategic pillars: focused growth, innovation, efficiency, commercial excellence and impact from our investments. We are targeting value-creating growth, where we hold a leading competitive position, and we aim to maximize multimetal yields through innovation in metallurgical know-how. We continuously optimize our operations for peak efficiency and strengthen our commercial excellence to deep market access and competitiveness. This is underpinned by three key enablers. Sustainability leadership, our performance culture and financial strength. In the fiscal year, '24-'25, we successfully advanced projects into the in-commissioning phase. Including Bleed Treatment Olen Beerse, Aurubis Richmond Phase 1 and the third Solar Park in Pirdop. BOB has already started commissioning in December '24, and the first phase of Aurubis Richmond celebrated first month in September '25 and is now in the early stages of hot commissioning. Looking ahead to the current fiscal year, important projects such as Complex Recycling Hamburg, Aurubis Richmond Phase 2 and the Tankhouse expansion in Pirdop are planned to go into commissioning and expand our multimetal network. Projects such as Slag Processing in Pirdop and the new Precious Metal Refinery in Hamburg are still further out with commissioning scheduled in the fiscal year, '26-'27. These projects will create impact by enhancing our recycling capacity improving efficiency and supporting our sustainability and growth ambitions. In the next few minutes, I would like to highlight the 3 key projects for '25-'26 in more detail. First, Complex Recycling Hamburg or CRH, is expected to start commissioning in the first half of the current fiscal year and will further optimize the metallurgical network in Hamburg. The facility will show -- will allow for about 30,000 tonnes of additional external recycling input per year, increasing our ability to process complex secondary materials. From a gross margin perspective, the project will contribute to strengthen the metal result, as well as our earnings from TC/RCs and RCs. Second, Phase 2 of Aurubis Richmond in the U.S. will double the intake capacity for complex recycling materials to 180,000 tonnes. Commissioning will be followed by a technical ramp-up phase, after which we expect a material contribution to earnings. Once fully ramped up, Aurubis Richmond will contribute to increasing TC/RCs and RCs, as well as the group's metal result. Third, the Tankhouse expansion in Pirdop will enable us to process Pirdop's entire anode production directly on site, adding around 50% more refined copper production capacity at the site. This additional cathode production will mainly add to the group's earnings from product and premiums, while also supporting the metal result to a lesser extent. Together, these projects support our multimetal strategy, strengthen our footprint in Europe and North America and further enhance our resilience. Our commercial excellence pillar, specifically target strengthening the relationship with our partners, downstream but also upstream in particular. Secure competitive raw material supply is crucial for Aurubis. Here are some of the key agreements we concluded. With Troilus Gold in Canada, we signed an offtake agreement for 75,000 tonnes of copper-gold concentrate based on a positive feasibility study supported by a German government financing package. Our metallurgical capabilities and ability to process complex raw materials allow us to unlock resources and create value together with Troilus. With Viscaria in Sweden, we have agreed on 25,000 tonnes of copper concentrate deliveries from 2028 to 2035, with an option for extension. This mine project has a strong ESG profile and strengthens European supply. With Teck Resources, we signed a memorandum of understanding, collaborate on responsible mining and sustainability, focusing on traceability, transparency of ESG performance and credible certification frameworks, building on our long-standing partnership. In our collaboration with both Viscaria and Teck, our authentic sustainability leadership has been key to building and further strengthening the relationships. These agreements support our long-term raw material security, enhance our ESG positioning and contributes to the resilience and competitive of our supply portfolio. To summarize, 2024-'25 was a successful fiscal year for Aurubis. Despite planned maintenance shutdowns, one-off items and a challenging market environment, we delivered a solid EBITDA of EUR 589 million and an operating EBT of EUR 355 million, which was comfortably within our guided EBT range. Cash generation improved significantly as is reflected by net cash flow of EUR 677 million, and we aim to improve it further going forward. We reached key milestones in our strategic product including the first melt at Aurubis Richmond. The proposed dividend of EUR 1.60 per share represents a payout ratio of roughly 27% and reflects our confidence in the business and its long-term prospects. For 2025-'26, we expect an increased metal result and higher contributions from our product business. This will compensate for challenging raw material markets. With declining annual CapEx, we expect free cash flow generation to improve to a breakeven before dividend, while we confirm our guidance for an operating EBT of EUR 300 million to EUR 400 million, broadly at the '24-'25 level. Overall, we are well positioned to benefit from structural megatrends and to continue delivering on our performance 2030 strategy. Let me close the presentation by reiterating what makes Aurubis stand out. First, we have a strong market outlook. The decade of metals has begun, and megatrends are expected to drive double-digit growth in our end markets by 2035. Second, Aurubis holds a leading position as a top copper and multimetal producer in Europe and the U.S., with a unique setup of capabilities in primary and secondary metallurgy. Third, our strategy focused on growth and resilience, leveraging multiple earning drivers to increase our leadership in multimetal and our impact, efficiency and robustness. Fourth, we deliver strong financials. On the back of a world-class operations and focused investments, we aim for steady EBT growth and a 15% long-term ROCE target. Fifth, we are clearly committed to a shareholder value, combining value-accretive growth projects with an attractive dividend policy and potential additional returns of excess cash. In short, performance, resilience and multimetal leadership define Aurubis investment case. And with this, I would like to hand over to Elke Brinkmann. Elke Brinkmann: Thank you, Toralf and Steffen. I would like to provide you with an outlook on the next event following our Q4 publication. We will publish our Q1 2025-'26 results on February 5, followed by the Annual General Meeting on February 12, '26. And with that, I would like to ask the operator to take over for your questions. Operator: [Operator Instructions] And first up is Boris Bourdet from Kepler Cheuvreux. Boris Bourdet: My first question would be on the recent developments you alluded to in your presentation regarding the recent discussions on TC/RCs. We've heard that the Chinese CSPT was committed to reduce the production by 10%. I was wondering whether that would change your view on TC/RCs marginally. And can you share with us where you would expect the benchmark to land, if any? And also from Slide 11 on TCs, I can make a rough calculation that -- it meant -- lower TCs meant EUR 90 million downward contribution this year. Is it the same kind of contribution you expect next year? That's the first question. Toralf Haag: I'll start with the first question, and then Steffen can take on the second question. Yes, you're right, Boris. There was also a publication that the Chinese smelters plan to reduce the capacity, the production output by 10%. And we have not felt that in the spot TC/RCs. But we expect a slight recovery of the TC/RC level. But again, it's going to be a slight recovery in no major recovery.. But this is positive news which unfortunately only will have limited impact so far. Steffen Hoffmann: And Boris, on your second question relating to TC/RCs, right? We are flagging that also for this year, we see an impact of declining TC/RCs for copper concentrates. So basically low TC/RC levels are rolling into our Aurubis average terms. You do know that, obviously, a big chunk of our contracts is already concluded. So call it, at this stage, roughly 85% of the contracts are concluded. So our exposure to direct spot rates is limited but some of the contract language has a certain link to recent market levels. And yes, the overall impact this year is around in the vicinity, let's say, from a year-over-year impact in an EBT bridge, it's a similar impact as we've seen last year versus the year before. Boris Bourdet: And maybe 2 others. One question would be on yesterday's announcement by the European Commission about the RESourceEU program. It doesn't seem like copper is -- copper scrap is part of what is being discussed at the moment, but could be -- can you share your view on what could be expected from this and discussions you might have with the European Commission? Toralf Haag: Well, as you said, this recently announced RESource program does not have copper in the focus. We are more relying on the Critical Raw Materials Act, which was published a while ago, and we are in constant discussions with the European Union to secure more raw materials in Europe, number one, by focusing and allowing -- permitting more mine projects in Europe; and secondly, to limit the export of secondary material out of Europe. So those are the two cornerstones of increased raw material availability in Europe but these discussions are taking their time. Boris Bourdet: Okay. And regarding the one-offs you mentioned during the call, so the EUR 12 million impairment on the JVs plus the EUR 10 million provision at Lunen. Was that already part of the guidance? Or was that a last minute surprise, meaning that without this, you might have ended up quite above consensus expectations for the full year results? And what exactly is that equity impairment for the JVs? Steffen Hoffmann: Boris the two one-offs that you have alluded to that we disclosed separately have been baked in the full year guidance. For example, when we were exchanging with you and the capital market around the CMD, we included that. So we were not surprised by that. On the equity adjustment or the participation. We have said it's in the MMR segment. It's in the recycling segment. it's related to a battery recycling participation. And in the annual report, you can also find the name. So that's why I don't ask you to go -- to find it out yourself, the company is called Librec, it's a Swiss participation that we are engaged in the battery recycling environment. Obviously, we all know that some of the key premises on the battery recycling market in EU are developing -- are moving time-wise a bit more to the right. So we felt that it was right to take a correction here. Operator: Next up is Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: My first one is on Richmond. So I'm basically just wondering whether everything so far is going according to plan. And are there any roadblocks which have come up -- which have come up since you started the smelting process? And are you also generally happy with the metal KPIs and the performance from what you're seeing so far? That is my first question. Toralf Haag: Yes, Bastian, yes, Richmond is going according to plan. We are now, as we have said, in Phase 1, we had some charges where we were smelting simple scrap. Now we are in the process of smelting more complex recycle materials. Right now, we don't see any major roadblocks, but it's too early to say if we meet our metal KPIs or not because we are still in the ramp-up phase. So we still need to have experience on two sides on the one -- the material mix we are getting in the U.S. in our recycled materials and number two, the production efficiency, that's still too early to say. But so far, it's on track. Bastian Synagowitz: Okay. Great. And then on your supplier structure and portfolio, is this coming together as well as you were hoping to? And are you still confident that the availability for the materials you're actually looking for is there in the market and as good as you were expecting? Toralf Haag: Yes. I mean we had experience in the U.S. market before because we had contact with suppliers for the supply of scrap material and recycling material for Europe. So they have been long-term relationships. The supplier structure is coming into place. We're getting the mix of different recycling materials in. So normal copper strap, also cables, but also more complex recycling materials like circuit board. So the supplier structure is there. The different materials are there. Like I said before, it's too early to make statements about what result we get out of this material and the efficiency. Bastian Synagowitz: Okay. Great. Then my next question is on cash flow and probably one for Steffen. I guess when we look at cash flow in the fourth quarter, you performed actually quite well. I'm wondering whether this has raised the bar for the target for breakeven this year as well? Has this become more ambitious? Or is this very much as you expected, and you're still very confident to hit that target as well. I know you kept that target for breakeven, I guess, to some extent that answers it, but I wanted to just understand how far this may have become a bit more of a stretched target now. Steffen Hoffmann: Yes. I think I can say that the way we could end the last fiscal year was slightly ahead to what we initially had in mind. So we had small smile on our face, let's put it that way. Now talking about '25-'26 and cash flow, we are expecting a net cash flow of EUR 640 million to EUR 740 million. And we've also said that the cash relevant CapEx would be expected to go down versus last year by roughly EUR 100 million. So depending on the point in the range that is chosen from a net cash flow guidance perspective, free cash flow breakeven could be rather modest or more significant I mean we still have 40 weeks ahead of us in the fiscal year. So let's not nail ourselves down on whether it will be exactly a breakeven before dividend or whether there is a slight upside, we are at the guidance where we are, and we are confident that we will achieve the targets. And that's what I think we can say at this stage. Bastian Synagowitz: Okay. Great. Fair enough. Then my last question is just on, I guess, your maintenance schedule, and I saw that you've been bringing forward the smaller maintenance still set in Hamburg now into November, I think originally, there was scheduled for May. Was there any particular reason behind it? I guess it's a small one, so I wouldn't think so, but just wanted to understand what's been driving this. Toralf Haag: No, Bastian. This is normal maintenance planning where we have different influence factors, the availability of materials for the maintenance. So it's a combination of many factors why the maintenance planning was adjusted, but no major incidents. Operator: And we're coming to the next questioner, It is Adahna Ekoku from Morgan Stanley. Adahna Ekoku: Can you help us with some more detail on the mix picture you're seeing for recycling RCs? How are the levels now as compared to the summer where I think European scraps RCs were at around EUR 250 per tonne. So where do these kind of stand now? And have you seen any green shoots at all to consider going into next year? Thank you. Toralf Haag: Yes, Adahna, we have seen a slight recovery of the recycling markets when it comes to -- also when it comes to scrap when it comes to the tonnage and also a slight improvement of the RCs, but we have not seen a substantial improvement. Adahna Ekoku: And maybe just to follow up on that, is that improvement from kind of any increase in economic activity or slightly lower exports or just kind of general improvement? Toralf Haag: We think it's mainly the function of, again, a higher copper price and therefore, higher availability of copper scrap. Operator: And the next question comes from Felicity Robson from the Bank of America. Felicity Robson: Could you provide some color around timing on commissioning for a strategic project for next year, especially around the second phase for Richmond, please? Toralf Haag: Well, Felicity, as we said in the presentation, we plan the commissioning of Phase 2 in the year -- in the calendar year 2026, it strongly depends on how we process now with Phase 1. So our current assumption is that we will commission it in the mid -- in the summer of 2026. Operator: [Operator Instructions] And we have a follow-up question coming from Boris Bourdet from Kepler Cheuvreux. Boris Bourdet: Thank you again. One broad question and one technical. The first is, what would you say has been the main change since the 8th of October where at the time of the CMD you have observed in the market? That's one question. And the second is on the tax rate, since there is a higher tax rate in Bulgaria. Would you share any guidance for the tax rate into next year? Toralf Haag: Well, on the first question, what was changed since October 8? There are no major changes in our assumptions there's maybe slight changes that we have a little bit improved situation like we discussed before on the availability and on the RCs on the recycling market. And we have some positive news on the concentrate market when it comes down to China capacities but we have not seen a big recovery in the TC/RCs for concentrates. So very slight changes, no major changes. Steffen Hoffmann: And Boris, on the tax rate, absolutely right, in '24-'25, we had a higher tax rate. I was alluding to that, 2 reasons one-off special item related to Buffalo on the deferred taxes. Secondly, a topic that's not a one-off, which is a topic to stay higher tax rate in Bulgaria, according to Pillar 2 now with a 15% minimum tax rate in Bulgaria. All of that resulted with the mix of results that we have from our footprint resulted to a tax rate of 26% and in last fiscal year. And I would assume that we are in the same ballpark also for this fiscal year. Operator: [Operator Instructions] Thank you. There are no further questions. Elke Brinkmann: Okay. Thank you. The IR team will, of course, be happy to answer any further questions you may have. We would now like to close today's conference call, and thank you for your attention. We wish you a pleasant rest of the day and a beautiful Christmas time. Thank you and goodbye.
Operator: Good morning. Welcome to the CIBC Q4 Quarterly Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead, Geoff. Geoffrey Weiss: Thank you, and good morning. We will begin this morning's presentation with opening remarks from Harry Culham, marking his first earnings call as our President and Chief Executive Officer; followed by Rob Sedran, our Chief Financial Officer; and Frank Guse, our Risk Officer. Also on the call today are our group heads, including Hratch Panossian, Personal and Business Banking Canada; and Susan Rimmer, Commercial Banking and Wealth Management. I'd like to take a moment to introduce two new members of our executive leadership team, Christian Exshaw from Capital Markets; and Kevin Lee from our U.S. region. Christian and Kevin have served with our bank for over 17 years and 23 years, respectively, and bring exceptional leadership, a proven track record of performance and exemplify our purpose-led and collaborative culture. Please join me in welcoming them to our new group heads. We have a hard stop at 8:30 and would like to give everyone a chance to participate this morning. So as usual, we ask that you please limit your questions to one and requeue. We'll make ourselves available after the call for any follow-ups. As noted on Slide 1 of our investor presentation, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results may differ materially. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. With that, I will now turn the call over to Harry. Harry Culham: Thank you, Geoff, and good morning, everyone. I'm excited to be speaking with you today as President and CEO of our bank. I'm energized by the opportunities ahead of us, building on our strong performance we've delivered in fiscal 2025. Our performance reflects our momentum and the execution of our client-focused strategy right across our team. When we announced our CEO succession in March of this year, I stepped into the role of Chief Operating Officer and spent the last 8 months listening and engaging with our stakeholders. And these discussions have reinforced my confidence that our client relationships are strong, our team is proud and our bank is being recognized for delivering consistent, strong financial performance. Building on this foundation, we have united our leadership team and employees globally around an evolved ambition to be a client-focused, highly connected and performance-driven bank, delivering industry-leading shareholder returns. And this ambition is underpinned by the same strategic pillars that have driven our success and strength through the cycle performance over the past several years. So let me be clear. Our strategy remains consistent. It is working, and we are committed to delivering on what we set out to achieve. Our focus now is to accelerate the execution of our strategy to deliver relative outperformance. And to sustain our momentum, we have aligned our team around 3 key enablers: One, we'll sharpen our client focus and double down on our connectivity. Two, we'll drive efficiencies and modernization; and three, we'll elevate our focus on human capital by fostering a culture of engagement, development and accountability. And with that, let me provide an overview of our adjusted results for fiscal 2025. We reported net earnings of $8.5 billion and earnings per share of $8.61, up 17% and 16%, respectively, from the prior year. Record revenues of $29 billion were up 14%, driven by double-digit revenue growth across each of our businesses. We delivered positive operating leverage and managed our enterprise efficiency ratio lower, both for a third consecutive year. Our top-tier credit quality remained resilient with an impaired PCL ratio of 33 basis points, delivering at the favorable end of our guidance range. Our robust CET1 ratio of 13.3%, coupled with the earnings power of our bank gave us confidence to announce a 10% increase to our quarterly dividend to common shareholders. We also delivered a return on equity of 14.4%, which was up 70 basis points from the prior year. Our strategy and unique competitive advantages position us well to further our momentum and deliver for our clients. Our first strategic priority is to grow our mass affluent and private wealth franchise. We've cultivated a unique ecosystem to win in this segment, including our distinctive Imperial service platform, strategic Costco partnership, industry-leading Wood Gundy brand and our high-quality RIA in the U.S. In Imperial Service, our advisors are passionate about our clients and they're engaged. Our NPS scores continue to hit all-time highs each quarter. Over the past year, our client-focused distribution channels have supported our market share gains in mutual funds, assets under management in Canada. In 2025, CIBC ranked in the top 2 of the big 6 banks for total mutual fund net sales. And we're going to continue to lean into these strengths to generate capital-light fee-based revenue, gather high-value personal deposits and drive wealth referrals. These are intentional outcomes directly aligned to our strategy and all accretive to our ROE profile. Our second strategic priority is to grow digital-first personal banking. Our leadership in digital banking is recognized industry-wide. This past quarter, we received the 2025 Mobile Banking Award by Service Corp. Leveraging our award-winning digital capabilities in Canada, we also launched a new digital banking platform for the U.S. market as well. So collectively, these efforts are enabling us to further attract and build new and deeper relationships through data-driven insights, adding value for clients and driving growth. Our third strategic priority is to leverage our connected platform, one of our greatest competitive advantages. Our culture of connectivity enables us to deepen and broaden our client relationships, expand our U.S. franchise and strengthen cross-business referrals. By connecting our commercial banking, wealth management and capital markets teams, we have built a strong internal referral system across our businesses that results in greater agility and more innovative solutions for our clients. And as a result, cross-business referrals in our U.S. Commercial and Wealth franchise were up 23% from the prior year. A connected capital markets footprint requires a strong presence across North America. In fiscal 2025, revenue and net income in our Capital Markets U.S. franchise were up 39% and 50% from the prior year, respectively. We expect the rate of growth in U.S. capital markets will continue to outpace Canada and other regions over the medium term. And finally, our fourth strategic priority is to enable, simplify and protect our bank. Our performance-driven approach requires continually realizing expense and balance sheet efficiencies, modernizing our technology and scaling our data and AI infrastructure. Building on our history of innovation, we launched CIBC real-time experience, which we call Cortex for short. This is a proprietary AI-enabled client engagement engine that seamlessly integrates with our existing platform and shapes data-driven personalization. In fiscal 2025, we made significant strides in further embedding AI as a core capability across our bank. We are well positioned to accelerate our AI adoption with a focus on Agentic AI and continued investment in talent and partnerships to continue to transform the banking experience. Looking to the operating environment in the year ahead, ongoing trade negotiations present uncertainty in Canada and abroad. Our outlook assumes that trade deal is extended, an outcome we strongly believe is in the best interest of the North American economy. We expect targeted fiscal policy relief for sectors affected by trade as well as stimulative monetary policy to support moderate economic growth across our geographies in 2026. We are also supportive of nation-building initiatives in key sectors of Canada's economy to help create a more prosperous future. We have deep client relationships in these sectors and we'll be there to support Canada's growth. Regardless of how the environment evolves, we will continue to stay close and proactively engage with our clients. So in closing, we're setting our sights higher -- to build on the clear momentum we've established, we have built an engine to deliver sustainable, relative outperformance and a road map to generate profitable growth over the long term. We believe our unwavering client focus, the bench strength of our team and accelerated execution of our strategy will drive value for our stakeholders through the cycle. It's an exciting time at CIBC, and I'm honored to have the opportunity to lead our team. With that, I'll now turn it over to Rob for a detailed review of our financial results. Over to you, Rob. Robert Sedran: Thank you, Harry, and good morning, everyone. Let's start with three takeaways. First, our consistently strong results and increasing ROE reflect the disciplined execution of our client-focused and connected strategy. In other words, the results were on strategy. Second, our record results this quarter are revenue driven, providing good momentum as we head into 2026. And third, our balance sheet -- our strong balance sheet has allowed us to grow with our clients and return capital to our shareholders. In fiscal '25, we returned over $5 billion or approximately 2/3 of our net earnings through dividends and share repurchases. These achievements reinforce our confidence in our ability to deliver long-term value and underpin the dividend increase Harry referenced in his remarks. Please turn to Slide 8. For the fourth quarter of 2025, earnings per share were $2.20 or $2.21 on an adjusted basis. Adjusted ROE of 14.1% was up 70 basis points from the same quarter last year. For both the quarter and the full year, the only adjusting item was the amortization of intangibles. Let's move on to a detailed review of our performance. I'm on Slide 9. Adjusted net income of $2.2 billion increased 16%. Expanding margins, volume growth and higher fee revenues allowed us to maintain revenue momentum, deliver the 9th consecutive quarter of positive operating leverage and continue to drive pre-provision earnings growth in a strong range at 20%. Total provisions for credit losses were up 44% year-over-year largely due to higher performing provisions as impaired losses were at the low end of our 2025 guidance range. Frank will discuss credit trends and the outlook in his remarks. Slide 10 highlights key drivers of net interest income. Excluding trading, NII was up 14% with continued balance sheet growth and expanding margins. All bank margin ex trading was up 14 basis points from the prior year and up 6 basis points sequentially. Canadian P&C NIM of 290 basis points was up 9 basis points sequentially driven by loan margin expansion as well as the impact of favorable mix. In the U.S. segment, NIM of 384 basis points was up 6 points from the prior quarter due to continued strength in deposits as well as loan fees that were higher than normal. In both Canada and the United States, we expect margins to move gradually higher from these levels, albeit at a slower rate than what we saw in fiscal '25 based on the current forward curve. Turning to Slide 11. Noninterest income of $3.4 billion was up 15%. Market-related fees increased 18%, helped by constructive markets with particularly strong growth in trading, underwriting and advisory and mutual fund fees. Transaction-related fees were up 8%, driven mainly by higher credit fees, partly offset by lower card fees. Slide 12 highlights our expense performance. Expenses increased 10% as investments and seasonal costs, including higher severance, were only partly offset by the benefits of prior initiatives to improve efficiency. We continue to invest in technology and AI to both surface efficiencies and develop an enhanced client experience through faster and more personalized service. We intend to manage expense growth to the mid-single digits for 2026 and continue to manage to positive operating leverage on an annual basis. Slide 13 highlights the consistent strength of our balance sheet. Our CET1 ratio at the end of the quarter was 13.3%, down 7 basis points sequentially and stable year-over-year. We delivered solid organic capital generation, offset by deployment in risk-weighted assets and our ongoing share repurchase program. Please note that in addition to ongoing organic capital generation, in Q2 of '26, an adjustment to our operational RWAs will add roughly 25 basis points to our CET1 ratio. Our liquidity position remains very strong with an average LCR of 132%. Starting on Slide 14 with Canadian Personal and Business Banking, we highlight our strategic business unit results. Adjusted net income was stable to the prior year as strong revenue growth was largely offset by higher provisions for credit losses and higher expenses. Supported by core business momentum, pre-provision pretax earnings were up 14%. Revenues were up 12%, helped by margin expansion and favorable business mix. Net interest margin was up 33 basis points year-over-year and 11 basis points sequentially. Beyond the benefit from our tractoring strategy, we continue to see tangible results from our focus on deep and profitable client relationships, product mix and disciplined pricing decisions. Expenses were up 10% due to investments in technology and other strategic initiatives as well as higher employee-related compensation, a software write-down and a legal provision. On Slide 15, we show Canadian Commercial Banking and Wealth Management, where net income and pre-provision pretax earnings were up 9% and 13% from a year ago. Revenues were up 15% from last year. Wealth Management growth of 18% was driven by higher average fee-based assets resulting from market appreciation and increased client activity driving higher commissions. Commercial Banking revenues were up 9%, driven by volume growth and margin expansion. Commercial loan and deposit volumes were up 10% and 9%, respectively, from a year ago. Expenses increased 16% from a year ago, mainly from higher compensation linked to the strong revenues, higher spending on technology and other strategic initiatives. Turning to U.S. Commercial Banking and Wealth Management on Slide 16. Net income was up 35% from the prior year, mainly due to lower loan loss provisions. Revenues were up 9% from last year. Net interest income was helped by deposit growth of 8% and wider deposit margins. Fee income growth was broad-based, reflective of our strategy to deepen client relationships. Expenses were up 18%, partially due to higher performance-based compensation as well as strategic initiatives. Turning to Slide 17 and our Capital Markets segment. Net income was up 58% year-over-year. Revenues were up 32% across our Capital Markets businesses. Global Markets saw growth across most products. Corporate Banking was up from higher average balances and fees and investment banking saw higher debt underwriting and advisory revenues. Our focus on the U.S. continues to deliver strong results with year-over-year revenue growth of 48% and 38% of segment revenues coming from that market this quarter. Expenses were up 9%, largely due to continued investments in business and technology initiatives, higher compensation and higher volume-driven expenses. Slide 18 reflects the results of Corporate and Other, a net loss of $42 million compares with a net loss of $7 million in the prior year. We maintain our medium-term guidance of a quarterly loss between $0 and $50 million for this segment. Slide 19 highlights our full year performance. 2025 was a record year for CIBC. We delivered double-digit growth across all of our metrics, growing revenues by 14%, pre-provision earnings by 18% and EPS by 16%, all well ahead of our medium-term targets. ROE for the year was 14.4%, an increase of 70 basis points from the prior year. We are confident that our strategy, connected culture and financial strength position us well to build on this momentum, drive EPS growth and deliver a premium ROE. On that ROE, we remain committed to an improving ROE above 15%, and based on our current outlook, expect to achieve that target in fiscal '26, helped by EPS growth that is at the high end or higher than our 7% to 10% medium-term target range. In closing, we believe this year's performance reflects the impact of the focused investments we have made in technology, talent and client experience, investments that combined with disciplined execution are now translating into strong financial results. With that, I'll turn it over to Frank. Frank Guse: Thank you, Rob, and good morning, everyone. Despite economic uncertainties, our credit performance remained resilient throughout 2025, ending the fiscal year at the low end of our full year guidance. We continue to focus on developing deep client relationships across all our segments and invest in risk strategies to drive strong credit outcomes. Trade headwinds in recent quarters have led to higher provisions in our performing allowance. Our build this quarter, leveraging expert judgment positions us well to navigate uncertainties that may persist into the coming year. We remain confident in the quality and consistency of our credit performance as demonstrated over the past year. Turning to Slide 22. Our total provision for credit losses was $605 million in Q4, up from $559 million last quarter. We continue to strengthen our allowance coverage this quarter by 2 basis points to 80 basis points with our year-over-year total allowance up by $625 million or 15%. Our performing provision was $108 million this quarter, mainly a reflection of the evolving economic environment and the impact of some credit migration. Our provision on impaired loans was $497 million, up $16 million quarter-over-quarter. Higher provisions in our Capital Markets and Canadian Commercial Banking segments were partially offset by lower provisions in our other portfolios. Turning to Slide 23. In Q4, '25, impaired provisions increased slightly with the fiscal '25 loss rate at 33 basis points. Canadian Personal and Business Banking and U.S. Commercial impaired provisions were down this quarter. Impaired provisions in our Capital Markets business was up in Q4, mainly driven by two names. These names represent loan exposures in different geographies. And overall, this portfolio continues to perform well. In our Canadian Commercial Banking portfolio increases this quarter were not attributable to any notable sector. We remain pleased with the strong performance across our portfolio, especially in our commercial portfolio this year. Slide 24 summarizes our gross impaired loans and formations. Gross impaired loan ratio was 61 basis points, up 5 basis points quarter-over-quarter. The increase in business and government loans was largely driven by one new impairment in our Capital Markets portfolio. While mortgages experienced a moderate increase this quarter, our current loan-to-value ratio for the mortgage book remains prudent at 55% for the overall book and 65% on impaired balances. Notwithstanding the softness in the housing market, we continue to not expect any material increase in losses in our mortgage portfolio. Slide 25 summarizes the 90-plus day delinquency rates and net write-offs of our Canadian consumer portfolios. Our Canadian consumer portfolios performed as expected throughout fiscal '25, reflecting the evolving economic conditions. The 90-plus day delinquencies in our credit cards and residential mortgages portfolios increased quarter-over-quarter, driven by challenging macroeconomic conditions, while personal lending remained flat. Although our net write-off ratio was down slightly quarter-over-quarter, we remain focused on unemployment levels, which will remain a key driver of this metric. While we continue to see the impact of elevated unemployment and ongoing macroeconomic uncertainties, we are pleased with the overall resilience and strength of these portfolios. In closing, while the economic environment was more challenging in 2025, we were pleased with our credit performance this past year. We will continue supporting our clients to navigate through the dynamic environment and taking proactive actions to effectively mitigate risk. Looking ahead to 2026, despite ongoing headwinds, we anticipate that the gradual improvement in the macro economy will lead to impaired provisions stabilizing in the mid- to low 30 basis point range, a slightly improved outlook over our mid-30 basis point guidance for fiscal 2025. The increase in performing allowances over 2025 reflects our proactive approach to maintaining prudent reserves, ensuring we are well positioned to manage uncertainties that may persist in the year ahead. I will now ask the operator to open the line for your questions. Operator: [Operator Instructions] Our first question comes from Ebrahim Poonawala from Bank of America Merrill Lynch. Ebrahim Poonawala: I guess Rob's prepared remarks set this up, but maybe both from Harry and Rob for both of you. When we think about -- you mentioned the 15% ROE, which I think is better than expected for this year. I guess, Harry, for you, I think the question is when you look at the franchise and hear you loud and clear, there's no big dramatic change in the strategy. But when we think about the Canadian banks, there are banks that are clearly earning much superior ROEs, 17%, 18%, and there are others who are trying to catch up to get closer to that. Given kind of your guidance for 2026 and what you see within the franchise. Just talk to us in terms of is there an opportunity for commerce to have a best-in-class ROE? Or are there structural disadvantages the bank faces to get to that point? And if so, what do you need to do differently to get there? Harry Culham: Thank you, Ebrahim, I'll take it first, and I'll pass it over to Rob. It's Harry here. So as I said in my opening remarks, we are on a journey here. Our strategy and our unique competitive advantages that really position us well to deliver profitable growth. And that will lead to a premium ROE. We're targeting the right client segments where we can deepen relationships and be meaningful to our clients. We have the right product focus. We're focused on deposits, investments, transaction accounts across each of our businesses. And we believe we have the right technology. We've invested in AI-enabled technology, such as Cortex, which I mentioned at the outset, in the retail and our cash management systems in corporate and commercial. And I believe we have the right culture to take us to the next level. Our team members are focused on delivering all of our connected bank to our clients, and that will lead to this trajectory that we're forecasting moving forward to move higher from an ROE perspective. Rob, do you want to jump in with some more specifics? Robert Sedran: Yes. Thanks, Harry. I mean, Ebrahim, we can all -- you can all do the math, but maybe I'll try to tie it together for you in terms of some of the levers that we think we have at our disposal. But I would reiterate what Harry said, when we cross 15%, we're not going to be hanging mission accomplished banners at CIBC Square. Like we do think the strategy will continue to push the ROE higher over time. And just because we're not changing our target at this time, it doesn't mean that our ambition isn't for a higher ROE. And we don't see any disadvantages that can't allow us to continue to push that ROE higher. When you think of some of the things that are going to get us there, you start off just even normalizing credit losses. I mean the performing provisions that we took this quarter around $450 million, that alone is about 60 basis points. We don't plan for that to happen every year as that normalizes, and that's even before considering the potential for impaired losses to come down. That's an ROE tailwind that we expect. Operating leverage is just -- is an operating philosophy for us. You think about a couple of hundred points of operating leverage, which is not necessarily fiscal '26 guidance, but it is a target that we shoot for sort of through the cycle. A couple of hundred points of operating leverage is another, call it, 30 or 40 basis points of ROE expansion that we can -- we expect to see. When you think about our capital position, we optimize the balance sheet as best we can, call it, a basis point is basically a basis point. So if the capital CET1 comes down by 40 or 50 basis points, the ROE goes up by 40 or 50 basis points, excess capital doesn't expire. We're not in a rush to get rid of it. But we do have a buyback active and we do see opportunities to deploy profitably over time. So there's a number of levers that are adding up to our confidence that the ROE trajectory is going to continue beyond next year. Operator: Our next question comes from the line of Matthew Lee from Canaccord Genuity. Matthew Lee: NIM continues to be a big story for you. I know you've talked about persistent NIM increases and provide some color directionally, but can you maybe break down the NIM improvements based on product mix, deposit mix and tractors. Just trying to get a better understanding of which of those factors are having the biggest impact? And then what levels of sustainability there is beyond 2026? Robert Sedran: Matthew, it's Rob. I'm going to get started and then hand it to Hratch because I think a lot of the story from a business mix perspective is unfolding in Personal and Business Banking. The tractoring strategy has been a persistent tailwind for us. We think that tailwind is going to continue through '26, albeit perhaps starting to moderate a little bit. But the tractoring is something that is largely based on the forward curve, and provided the rates hang around where they have been. We expect to see that benefit persist in both Personal and Business Banking and at the all bank level. When it comes to business mix, it's probably better to hand it off because it is very much on strategy, and I'll let Hratch talk a little bit about what he's seeing. Hratch Panossian: Yes. Thanks, Rob. Matthew, thanks for the question. I'll start by saying, look, we're very proud of what the team has been able to accomplish on the retail side, right? What you're seeing, as Rob said, is really the result of strong execution, pricing discipline and strategy. Yes, rates in the environment are helping, but that's actually been a smaller part of the story as we look through this year. So I think we've talked about this before. When you look at the rate help in the business, it's a few basis points a quarter. And when you look at the full year this year, full year ROE is about 30 basis points higher on a year-over-year basis, and a lot of that has been driven by the strategy. And we've been very clear about our strategy. We're focused on our clients. We're focused on being that everyday bank for our clients and have them highly engaged. That means focusing on the everyday products and winning share there. And I think we've done that well this year. You look at our demand deposits that actually grew double digits before we did some work to optimize margins. We actually ran off some high interest deposits deliberately that were negative margin. So without that, demand deposits that were profitable are up double digits for the year. We've increased our cards business 6%. That helps. We've been very deliberate on the mortgage business. We've been doing business with the clients that are franchised with us. We price sharply, but we price for the overall relationship. We will not price mortgages individually. And by doing that, we've been expanding margins in the mortgage business as well. And so if you look at this quarter's 11 basis points, it's a lot of the same drivers, right? It's those products that are growing that are higher margin, it's the margins in mortgages going up, it's the margins and deposits going up. And I think that's what has allowed us as a team to deliver from what I can see right now this quarter's street-leading revenue growth. And I think there is a lot more momentum to go as we continue to execute on our strategy. The interest rate, right, will slow down. I think the interest rate help through '27 will slow down, but we can continue to execute on our strategy and accreting to margin and accreting to ROE in this business. Operator: Our next question comes from John Aiken from Jefferies. John Aiken: Rob, we just drilled down NIM. I'd like to take a little -- closer look on expenses if we can. Obviously, you're looking for positive operating leverage next year. But as we look at the investments that you're making in terms of your platforms, technology, everything else like that, are there any of the segments that you would expect to have greater or lesser operating leverage as you look out to 2026? Robert Sedran: John, it's Rob. So good question. And we tend not to focus too much on operating leverage at the individual segment level in any given year. There is some differences between them, some investments that we're making and some strategic initiatives that can pop up. You saw a little bit of that in Q4, right? So if you look at some of the Q4 expenses, we had pretty good visibility coming into the quarter on revenue growth, pretty good visibility on operating leverage, and decided to take the opportunity to advance some of the -- those strategic initiatives that we often talk about. As we think about the coming year, all -- we ask for positive operating leverage from all of the businesses. But a year like what Capital Markets had as an example, this year, it's going to make it a little bit harder for Capital Markets to deliver positive operating leverage next year. We don't let them completely off the hook, but it's just something that we don't necessarily assume is going to happen. The other businesses, we're targeting positive operating leverage. But again, we're going to manage it through the year and really aiming to deliver it at the all bank level rather than the individual segment level. John Aiken: And just as a follow-on, when we look at technology spend in particular, are we looking at this in totality accelerating, leveling off or staying reasonably the same? Robert Sedran: No, I think we need to assume that technology spend continues to grow, right? There's a lot of talk about AI, a lot of talk about the different operating models. But AI isn't pixie dust. It requires investment. We're making those investments. And we are going to continue to add resources there and reshape the workforce as well over time. We think we've been managing through it so far, and we're going to continue to accelerate those investments. We spent time putting governance structures around our technology spend, putting in a really deep dive on how we allocate those technology spends. We think we've been smart and purposeful on those investments. That's going to continue, but particularly with a robust revenue environment that we've had, we would expect to continue to invest in technology. It's the way forward for the industry. It's certainly the way forward for our bank. Operator: Our next question comes from Doug Young from Desjardins Capital Markets. Doug Young: Just a few things on capital, Rob. First, you said there's a 20 basis point benefit you're getting in Q2 of '26. What's driving that? And is there anything else coming down the pipe to think about? And then like the focus for excess capital, I assume it's buybacks and tuck-ins. And then like thinking about capital and you're looking at a 15% plus ROE. Like what CET1 are you triangulating to for fiscal '26? Robert Sedran: Okay. Thanks, Doug. It's Rob. So it was 25 basis points. And you will recall in Q1 of '23, we had an operational risk charge that showed up in our results in Q2 of -- showed up in operational risk weights, excuse me, in Q2 of '23. The rules allow for the potential exclusion of that 3 years forward, and we did receive approval to remove that from our operational risk weights. So 3 years later, it will be Q2 of '26. So we'll be adding the 25 basis points of CET1 back at that time. When we think about the level of capital at which we're looking to operate, obviously, it's -- we're running with significant excess common equity. We would say that we aim for about 100 basis points above the regulatory minimum. That would be around 12.5%. A second gate though, on that is the competitive dynamic and where our competitors are. What is assumed in our capital plans for the coming year, is basically the ongoing buyback that we have, ongoing robust capital deployment, which we expect to see risk-weighted asset growth. So we're not seeing a huge drawdown in our capital ratio, but we do expect the capital ratio to move a little bit lower in line with the buyback. And from a deployment perspective, the story really hasn't changed. We think we've got four growth businesses that over time can absorb that excess common equity, profitable growth across all of our businesses. We are always looking around for tuck-in acquisitions that could advance and accelerate our strategy. I wouldn't say much more beyond that from an acquisition perspective at this point. It is largely of a tuck-in variety. And so it's more of the same from what you've heard from us in the past. Operator: Our next question comes from Mario Mendonca from TD Securities. Mario Mendonca: I think Rob and Harry, when you were referring to the potential ROE improvement, one segment that was left out was the U.S. And what I'm observing there for the quarter and for a few years now is that expense growth has been very elevated. And I appreciate it's things like comp and tech spending and -- but it seems like there's a major project going on in the U.S., perhaps it's compliance-related spending. Can you talk about what's going on there and when you expect that spending to become a little more in line with the revenue growth, so that business can contribute as well? Robert Sedran: Maybe I'll start -- it's Rob. Maybe I'll start, and I'll pass it off to Kevin to give a little bit of color. We have said and we've been saying for a while, I guess, on the U.S. side that we are building for the bank we want to be, not necessarily the bank we are. And regardless of the direction of travel on regulatory requirements in the short term, it does require us to invest in that infrastructure to support the growth profile that we expect to see coming in the coming quarters and years. So we've been going through an awful lot of that. I do think -- we do think the path from here is not quite at the same level of growth. There was some strategic spend in Q4 as well that makes it look a little bit on the high side, and maybe that's a good place to hand it off to Kevin to talk a little bit about what happened in Q4 and a little bit about how we seize the outlook. Kevin Lee: Right. Thanks, Rob, and Mario, thanks for the question. Very happy to be here today. So the elevated expenses in the quarter were due to a number of factors. Number one, performance-based compensation was a large part of it. But -- and Rob referenced this a little bit, there was a charge of about USD 10 million relating to the optimization of our branch network. Also important to note that there is going to be a corresponding annual savings to that is almost at the same level. And in addition to that, there were really a number of just other smaller seasonal items. So important to take away that we expect expense growth to normalize and be in the mid-single digits next year exactly in line with the broader bank. Mario Mendonca: Okay. That's helpful. Let's drill down something else. The capital markets business, the loan growth there has been exceptional. By my math, 22% year-over-year this quarter. Last couple of quarters have been running very hot. Can you speak to what's growing there and address the notion that sometimes growth in this area just leads to grief 2, 3 years later. We've seen this at banks in the past. So talk about what's going on there and maybe address the concern that this is going to be an issue 2 or 3 years from now. Christian Exshaw: Thanks for the question, Mario. This is Christian. So I'll just take it back to the U.S. strategy. So as Rob mentioned, the U.S. has been growing quite considerably for us. The U.S. now is roughly 34%, 35% of the Capital Markets revenue. It's roughly double what it was actually 5 years ago, and we continue to, I would say, invest in this business. When you look at, I would say, the corporate credit book, it actually generates now more revenue in the U.S. than it does in Canada. And that just means that we've been onboarding many, many more, I would say, clients, so just in line with our strategy. And remind you that when it comes, I would say, to looking at this loan book, it really is about having an anchor product, so we can actually cross-sell, whether it's advisory services or hedging product. The other area, which has been growing considerably, as you noted, has been the business that we call global credit financing business. We created this business a number of years ago. And for risk purposes, we put all these businesses together. So it encompasses businesses such as repos, ABS, MBS, securitization, CLOs and loan warehousing. And we actually like this business very much, I would say, because it scores strongly on three metrics. Number one, as I said, is that it is client-driven and therefore, aligned with our strategy. And we -- in that business, you deal mainly with the highest quality sponsors, pension plans, asset managers, insurers and some wealth firms. And we deepen the share of wallet with those clients with, call it, 8 to 10 different products, as I said, from advisory to hedging products. Number two, returns strong balance sheet returns. We, on average, make comfortably over 20% ROE in these businesses. And then number three, which, as you pointed out, we actually like the risk in these businesses. Transactions are written in most of the business to a single A or AA equivalent. In securitization, it's more AA to AAA. So we like this. Well, in the loan warehousing facilities or CLO businesses we're always second loss, so obviously, it protects the bank. Now what's also very important is the quality of the people looking after these businesses. Most of the senior leaders have over 20 years of experience, and they either have a credit risk management background. So they actually originally had this in their experience, in their CV. And number two, if not, they are, I would say, highly experienced traders. Mario Mendonca: So would I be correct in suggesting that the growth is being driven by the nondeposit-taking financial institutions business, the stuff that has become very topical recently? Christian Exshaw: Yes, that's correct. Operator: Our next question comes from the line of Sohrab Movahedi from BMO Capital Markets. Sohrab Movahedi: Rob, just looking at your Slide 13, you've given us the capital waterfall here. We've just talked a little bit about the good loan growth that comes across all the businesses. And as you think about next year, as you think about that ROE kind of build, could we see a situation where your RWA growth is exceeding your internal capital generation? . Robert Sedran: Sohrab, it's Rob. Thanks. It's a good question, and it's not certainly how we expect it to roll forward. We continue to see quarterly capital generation -- organic capital generation, something in the area of 10 basis points a quarter. If we think earnings net of dividends ballpark it at around 35, more typical of risk-weighted asset growth before credit migration would be around 25. That's kind of how you get to the 10 basis points a quarter. This quarter, we saw a little bit elevated credit migration related to the housing market being a little bit sluggish. We don't expect any losses on that, but we did have to set some capital aside, but we still anticipate a positive internal capital generation. Operator: Our next question comes from Gabriel Dechaine from National Bank. Gabriel Dechaine: First for Frank. Your outlook for impaired provisions lower than losses than we saw this year. I get that. Just wondering what the influence of USMCA difficulties would be, how that would affect that outlook? And then about the capital deployment strategy. No mention of M&A. And I'm just bringing this up to kind of check a box on the list, but just to feel the pulse given the new leadership. What's your appetite for M&A? It can spice things up but can also lead to heartburn. Frank Guse: Thanks For the question. So as I said, entering fiscal 2026, we expect impaired provisions to remain broadly stable in comparison to 2025. And then our base case would say that economic environment should strengthen throughout the year and in particular, the back half of the year, which is why we believe it should actually end up at the slightly lower end of our previous guidance, and that's why we call it mid- to low 30s on a go-forward basis. What we are, of course, looking closely at is although the trade negotiations, but even more so, what happens to interest rates, higher unemployment, and some of the other uncertainties that we are facing. And I think what came through in my prepared remarks is we remain very confident in the strength of our position, where we are from a credit perspective, sorry. And continue to monitor that portfolio performance quite well. It's hard to say where we would end in different scenarios. But what I can say, we have given a little bit of a broader range to reflect a variety of scenarios that we clearly looked at. Gabriel Dechaine: Probably not -- you wouldn't get the back half improvement if the negotiations break down perhaps? Frank Guse: I think that's a fair assumption, yes. Harry Culham: And Gabriel, it's Harry here. Thank you for that question. And just around our deployment priorities when it comes to capital, just to reiterate what Rob said and maybe elaborate a little bit. We continue to have that four-pronged approach to capital deployment. And we have the ability to activate all four levers when needed. We're really focused on growing organically, supporting our clients, and we think we have ample opportunity to deploy our capital over time in this respect as we deepen our relationships across our platform. Dividend and dividend growth, and we do that once a year, as you know, in line with our earnings expectations. And you heard Rob speak about that earlier. Our buybacks, which we've been doing and we'll continue to be active in. And this is a method to manage our share count, manage our capital position, but it -- and we have the flexibility to pick up the pace to slow it down if the operating environment changes. And of course, as you alluded to M&A, which would -- as Rob said, would be in capital-light businesses, really opportunistic tuck-ins that are strategically and very importantly, culturally complementary to our existing platform and accretive to ROE over time. So all four levers of this strategy really are tied to our goal of delivering a premium ROE over the medium term. And hopefully, you're hearing that we're running our bank and our strategy in a stable steady, predictable and consistent manner. And that's how we like to run our capital deployment as well. Operator: And our last question comes from Darko Mihelic from RBC Capital Markets. Darko Mihelic: Just wanted to follow on the question that Mario asked. Christian, you gave a lot of detail, and thank you very much for Slide 44 on essentially private credit sort of exposures. It does elicit a couple of questions for me, though, just to help build the mosaic around these exposures. The first question, Christian, is it's been great growth. It's been very low losses. I suspect you probably would tell me that a stress test loss will also be relatively low. So what is your risk appetite here? You did say it's client-driven. So if this continues to be an area that's hot, how far are you willing to push the envelope and make this a bigger part of your total balance sheet? Harry Culham: It's Harry, Darko. I'm just going to jump in quickly because I think this -- the support of our clients in this segment, the nonbank financial institutions, touches all of our SBUs, but I'll pass it over to Christian to answer your question in a second. The first thing I'd say is, this business reference is really core to our client-focused strategy. We are delivering robust risk-adjusted returns, and it's really aligned to our client activity as clients move from public to private markets, which we're all seeing. This is a broad-based portfolio. And as Christian pointed out, it's highly diversified across geographies, business segments and products and clients. And the underlying loans and structures have a meaningful risk mitigants that we are very comfortable with. We have grown at a very rapid pace over the last while. We came from a very small franchise over years to deepen these relationships with the most prominent players in the space. But Christian, why don't you just take it from there, please? Christian Exshaw: I think, Harry, you're right. Thank you for the question. As Harry stated, that number I would say, encompasses the entire space of what it is we do at CIBC. You are not going to see, I would say, so much growth going forward. As Harry said, we have been playing a catch-up. We are building a number of businesses in the U.S., power trading. We've applied for primary dealership. We're building a futures trading capability. So we need, I would say, to diversify the resources. We don't want from a risk perspective to concentrate all of our funding, all of our capital in one area. So we're pretty happy where it is. And we should see, I would say the, I would say, low to -- sorry, high single-digit growth in this year. Operator: I will now turn the call back over to Harry for closing remarks. Harry Culham: Great. Thank you, operator, and thank you all for your engagement this morning. I do recognize it's a very busy morning. But I do want to close today's call by thanking our incredible CIBC team. Having engaged with thousands of team members during our leadership transition, the pride and the confidence of our team as in our bank is very clear. Thank you for bringing our purpose to life and for everything you do for our clients, our team and our communities and, of course, our shareholders. So as we enter the giving season, I want to recognize our team's tremendous commitment to our communities as our team generously gives their time and dollars to make a meaningful difference. From the CIBC Run for the Cure in October to CIBC Miracle Day just yesterday, I'm very proud of our culture of care and the difference our team makes in our communities. And on that note, I also wanted to acknowledge Sandy Sharman, our current Group Head of People, Culture and Brand, who will be retiring from CIBC at the end of 2026. Through Sandy's 19 years at the bank, her contributions have been instrumental in reinvigorating our brand and building out the client focused connected and caring culture that differentiates us today. And I would also like to welcome Richard Jardim and Yvonne Dimitroff to the executive leadership team at CIBC. Richard will assume the role of SVP, Chief Technology and Information Officer; and Yvonne will assume the role of EVP, Chief Human Resources Officer. Finally, in closing, wishing you and your families a safe and happy holiday season, and I look forward to catching up in the new year. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s FY '26 Third Quarter Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes. Philippe Deschênes: Thank you, Joel. Good morning, and welcome to BRP's conference call for the third quarter of fiscal '26. Joining me this morning are Jose Boisjoli, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call and that the actual results could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult BRP's MD&A for a complete list of these. Also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the Investor Relations section. So with that, I'll turn the call over to Jose. Jose Boisjoli: Thank you, Philippe. Good morning, everyone, and thank you for joining us. We are pleased with our third quarter financial results, which came in ahead of expectation. While we continue operating in a dynamic macroeconomic environment, our teams remain focused on disciplined execution and our hard work paid off. We also gained market share in ORV, fueled by the success of our newly introduced models, notably the Can-Am Defender HD11. Let's turn to Slide 4 for key financial highlights. We ended the quarter with revenue of $2.3 billion, normalized EBITDA of $326 million, normalized EPS of $1.59 and free cash flow of $320 million, all significant increase over last year. On the back of this solid performance, we are increasing our guidance and are now expecting to deliver approximately $5 of normalized EPS for the year. Moving on to Slide 5 for global industry trend. In North America, our retail sales decreased by 4%, or 1% excluding snowmobile, in line with the market. Our retail in Canada was flat, excluding snowmobile, with a solid performance in the side-by-side category. In the U.S., we were down 3%, in line with our plan, and we expect the trend to improve in Q4. In international markets, Latin America continued to experience solid momentum, with retail up 13%, led by a strong ORV performance in Mexico and by our highly engaged and growing dealer network. Demand remained generally soft in EME, with retail down 4%, while Asia Pacific, our retail decreased 11%. Global industry trends have remained mostly consistent with previous quarters. In general, demand remains stronger for high-end products compared to entry level. We view this favorably as we have introduced several new high-end models this year that are well received. Turning to Slide 6 for a look at our retail performance by product line in North America. As anticipated, we have lost market share in all product lines, except ORV due to the industry dynamic in the low volume period of the retail season. That said, the highlight of the quarter was the strong reception of our 2026 ORV lineup, which drove market share gain for both side-by-side and ETV despite continued promotional activity from other OEMs. As you can see on Slide 7, the momentum created by the new generation of the Defender, the Outlander Backcountry 4x4 and 6x6 and enhancements to our Maverick lineup led to a record month of October at retail for both side-by-side and ETV. Our new model capture consumer attention and earn rave review from media representatives who try them. The coverage highlighted our product as the market benchmark in the industry. Building on this momentum, we've launched additional ORV models at the end of November, namely the Defender CAB AGT10, the most affordable HVAC equipped side-by-side in the industry. Now let's turn to Slide 8 for a more detailed look at year-round products. Revenue were up 22% to $1.3 billion, driven by higher ORV shipments following new product launches. At retail, side-by-side was up high single digit, outpacing the industry. In fact, we delivered our strongest third quarter ever at retail for side-by-side. We continue to strongly outperform in current unit, gaining 4 point of market share in the utility category. In ETV, retail was down mid-single digits, outperforming the industry, which was down high single digit. In current units, we've gained double-digit market share point, driven by our Outlander platform and newly introduced models. As for 3-wheel vehicle, we closed the 2025 season lagging the industry. We continue to experience softer retail for our entry-level Ryker lineup, which is consistent with overall market trends. This said, our high-end Spyder lineup performed better, allowing us to remain #1 in the 3-wheel vehicle business with a market share over 50%. Turning to seasonal product on Slide 9. Revenue were down 2% to $606 million, mainly due to a planned reduction of snowmobile shipment to rightsize network inventory. Looking at retail, the snowmobile industry saw a very high level of discounted noncurrent unit from other OEMs. In fact, about 2/3 of unit retail during the quarter were noncurrent, a level we have not seen for many years. As expected, we lagged the industry given our lower noncurrent inventory and strong retail performance at the end of last season. This dynamic should continue throughout the winter. However, we outperformed in current units as a result of the overall strength of our lineup and elevated level of presold units. Turning to on-water product, trend remained relatively soft in North America. For the season ended in September, personal watercraft sales were down low teen percent, slightly lagging the industry but we remain -- we maintained our #1 position in North America. As for pontoon, retail was down mid-20% as the industry is still going through a correction period. We had a better quarter in counter-seasonal market, which are entering their peak retail season, with Sea-Doo retail up mid-single digit in both Asia Pacific and Latin America. Moving to Slide 10 for parts, accessories and apparel and OEM engine. Revenue were up 18% to $379 million due to a higher volume of parts and accessory sales as dealers replenish their inventory. The increase in parts and oil sales show that consumers are riding our product, which is positive, while higher accessory sales reflect the success of our new product introduction. The revenue increase is also due to a more favorable mix of OEM engine sales. Before turning the call over to Sebastien, I want to give you an update on the sales of our Marine business. In Q3, we've closed the sales of Manitou. As for Telwater in Australia, the transaction remains subject to regulatory approvals. The process is taking longer than initially anticipated, and we expect a decision over the coming weeks. With that, I turn the call over to Sebastien. Sebastien Martel: Thank you, Jose, and good morning, everyone. Thanks to our team's disciplined execution, continued focus on operational efficiency and the strong reception of our newly introduced models, we delivered a solid Q3 with retail and financial results above expectations. Now looking at the numbers. Revenues increased 14% to $2.3 billion, driven by stronger ORV shipments, partly offset by lower snowmobile deliveries. Gross profit reached $541 million, representing a margin of 24.1%, up 210 basis points, mainly driven by better capacity utilization, cost improvement initiatives, lower sales programs and favorable pricing. These gains were partly offset by the impact of tariffs, the return of variable compensation and unfavorable foreign exchange rate variations. Normalized EBITDA grew 21% to $326 million, and our normalized earnings per share rose 33% to $1.59. Free cash flow from continuing operations was $320 million, and we closed the quarter with $250 million of cash on hand. Also during the quarter, we seized the opportunity to further strengthen our balance sheet by extending the maturity of a portion of our long-term debt, lowering the average interest rate of our term facility and repaying about USD 200 million of debt. These actions are expected to generate financing cost savings of about $10 million in fiscal '26 and $30 million annually from fiscal '27 onwards. Given our solid balance sheet and robust free cash flow generation, we are well positioned to enhance the return of capital to shareholders by reactivating our share buyback program. Accordingly, we have renewed our NCIB, allowing us to repurchase up to 3.1 million shares over the next 12 months. Now turning to Slide 13 for an update on our network inventory. We maintained a disciplined approach to network inventory management throughout the quarter, ending Q3 with inventory down 17% versus last year and down 6% below pre-COVID levels. Importantly, we have made strong progress in key areas of focus with 3-wheel, personal watercraft, switch and snowmobile, all showing strong double-digit reduction. Meanwhile, our ORV network inventory remains healthy, down 8% year-over-year, with SSV sequentially declining from Q2 levels, notably driven by our solid retail performance. This positions our dealers with significant capacity to take on our newly introduced products as we ramp up production. Looking ahead, aside from snowmobiles for which the season is still unfolding, the rightsizing of our network inventory is largely complete. This will allow us to better align wholesale with retail moving forward. With our robust product lineup and healthy network inventory levels, we believe we are best positioned in the industry to capture demand upside while market conditions improve. With this, let's turn to Slide 14 for an update on fiscal '26. As I mentioned earlier, we are pleased with our execution and results so far this year. Assuming macroeconomic conditions and tariff remain stable, we have good visibility on dealer orders for the rest of the year, positioning us to deliver revenues at the higher end of our initial guidance ranges. Additionally, with the continued tight management of our expenses, efficiency gains we are generating across the organization and the benefits of our recent debt transaction, we now expect to deliver better normalized EBITDA and normalized EPS than previously anticipated. As such, we now expect to deliver about $8.3 billion of revenue, $1.1 billion of normalized EBITDA and about $5 of normalized EPS for the year. Looking ahead, with our successful product introductions, lean network inventory levels and improving dealer sentiment, we expect to carry our strong momentum into fiscal '27, positioning us to deliver double-digit normalized EPS growth while having the financial flexibility to enhance return of capital to shareholders. On that, I turn the call over to Jose. Jose Boisjoli: Thank you, Sebastien. Before closing my remarks, I would like to talk about our fourth Yellow Day held on November 20. As an organization, we are committed to making a positive social impact. I was pleased to see a growing number of employees, dealers and ambassadors worldwide actively engaging with our cost to ride out intimidation. It is rewarding to know that we are making a real difference. In conclusion, I am proud of our accomplishments so far this year. Our strong Q3 performance has resulted in higher guidance for fiscal '26. In the short term, all our teams are aligned internally and focus on delivering against our new M28 strategic plan to capture our full powersport potential. As part of this plan, we introduced financial objective of $9.5 billion in revenue and $8 in normalized EPS by end of fiscal '28. We are confident in our ability to reach these objectives. Looking ahead, we are the best positioned OEM to benefit from an industry rebound given our lean inventory position, engaged dealer network and strong lineup. We had the most product introduction for model year '26 and we will not stop here. Our goal is to consistently wow consumers with innovative product and unbeatable experience. With the solid foundation we have built over time, we can create a bright future for BRP and drive long-term profitability. Lastly, about the nomination of the new CEO, the process is ongoing and the Board is still targeting the end of January. I will work closely with the executive team to ensure a smooth transition for my successor. I am proud of what BRP has become. We have built a strong organization, and I have no doubt that we are the best OEM in the industry. This is my last earnings call. It was a pleasure working with all of you. On that, I turn the call over to the operator for questions. Operator: [Operator Instructions] Your first question comes from James Hardiman with Citigroup. Sean Wagner: This is Sean Wagner on for James Hardiman. You gained share in the quarter in ORV despite once again calling out the high levels of noncurrent inventory and elevated promotions from the other OEMs. I guess, I'm just wondering if you can give any color on how things looked if we split it up into current versus noncurrent? If you have any thoughts on sort of how that looks in the fourth quarter? I think you mentioned that, that should continue through the winter. But I guess, maybe do you see that sort of normalizing or maybe even improving next year? Jose Boisjoli: As you know, we came out of club with great engagement from the dealers. The dealers were extremely and the media were extremely pleased with the ETV lineup and also the side-by-side lineup, notably the HD11. The review is very good, and we start production and shipment beginning of Q3. And we had the benefit mainly in the second half of Q3 to have a very good retail because the product was at the dealership, and they were selling every day. Then, obviously, like I said in my remarks, with gain in the current, we've lost in noncurrent, which was on plan. But this is basically what I can say. The momentum for side-by-side is very strong, and it was our highest quarter ever at the term of retail. Now for November, obviously, I cannot go into detail. We have our numbers, but we don't have any industry data. But I can say that, again, the retail is quite positive, the HD11 and the ETV Backcountry series, or the 4x4 and 6x6 are extremely well received. Then off-road, we are very happy with the trend in October, but also the trend in 1 month in November. On the snow side, obviously, we're benefiting of an early snowfall in many regions. And right now, the momentum is improving. Then this is basically what I can say on what happened on off-road and our situation on November. But overall, we are very happy with our position in the industry. Sean Wagner: Okay. That's very helpful. I guess just following up on that, to your point, there's -- you've had a great start to model year '26, it sounds like for ORVs through November. Your fiscal '28 targets assumed low single-digit growth in side-by-side. Has your thinking changed at all there of the potential for that segment? Or is this kind of still in line with your expectations? Or is it just too early to say? Jose Boisjoli: No, obviously, we introduced M28 about 2 months ago then, but as you remember, we reached close to 30% in a few years. We've lost market share in the last 18 months because of our desire to reduce the inventory and we had less non-current than the competition. But as we said when we introduced the M28, the plan is to go back to 30% by the end of fiscal year '28. Operator: Your next question comes from Mark Petrie with CIBC. Mark Petrie: And first, just let me repeat my congratulations to you, Jose. It's been a pleasure working with you over the last decade plus and wish you all the best in your next chapter. Obviously, product innovation is a key short-term variable, but I want to hear your comments or if you could just expand on your comments so far about dealer appetite to invest in their business and sort of step up inventory levels, just given macro conditions and uncertainty? Sebastien Martel: Yes. Mark, obviously, when we went to club in August, we were -- we couldn't ask for to be in a better position because we had invested in reducing network inventory, and now we're coming with great products. And so when dealers are sitting down and looking at their business, obviously, they are more willing to take on the new models, the new innovation, and that's what we're seeing from dealer orders. The reception is good. Dealers are obviously always concerned with the macroeconomics. Have we reached the trough, some speculate that we are, but obviously, as we see rates come down, as we see inventories being leaned by all the OEMs, the level of appetite from dealers is also increasing to take on more inventory, especially of the new stuff. So we're in a very good position and couldn't ask for a better outlook in terms of dealer engagement. Mark Petrie: Okay. And if I could follow up on that topic. At the Investor Day, I think you talked about some OpEx being allocated, notwithstanding your lean initiatives, some OpEx being allocated to support dealer engagement. Hoping you could just talk more about those plans and the timing of that, and how you see that affecting your business? Jose Boisjoli: Like we said, we intend to be the best, obviously, with our -- we have the best product lineup, but also we want to be the best for experience and thus include our dealers. And we will invest to better support our dealers in terms of parts and accessories, training them and also leading them with all the leads we get from the website. And this is part of the plan. But like we said, we are full throttle with the M28 plan right now. The plan have been cascaded down. And also, we will increase the number of dealers. We had an objective of 30 dealers addition net this year, and we already have achieved that number, then it's quite positive. And the team is not stopping because we have achieved our number for this year that they are already working on next year achievement. But what I want to say is what you saw in Valcourt with the M28, everything is in motion, and we're very happy where we are. Operator: Your next question comes from Robin Farley with UBS. Robin Farley: Just thinking about your commentary on ORV and you mentioned that other OEMs have elevated inventory still and promos and noncurrent. It seems like yourselves and some of the larger OEMS and even CFMoto have felt good about their inventory position for a while. So isn't it fair to think that at this point, the only other OEMs out there with this kind of excess noncurrent and being promotional, at this point, that's going to be a fairly small percent of what's out there. I guess I'm just curious on your thoughts on why that would be -- if it's sort of a single-digit percent of product out there? Is that still pressuring things overall? And how much longer do you think at the rate that you're seeing that sell-through do you expect this to continue? Sebastien Martel: Well, we expect Q4 to still be a noncurrent market. Obviously, we just transitioned into a new model year. And so as OEMs introduce new models, dealers are selling through their noncurrent. Obviously, Q3 is a being noncurrent quarter where the bulk of the retail is noncurrent, Q4 as well. But we've seen OEMs being still promotional, even on model year '26 products, we saw OEMs for side-by-side already advertising discounts. So our view is that this environment will be here for maybe another few quarters, and that obviously impacts the profitability of everybody's business. From a consumer point of view, the high-end products are selling well, but the lower-end models, the more entry-level models, traffic is lighter, and therefore, we see some OEMs pushing harder on discounts. Robin Farley: That's helpful. And maybe just as a follow-up, do you have a view on sort of where the industry may shake out for ORV retail in the next 12 months kind of based on everything you're seeing? Sebastien Martel: Yes. Our going-in assumption for next year is a flat industry. And if I look year-to-date, industry is down 1%, so you could call it flattish. So our base case for next year is for the industry to remain where it is. Operator: Your next question comes from Benoit Poirier with Desjardins. Benoit Poirier: Yes. Congrats to Jose, it's been a pleasure working with you over the years. Jose Boisjoli: Thank you. Benoit Poirier: And maybe first question for Sebastien. When I look at the working cap, you benefited from a strong working capital release in the quarter. Just wondering if this was more of a onetime item in pack, and how should we expect working capital to play in the coming quarters? Sebastien Martel: Yes. Obviously, we're really happy with our free cash flow generation year-to-date that we're at about $650 million for the first 3 quarters of the year. My outlook for the year will probably end about, let's say, $650 million to $700 million free cash flow generation. Working capital has been a big focus of the organization, especially off COVID, where we did build up some safety stock, et cetera. Now with better visibility on the supply chain, obviously, everyone has been hands on this element, and we see the benefits to date. So I'm expecting overall for the full year, maybe a slight tailwind on overall working cap, but obviously, very happy with the work that the team is doing in freeing up some cash by reducing our investments in working cap. Benoit Poirier: Okay. And this morning, there are some headlines about the fact that the Trump could decide to withdraw from the USMCA, obviously you are very well positioned right now, but just wondering any actions that you can take to mitigate the risk and how do you deal with this uncertainty. Jose Boisjoli: As we said, Benoit, we're very involved into following the negotiation and even giving our point of view or giving data on our situation with industry association, but also with some government and the progress of reanalyzing and trying to renew the USMCA is ongoing. We're not reacting to news every day because it will be too painful. Then we're just focusing to better support the industry and the government with data and our point of view on different things, and we will see what will be the outcome. But so far, the people are working hard to renew it with minimum changes. Operator: Your next question comes from Craig Kennison with Baird. Craig Kennison: Seb, I wanted to follow up on your response to Robin. When you talked about flat retail for the year, were you talking about calendar '26? Sebastien Martel: Yes, calendar '26. Craig Kennison: Thank you for clarifying. And then you were also talking about the low-end consumers still struggling relative to the more affluent consumer. Do you have an assessment of the rate sensitivity of that low-end consumer and the impact of meaningfully lower rates next year? Sebastien Martel: Yes. Obviously, it's difficult to triangulate how a movement of, let's say, 25 basis points in rate will impact consumers. But what I can tell you is, if look at Canada versus the U.S., rates are probably about 175 basis points lower in Canada than the U.S. And we've seen good demand and good better retail in Canada. So certainly, as rates will come down in the U.S., we do hope that we'll see the same impact that it had on Canadian demand. Craig Kennison: And finally, just -- it sounds like HD11 has done really well and dealers are selling through that quickly. I'm curious how quickly are you getting retail signals such that you can adjust production to make sure you have the right inventory? Because we do hear that, "Hey, we'd love more HD11, but we've got too many of the other units that are turning more slowly." I'm curious if you've upgraded your ability to process those signals? Jose Boisjoli: Yes. To give you a sense, we're still producing the old platform and the new one, but in Q3, we produced about 3/4 of the new one and 1/4 of the old one, then we're definitely transitioning fast. We're taking order every month, Craig, as you know. And right now, beginning of December, we're taking deliveries. We're taking orders for what will be delivered in February. Then we have quite a good ability to adjust to the most popular model at retail. And we're very confident with -- it's a fast turnover. The dealer received the unit, they PDI it, and don't fill on the floor very often, then we could not be happier of the reception of the new Defender. Operator: Your next question comes from Martin Landry with Stifel. Martin Landry: I would like to focus a little bit on snowmobiles. Wondering if you can just refresh or remind us what's your inventory level versus your comfort level in terms of snowmobiles right now? Jose Boisjoli: Then just to give you a sense, we finished last season last spring with about 60% market share, in North America I'm talking, and 30% of the inventory, the noncurrent inventory. And obviously, we're planning to lose market share this year because this unbalanced current, noncurrent ratio from other OEM. But this was all planned, all included in our guidance. What is good right now in the Northeast, including Quebec, the snow is quite good, good in upper peninsula. In the West, Canada, U.S., it's a bit patchy. And in Scandinavia, it's good. Then overall, it's a good start of the season. We gained market share in the current, and we have a lot of presold unit. We've lost in the noncurrent as planned, and it will be a year of correction and this was all planned. Martin Landry: Okay. So can we expect you to have fully cleared your older models by the end of the snowmobile season? Jose Boisjoli: We were a bit on the high side, but we were in a relatively good shape at the end of the season '25. And we still need to deplete some of that inventory to be at, I would say, normal level. But we believe that -- and partially with the good snow, we believe that all of this should be, for us, realigned at the end of the season '26. Operator: Your next question comes from Joe Altobello with Raymond James. Joseph Altobello: I wanted to go back to the promotional environment. I think in your press release, you mentioned that you saw favorable variations in your sales programs. But this morning, you're talking about still very elevated levels of promotion in the industry. So is it that the industry is still very promotional, but you guys were a little bit lower in terms of sales programs versus last year? Sebastien Martel: Yes. Well, if you recall last year, Joe, we wanted to address inventory in the network and the noncurrent inventory as well. And so we did put a lot of dollars last year to work in order to flush that inventory, which we were able to do. And so this year, we're probably trending about, let's say, 70 to 80 basis points lower in terms of retail promotion versus last year. So that's the main reason. But nonetheless, I mean, there's still some high levels of promotions that are being advertised out there in the market. Joseph Altobello: Got it. Okay. And in terms of fiscal '27, you mentioned that wholesale and retail should be largely in alignment. And I think Seb, in the past, you've said that just lapping this year's destocking probably gives you $400 million to $500 million of revenue. Is that still the case? And should we think about that as a base and then layer on whatever assumptions we have on pricing and market share gains? Sebastien Martel: Yes. Obviously, we are in the middle of our planning for next year, but it's certainly too early to provide a detailed guidance to all of you. And as you mentioned, there are some elements we already know and that should serve as your best case for your models there for next year. The big tailwind is the element that you mentioned there, just the rightsizing of the inventory that is behind us last year and this year. And so that is a tailwind of about $400 million to $500 million of revenue and probably roughly about $1.25 of EPS. Obviously, there are some headwinds. We're transitioning the production of Ryker to Vietnam. And so with that transition, there will be less Ryker deliveries next year. So that's one of the headwinds. Some of the cost drivers as well, depreciated expense will go up probably about $30 million next year. And I'm also expecting my tax rate to go up to historical levels, call it, 25% to 26%. So if you factor these elements in your base case, Joel, you'll probably end up in an EPS probably up in the mid- to high teen percentages for next year and probably an EBITDA margin ballpark 14-ish percent. But again, this is a base case. And obviously, over the next few months, we'll see how the business trends. Snowmobile season is an important business for us. And so if the snow sticks, maybe it will be good. The macro environment is also evolving every day. As Benoit mentioned this morning, we have new data on tariffs. We'll see how that unfolds. And obviously, there's a competition as well. How are other OEMs going to behave, are they going to be more aggressive in terms of putting units in the industry and also discounting. So obviously, there's a lot of variables that we're monitoring in order for us to make an educated guess on the industry. But again, with still a few months to go before we issue guidance, we'll be able to give you the full download in March. But again, we're optimistic, especially with the strong lineup that we have in all of the product categories. Operator: Your next question comes from Brian Morrison with TD Cowen. Brian Morrison: Jose, it's certainly been a pleasure working together all these years. I want to go back to the inventory, and you've done a very good job explaining ORV and snowmobiles, can you just maybe let us know how CD sits as we enter into the season. And with respect to ORVs, how has the initial reception been with respect to the discounting of your entry-level product line? Sebastien Martel: I'll take on the first question, Personal Watercraft. If you look at Slide 13 on the deck, personal watercraft is actually down 22% versus last year. So obviously, very happy with where we sit. As I've shared with you in the past, other OEMs do have more inventory in the network. And so we believe it will be a similar I guess, the similar dynamic that we see in snowmobile for the next season with some noncurrent units impacting overall market share performance. But from a current point of view, the lineup we have is obviously very strong. And the orders that we got from the dealers at our club in August also provide us a good outlook for next year. So we were sitting in a very good position, much better than where we were last year. And on the entry-level product, Jose, overall reception? Jose Boisjoli: Yes. Basically, consumer trend, no big change since the beginning of the year. Just to give you some statistic, new entrant in Q3 was 21%, about in line with the pre-COVID level. And premium sales better than value. Just to give you a sense on side-by-side, our premium units was up mid-double digit when -- this is the industry, by the way. The premium was up mid-double digits when the value was down low double digit. And for the utility, selling better, up low double digit when the export was down mid-single digits. And you can see the trend don't change. Our household customer -- household income of our customers high at USD 175,000, and the same trend continue. The beauty of all this, it's -- obviously, we don't like when we talk about Spark Ryker, our entry-level product. But overall, our lineups are more high end than low end, and it's very good for us. Brian Morrison: Right. So one follow-up question, if I can. You renewed your NCIB here this morning. I wonder if you can just reiterate what your target leverage is, and if you expect to be active with the NCIB in the near term? Sebastien Martel: Yes. Our target leverage for the end of the year, probably in the range of 2x net debt-to-EBITDA. We've always said we're -- our overall target is between 1x and 2x. So we're really happy with how the business has progressed and the refinancing that we did last -- just a few months ago with the repayment of USD 200 million of debt and also the repricing where it provides us a big tailwind of $0.30 next year. So I couldn't ask for better results from our Treasurer and our legal team, really happy with the outcome. On the NCIB, we've been on the sideline now being more cautious over the last 15 months, waiting to see where the overall economy is going to go trade, et cetera. Now that we are seeing our leverage come down, we're strong free cash flow generation. Our intention is to be active on the NCIB in the next few weeks. Operator: Your next question comes from Sabahat Khan with RBC Capital Markets. Sabahat Khan: I guess just some of the directional comments you gave on calendar '26, something around the 14% type base case for EBITDA margin. Just curious, based on your current visibility, what sort of production levels are you at? Just trying to think an operating leverage has obviously put a potential part of the story going forward. So just -- are you back to something resembling normal production? Or where about will your factories be for the next year based on... Sebastien Martel: We'll still be below average asset utilization rates, again I talked about a tailwind of, I would say, $400 million to $500 million of revenue. And so it still would bring us in the probably low 70 asset utilization. Sabahat Khan: Great. And then you noted the tariff impact to the dollar amount in the calendar release here -- or sorry, in the presentation. Can you just talk about the tariffs might evolve, but is this more the idea that, look, anything additional might just have to be sort of worked through the efficiencies? Or is pricing on the table as well, depending on how tariffs evolve? Sebastien Martel: It really all depends. It's tough to speculate. It will depend on the materiality, on what components it impacts, on the flexibility we have with suppliers, can we relocate parts, et cetera. But what I can say is that our teams, our custom brokers are getting smarter, more sophisticated. We have now more granular data that allows us to be a lot more targeted when we do file custom declaration forms. And so that headwind that we have this year is expected to be actually very similar next year as well because of the better processes we have and better collaboration we have with the various partners. But again, we'll monitor, and we'll act accordingly as we usually do. We've always been very proactive in adapting to new situations. Operator: Your next question comes from Luke Hannan with Canaccord Genuity. Luke Hannan: I want to follow up on that last line of question, Seb. So just to be absolutely clear, if we went back to last quarter, I think the gross headwind that you're expecting for fiscal '27 was in the neighborhood of $120 million to $130 million. So it should now be closer to $100 million -- pardon me, $90 million when it comes to the gross tariff headwind? Sebastien Martel: Yes, that's correct. We mentioned again, we -- the team obviously is a huge focus of us, and we worked on finding ways to reduce the overall exposure. And it's a very positive outcome. And so my expectation is that we should be flattish next year. Luke Hannan: Got it. Very helpful. And then for my follow-up here, the higher level. When we think about the bridge between the new raised guidance that you just put out there and then the mission 2028 target of $8 of EPS, and then we also factor in the mid- to high-teens EPS growth, roughly speaking, that we should expect for next year, it does imply more contribution, I suppose, during the year of fiscal '28 as well. Can you just help us think from a high level what should be the bigger drivers of EPS growth during 2027, fiscal '27 versus '26? Sebastien Martel: Well, for next year, I gave you -- well, are you talking calendar or you're talking fiscal? Luke Hannan: Fiscal year, yes. Sebastien Martel: So I gave you the fiscal details. So the drivers, obviously, are in the base case is mainly the tailwind coming from retail equal wholesale. But then when you look at '28, obviously, there's a lot of elements of market share gains from the ORV business, the dealer network expansion, all of that will be drivers of growth in '28. So the base case for '27 remains, as I highlighted, and the drivers between '26 and '27, but '28, obviously, there's the product introductions that we'll be doing and the focus on the dealer experience and the dealer network. Operator: Your next question comes from Xian Siew with BNP Paribas. Xian Siew Hew Sam: Could you talk maybe a little bit about how retail and market share gains evolved over the quarter? It sounded like maybe the first couple of months of the quarter were a little bit more promotional and maybe there's some acceleration in October and into November. And if that's the case, I guess, like with the exit rate improving, does that give you kind of more confidence in potential market share gains over the next year or so? Jose Boisjoli: I mean I don't -- we don't want to be -- to start to split quarters because it will be complicated. But we were talking more about off-road. Basically, we introduced very good novelty for model year '26. And those product was introduced in August at the club. We started production the day after. And basically, the time that you produce, you ship, the dealer PDI, transportation, dealer PDI. That's why our second half of Q3 in terms of retail for off-road was stronger than the first half because the new model hit the ground at the dealership when they had low inventory. That is more a timing of new model hitting the dealership. What I'm happy with is, in November, the trend continue, and this is promising for the remaining of the fiscal year. Xian Siew Hew Sam: Okay. Very helpful. And then maybe on the utilization rate, I think you mentioned like in the 70s percent next year. Can you maybe just remind us this year what is the utilization rate and how like that we can kind of calibrate as utilization steps up, how would you think about margin benefits? Sebastien Martel: Yes, we're in the average of a 65% utilization rate this year. Operator: Your next question comes from Cameron Doerksen with National Bank. Cameron Doerksen: Let me echo my congratulations to Jose. I'm sure you're looking forward to the end of January. I wanted to come back to the -- I guess, the snowmobile market discussion. So if you and the industry end this season with a very healthy dealer inventories, and we have a pretty decent snow season, it's off to a decent start so far, it feels like this could be a very nice tailwind for you in fiscal 2027. I'm just wondering if that's potential upside to kind of that $400 million to $500 million revenue from the alignment of retail and wholesale? Or is that kind of incorporated into that assumption? Sebastien Martel: No. Obviously, if we have a, again, a super good season, we have a lot of enthusiast customers in the snowmobile industry. And so if you have a lot of snow and people get a lot of riding and we obviously have -- we'll have great product news next year as well. You can expect strong customer orders in the spring and that obviously is going to be a good tailwind for the back half of fiscal year '27. So -- but we always like to plan snowmobile conservatively because it's very dependent on snowfall. And so again, every inch of snow is more units that get retail, so we'll take it. Cameron Doerksen: Okay. No, that's good. That's helpful. And Seb, just -- I guess just a clarification, I guess, on the remaining marine sale at the Telwater, I think, Jose, you mentioned hopefully coming in the next few weeks, just what's the cash inflow? I mean I think the number, it looks like it's probably something like $200 million that you would expect from that. Have I got that right? And if not, what is the expected cash inflow from that? Sebastien Martel: Well, obviously, we have a good offer from Yamaha for that asset, in the ballpark, it's around that amount of expected cash inflow from the proceeds that is expected. Cameron Doerksen: Okay. So that would come in Q4, assuming that the regulator approves it? Sebastien Martel: Yes, it will come into Q4 or early -- yes, Q4. Operator: Your next question comes from Jamie Katz with Morningstar. Jaime Katz: I have just a quick one on CapEx. I know it was shifted down a little bit. Were there any particular investments that we should be aware were sort of either pushed out or delayed? And then should we be thinking of CapEx as a percentage of sales still around that like 4.5% level longer term? Sebastien Martel: Yes, nothing special to call out for this year. Obviously, we are diligent in our CapEx spend, and the teams know that if we push a project out, it doesn't mean that they lose it. And so everyone is being responsible in how they deploy CapEx. And for next year, probably in the range of, let's say, $420 million is a fair number in terms of CapEx and for the out years as well. As you might know, we've invested quite a bit in the last few years in capacity. And so we don't necessarily need to build any more capacity out for our plan. That's the good news. And most of the investments are around product and technology. Jaime Katz: Okay. And then I don't know that this was called out, but for new-to-brand consumers, is there anything noteworthy on what is getting them to convert sales? Is it promotions, innovation, financing deals, some mix of that all? Just curious what's motivating consumers the most right now? Sebastien Martel: I'd say innovation is what's motivating customers the most. Obviously, with products that have been out there in the market for quite a bit of time, discounts can drive consumers, but for new to BRP, obviously, when they see the innovation that we have on most of the product line, on all the lineup, that is what's driving the conversion from other brands. Operator: Your next question comes from [ eli Lapp ] with BMO Capital Markets. Unknown Analyst: Two for me. I just wanted to follow up on the potential sale of to Yamaha and what you would potentially do with those proceeds, the $200 million? And then just kind of in the same vein, you mentioned $210 million of debt reduction. Could you tell us where your debt stood where your total debt stood at the end of the quarter? Sebastien Martel: Yes. Well, our capital deployment priorities are not changing. The first one is to invest in the business and that will remain. Then the other capital deployment priority is obviously modestly increase our dividend, and then any excess free cash flow, when the shares trade below what the implied value is, we like to return capital to shareholders. So the good news is we have flexibility. I feel that our cap structure is adequate today with the refinancing that we did just a few months ago. The overall debt stands at USD 1.7 billion today. And so overall leverage is very comfortable, and I don't feel that we need to reduce the overall debt level. Unknown Analyst: So just as a follow-up, you had mentioned during the call, I think that -- if you correct me if I'm mistaken, but I think you said your long-term guidance was 1 to 2x? Sebastien Martel: 1.5 to 2x leverage. Unknown Analyst: 1.5 to 2x. Operator: [Operator Instructions] Your next question comes from Jonathan Goldman with Scotiabank. Jonathan Goldman: Most of them have been asked, but maybe just to clarify 1 to begin with. I'm sorry if I missed this. But Seb, did you talk about the base case for next year, including share gains? Sebastien Martel: Well, again, our plan, if you look at the M28 target, we said modest share gains in the ORV segment. So yes, it does factor a bit of share gains next year, but it would be a modest impact. Jonathan Goldman: Okay. Perfect. And then on the gross margin, I believe, Seb, on the last call, you said you could possibly see a tailwind next year in the 50 bp range. Given where the inventory is in the industry right now and your comments about promo still being somewhat elevated, how are you thinking about potential gross margin expansion next year? Sebastien Martel: Well, the big driver of our gross margin, obviously, is some of the volume that we're going to be bringing back from just matching retail with wholesale. The other element is obviously cost initiatives that we have in all of the -- all of our plans, all of our product lines. And so from asset utilization and cost efficiency, that should drive margins up. We are expecting as well to continue investing in the business or in the marketing. So I do not expect a huge operational leverage coming from OpEx, maybe 50 bps, which could bring us to a 14% EBITDA margin on the base case. Operator: There are no further questions at this time. I will now turn the call over to Mr. Deschenes for closing remarks. Philippe Deschênes: Thank you, Joel, and thanks, everyone, for joining us this morning and for your interest in BRP. We look forward to speaking with you again for our Q4 earnings in March. Thanks again, everyone, and have a good day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Greetings, and welcome to the Dollar General Q3 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kevin Walker, Vice President, Investor Relations. Kevin, please go ahead. Kevin Walker: Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO; and Donny Lau, our CFO. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News and Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our financial guidance, long-term financial framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations or beliefs about future matters and other statements that are not limited to historical fact. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning under Risk Factors in our 2024 Form 10-K filed on March 21, 2025, and any later filed periodic report and in the comments that are made on this call. You should not unduly rely on forward-looking statements which speak only as of today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. At the end of our prepared remarks, we will open the call up for your questions. To allow us to address as many questions as possible in the queue, please limit yourself to one question. Now it is my pleasure to turn the call over to Todd. Todd Vasos: Thank you, Kevin, and welcome to everyone joining our call. We are pleased with our third quarter results, including another quarter of balanced sales growth as well as strong earnings results that significantly exceeded our expectations. I want to thank our team for their ongoing commitment to serving our customers, communities and each other. Our mission of serving others informs everything we do at Dollar General and our efforts are resonating with customers as we continue to enhance our value and convenience proposition. For today's call, I'll begin by recapping some of the highlights of our third quarter performance as well as sharing our latest observations on the consumer environment. After that, Donny will share the details of our financial performance as well as our updated financial outlook for fiscal 2025. I'll then wrap up the call with an update on some of our key growth-driving initiatives, including our real estate plans for 2026. Turning to our third quarter performance. Net sales increased 4.6% to $10.6 billion in Q3 compared to net sales of $10.2 billion in last year's third quarter. We grew market share in both dollars and units in highly consumable product sales once again during the quarter in addition to growing market share in non-consumable product sales. This market share growth is a testament to our improved execution, compelling offering and broadening appeal with a wide range of customers. Same-store sales increased 2.5% during the quarter driven by customer traffic. The average basket size essentially was flat. Within the basket, an increase in average unit retail price per item was offset by fewer items on average. This traffic and basket composition is consistent with what we have historically observed when our core customer feels more pressured on their spending as they come in more often but have smaller basket sizes. For the third consecutive quarter, we delivered broad-based category sales growth with positive comp sales in each of our consumables, seasonal, home and apparel categories. Notably, the comp sales increase in non-consumable sales once again outpaced a solid increase in consumable sales. From a monthly cadence perspective, all 3 periods were positive, led by August. September was the softest period of the quarter as we lapped significant hurricane activity in the prior year before rebounding to higher levels in the month of October. And despite the delay in SNAP payments in early November, we are pleased with our strong sales performance to begin quarter 4. Overall, we are pleased with our top line results in Q3, which we believe demonstrate the important role we play in providing value to customers and our communities. To that end, we're pleased to see growth once again in our total customer count with disproportionate growth coming from higher income households. We remain focused on executing our proven playbook to retain a substantial portion of these customers. And with our unique combination of value and convenience, we believe we are well positioned to increase market share with customers across all income brackets. With that in mind, we continue to be pleased with our pricing position, which remains within our targeted range of 3 to 4 percentage points on average for mass retailers. We also continue to see a substantial offering of more than 2,000 SKUs at or below the $1 price point as an important component of the value offering for our customers. For example, our Value Valley offering, which is comprised of more than 500 rotating SKUs at the $1 price point was once again our strongest performing sets in the quarter with same-store sales growth of 7.6%. With nearly 21,000 stores located within 5 miles of 75% of the U.S. population, along with our robust and growing digital presence, we are proud of our unique position as America's neighborhood General store. We remain committed to serving our customers with low prices they expect on the products they need and as we help them save time and money every day. Overall, we're proud of our Q3 results and the significant progress we've made this year improving our operating and financial performance. As we continue to invest in the growth and development of our teams, we are seeing lower year-over-year turnover in all levels of our in-store positions which is also contributing to our improved execution and financial results. The progress we've made further supports our confidence in our long-term financial framework, and we are excited about the opportunities ahead. Before I turn the call over for our financial update, I want to take the opportunity to congratulate Emily Taylor on her promotion to Chief Operating Officer. During her time at Dollar General, she has been a strong leader who has consistently enhanced the customer experience both in-store and through our innovative digital offerings. She and her teams have elevated the Dollar General and pOpshelf brands while also improving operational efficiency, and we are excited to expand her responsibilities moving forward. I'm confident she is the right leader for this position and look forward to working with her in this new role. I'm also excited to welcome Donny Lau as our new CFO. We are thrilled to have him back at Dollar General and look forward to working with him to further accelerate our progress and drive sustainable growth over the long term. With that, I'll now turn the call over to Donny. Donny Lau: Thank you, Todd, and good morning, everyone. After almost 2.5 years away, I'm excited to be back at Dollar General, and I look forward to connecting with many of you in the months ahead. And while I've only been back a short time, it's clear there are substantial opportunities for growth and value creation. I'm especially excited about the progress we're making against key initiatives which is contributing to strong operational and financial results. I look forward to working with the team to advance our strategic priorities as we look to build on our momentum, drive long-term sustainable growth and deliver strong returns on invested capital. I'll now cover our Q3 results. Since Todd has taken you through the top line results for the quarter, my comments will cover some of the other important financial details. Unless we specifically note otherwise, all comparisons are year-over-year. All references to EPS refer to diluted earnings per share and all years noted refer to the corresponding fiscal year. For Q3, gross profit as a percentage of sales was 29.9%, an increase of 107 basis points. This increase was primarily attributable to higher inventory markups and lower shrink, partially offset by an increased LIFO provision. Our ongoing efforts to reduce shrink once again contributed to strong operating margin expansion in Q3 as we delivered a 90 basis point improvement in shrink versus prior year. Notably, shrink continues to improve at a much higher and faster rate compared to the expectations contemplated in our long-term financial framework, and we expect continued improvement over time. Turning to SG&A, which as a percentage of sales was 25.9%, an increase of 25 basis points. The primary expenses that were a higher percentage of sales in the quarter include incentive compensation, repairs and maintenance and utilities, partially offset by a decrease in hurricane-related costs. Moving down the income statement. Operating profit for the third quarter increased 31.5% to $425.9 million. As a percentage of sales, operating profit increased 82 basis points to 4%. Net interest expense for the quarter decreased to $55.9 million compared to $67.8 million in last year's third quarter. Our effective tax rate for the quarter was 23.6% compared to 23.2% in the prior year. Finally, EPS for the quarter increased 43.8% to $1.28, which exceeded the high end of our internal expectations. Turning now to our balance sheet and cash flow. We have made significant progress in strengthening our financial position. Merchandise inventories were $6.7 billion at the end of Q3, a decrease of $465 million or 6.5% compared to prior year, and a decrease of 8.2% on an average per store basis. The team continues to do a terrific job reducing inventory while driving sales and improving in-stock levels. Overall, we're pleased with our inventory position as we enter this important holiday shopping season. Importantly, we believe there is opportunity to further reduce and optimize our inventory position, and we expect continued progress as we move ahead. Year-to-date through Q3, we generated significant cash flow from operations of $2.8 billion, which represents an increase of 28%. As previously communicated, we redeemed $600 million of senior notes during the quarter, well ahead of their scheduled April 2027 maturity, further strengthening our balance sheet and reducing future interest expense. We also paid a dividend of $0.59 per common share outstanding during the quarter for a total payment of approximately $130 million. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in the business, including our existing store base as well as other high-return growth opportunities such as new store expansion, remodels and other strategic initiatives. Next, we seek to return cash to shareholders through a quarterly dividend payment and when appropriate, share repurchases. And while our leverage ratio remains above our goal of less than 3x adjusted debt to adjusted EBITDAR, we are making significant progress towards reaching our target level in support of our commitment to middle BBB ratings by S&P and Moody's. Moving to an update on our financial outlook for fiscal 2025. Our update primarily reflects our Q3 outperformance and improved outlook for Q4, while also considering the potential for continued uncertainty, particularly in consumer behavior. With that in mind, we now expect the following for 2025: net sales growth of approximately 4.7% to 4.9%, same-store sales growth of approximately 2.5% to 2.7% and EPS in the range of $6.30 to $6.50. Our EPS guidance continues to assume an effective tax rate of approximately 23.5% and that we will not repurchase shares under the existing share repurchase program. Now I want to provide some additional context around our expectations. With regards to gross margin, we anticipate shrink will be a continued tailwind in Q4, though to a much lesser extent than Q3, as we begin to lap the improvements we made toward the end of last year. We also now expect capital spending to be towards the low end of our previously stated range of $1.3 billion to $1.4 billion. This includes our continued expectations to execute approximately 4,885 real estate projects in 2025, including 575 new store openings in the United States and up to 15 in Mexico, 2,000 Project Renovate remodels, 2,250 Project Elevate remodels and 45 relocations. Finally, as a result of our strong cash and liquidity position, we plan to redeem an additional $550 million of our senior notes earlier than their November 2027 maturity. Our guidance contemplates about $9 million of incremental expense in Q4 in connection with this repayment. In closing, we are pleased with our third quarter result and updated financial outlook for fiscal 2025. While we plan to speak more to our 2026 outlook on our Q4 call in March, we are confident in our long-term financial framework, and we are very pleased to be ahead of schedule in our progress. Importantly, we are working to further strengthen and accelerate where we see opportunity our path to achieving these goals. We look forward to sharing our continued progress as we move ahead. Overall, we are confident in our business model. We remain focused on delivering profitable sales growth, high returns on invested capital, strong operating cash flow and long-term shareholder value. With that, I'll now turn the call back over to Todd. Todd Vasos: Thank you, Donny. I'll take the next few minutes to provide updates on 3 of our most important initiatives as we look to further advance our progress toward achieving our short- and long-term goals. Starting with real estate where we continue to enhance and extend our unique combination of value and convenience to new communities across the country. These efforts remain focused on driving sales and market share growth by expanding our unique real estate footprint while also enhancing our mature store base. We opened 196 new stores in Q3, primarily in our 8,500 square foot store format in rural markets. Importantly, we continue to accelerate our efforts and through the first 10 periods of the year have substantially completed our planned new store openings for fiscal 2025. Outside the U.S., we've opened 7 new stores in Mexico this year, bringing us to a total of 15 at the end of Q3. We continue to test and learn in these stores and remain excited about the opportunity to serve these communities. We also continue to make substantial progress with our remodel initiatives. As a reminder, in addition to our traditional remodel program, which we call Project Renovate, we previously introduced a new incremental remodel program called Project Elevate. This initiative is designed to further grow sales and market share in portions of our mature store base that are not yet old enough to be part of our full remodel pipeline. These projects include physical asset investments as well as merchandising optimization, product adjacency adjustments and category refreshes, all of which impacts approximately 80% of the total store. We completed 651 Project Elevate remodels in Q3 and an additional 524 Project Renovate remodels during the quarter. While we have not yet reached the 1-year anniversary of the first stores in the program, we are on track to deliver an average first year annualized sales comp lift of approximately 3% in Project Elevate stores. And we continue to expect comp sales lifts of approximately 6% for Project Renovate stores. Importantly, we continue to see significant improvements in customer satisfaction in these stores upon completion of the remodels. These results have given us confidence to make Project Elevate a key component of our real estate strategy as we move forward. Looking ahead to 2026, we are uniquely positioned to serve an underserved customer in rural America where approximately 80% of our current store base serves towns of 20,000 or fewer people. We plan to build on that strength in 2026 with plans to execute approximately 4,730 real estate projects in total, including 450 new store openings in the U.S., 2,000 Project Renovate remodels and 2,250 Project Elevate remodels and 20 relocations and we plan to open approximately 10 additional stores in Mexico. With regards to new stores, as a reminder, we monitor several metrics of our portfolio, including performance against pro forma sales expectations, new store productivity compared to our mature store base, cannibalization which overall has remained consistent and predictable, cash payback which we expect in approximately 2 years and a new store return which we expect to be in the range of approximately 16% to 17% on average in 2026. Overall, our new store projects continue to deliver healthy returns despite higher occupancy and operating costs. Importantly, we're committed to mitigating these cost pressures where possible and continue to see significant runway for new store expansion with approximately 11,000 opportunities for Dollar General stores in the U.S. And while we've always said that for a variety of reasons, we don't expect to capture every opportunity, we're excited about our ability to significantly grow our footprint in the years to come. We anticipate that the majority of our new stores next year will be in one of our 8,500 square foot formats and will be predominantly in rural communities. And nearly all of our relocations are planned for one of our 8,500 or 9,500 square foot stores. As a reminder, these larger footprint stores provide additional opportunities to serve our customers, including expanded cooler offerings and more health and beauty products. And while we currently offer fresh produce in approximately 7,000 stores, we anticipate bringing this offering to more than 200 additional stores in 2026. We are excited about our real estate plans for next year and believe these projects will continue to deepen our connection with our current customers while better positioning us to attract new customers as well. Collectively, we believe these projects will further solidify Dollar General as the essential partner in communities in rural America, both in our physical store locations as well as with an expanding digital reach, all while strengthening our foundation to drive long-term sustainable growth. The next area I want to discuss is our digital initiative which serves as an important complement to our expansive store footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers. Our digital capabilities include an engaging mobile app and website that continues to be very popular with our customers and have expanded our delivery capabilities while growing our DG Media Network. We have significantly expanded the reach of our delivery options available to customers. Our DoorDash partnership, which now services more than 18,000 stores, continues to drive significant incrementality and sales growth. As a reminder, we partnered with DoorDash to launch our own same-day delivery offering through our Dollar General digital solutions late last year. We believe DG Delivery can drive great customer loyalty within our digital platform while ultimately accelerating growth and increasing market share. We significantly increased the penetration of this offering in Q3, and now DG Delivery is available through our app and website in more than 17,000 stores. And most recently, we entered a partnership with Uber Eats to further expand the reach of our delivery capabilities as we provide value and convenience to customers on their platform. We are now live in more than 17,000 stores with Uber as well. Collectively, these delivery options have significantly enhanced the convenience proposition for our customers with more than 75% of our orders delivered in 1 hour or less, while also extending our value offering to a wide range of new customers. We are seeing larger basket sizes than the average in-store transaction and a very strong repeat visit rate from customers on our delivery platform. Looking ahead, we have ample opportunity to further drive incremental sales growth through a variety of customer experience enhancements and increase customer awareness. As we see continued growth in our digital properties, one of the most significant components of our digital initiative is our DG Media Network which enables a more personalized experience for our unique customer base while delivering a higher return on ad spend for our partners. We are continuing to drive significant year-over-year growth in retail media volume as partners seek to access to our unique customer base. Our digital advertising business continues to see double-digit growth in 2025 driven by new DG Media Network capabilities on our site and within our app. And we believe we are still in the early stages of the potential financial contribution from this initiative. The DG Media Network remains an important contributor to our long-term growth framework, and we're excited about its potential. Over time, we believe we can leverage our digital initiative to increase market share and drive profitable sales growth while further evolving our relationship with our customers and driving greater customer loyalty within the digital platform. The final initiative I want to discuss is our non-consumable growth strategy. As a reminder, we are focused on a few key drivers in our non-consumable categories over the next 3 years. These include brand partnerships, a revamped treasure hunt experience and reallocation of space within our home category. During Q3, we were pleased to deliver positive same-store sales growth in each of our 3 non-consumable categories for the third consecutive quarter. This growth was led by our 2 largest non-consumable categories, seasonal and home, each of which delivered comp sales growth of approximately 4% in the quarter. Our pOpshelf stores delivered another quarter of strong same-store sales growth in Q3. Our new store layout continues to perform well, and we continue to take lessons from pOpshelf and apply them to our non-consumable approach in our Dollar General stores as we further enhance that offering for customers. We believe our non-consumable sales growth, both in Dollar General and pOpshelf stores, continue to benefit from improved execution and a more compelling assortment as well as from the expanded trade-in shopping we've seen from higher-income customers. These results, including multiple quarters of strong sales performance and market share gain, continues to demonstrate that our treasure hunt approach is resonating with customers. Furthermore, our focus on value continues to guide our efforts and drive our success in these categories. And with approximately 20% of our holiday sets priced at $1 and more than 70% at $3 or below, we are excited about our ability to serve customers across all income brackets during this important time of the year. In turn, we believe we are well positioned to continue driving sales and market share growth in these categories while also further increasing our gross margin. In closing, I want to reiterate that we're pleased with our performance, proud of our progress and excited about the opportunities that lie ahead of us at Dollar General. We are laser-focused on furthering these efforts and accelerating our progress toward our goals over the short and long term. As we move through our busy holiday season, I want to again thank our approximately 195,000 employees for their commitment and dedication to fulfilling our mission of serving others. With that, operator, I'd now like to open the lines for questions. Operator: [Operator Instructions] Our first question is coming from Rupesh Parikh from Oppenheimer. Rupesh Parikh: Welcome back, Donny. So I have a 2-part question just on gross margin. So for Q4, it would be helpful to understand some of the puts and takes there you see on the gross margin line. And then from a longer-term perspective, we've seen significant progress this year on the gross margin front, including shrink. Just curious about your overall confidence in being able to deliver the next round of improvement, whether it's from retail media, mix shifts, et cetera, and on the damages front. Donny Lau: Yes. Maybe I'll kick it off and then hand off the second part of your question to Todd. But thanks, Rupesh, good to connect with you again. Maybe I'll just start with Q3 gross margin. I'm especially pleased, right, that we delivered 107 basis points of expansion in Q3, and that's on top of 137 basis points in Q2. And from a Q3 perspective that's also despite 79 basis points headwind from LIFO. And so while we're very pleased to see continued benefit from some of our other key focus areas like lower damages, reduction in markdowns and some of the other initiatives that Todd's going to speak about, I think the outperformance and shrink was notable during the quarter. And so the way I think about it, Rupesh, is we're really building momentum on our key initiatives and the team is really doing a nice job in terms of balancing price and managing mix. In terms of Q4, we do expect another quarter of gross margin expansion in Q4. We expect to see continued improvement in shrink as those alluded to on the prepared remarks to a lesser extent versus Q3. And that's because we really are lapping outsized or more improvement in Q4 of 2024 to the tune of about 68 basis points. We'll also be lapping a discrete item in the prior year really associated with the optimization of our portfolio. And we also expect continued benefit from growth in private label and non-consumables and continued improvement in damages as well as supply chain efficiencies. The one headwind I will note is just LIFO, although we do expect to partially offset that with price and through continue to manage mix as well. And so again, overall, on the gross margin line, I'd say, believe there's more tailwinds than headwinds, which is nice to see and feel really good about the momentum we're seeing and building on this front. Todd Vasos: Yes, Rupesh, thanks for the question as well. As I think about the long-term gross margin opportunities, feel very good. Actually, shrink is -- our shrink improvement so far has actually given us, myself and our team here, even more confidence in delivering on that long-term model in our gross -- on our gross margin line. If you think about it, when I think about where we're at today with shrink, as Donny indicated, the great thing about our shrink benefit so far is while we did take self-checkout out, which has been a nice contributor, the stores that never had self-checkout, about 6,500 of them have seen very substantial increases, or I should say decreases in shrink and increases in gross margin. So what that does, it gives us a lot of confidence that there's probably more gross margin opportunities than we even thought in that long-term model. So stay tuned for that as we go forward. And then as Donny indicated, boy, we still have a lot of great opportunities ahead. When you think of damages, we're just starting that journey. We've seen some nice damage clawbacks over the last couple quarters, but we see even more without giving you any guidance for '26 yet, even more as we move into next year and beyond. So stay tuned there. I think you'll see us execute against that very similarly how we executed very strong against our shrink initiatives. And then lastly, mix and media network. Mix continues to be a good guy and will continue to be. All of the work the team has done, the merchants, our operators, our supply chain on our non-consumable initiatives really has moved the mix number for us. And as you know, those hold a lot stronger gross margins, not only in our home, seasonal and apparel categories, but also our HBA categories which have outsized gross margin. So feel very good about the long-term prospects of that. And then lastly, our media network, we're in the second inning. We're just starting the media network piece. And I would tell you that we're off to a great start, double-digit increases again this quarter. And as I look out to the long-term model, we see a lot of opportunity there as well. So stay tuned. We feel strong. We feel good about where we are and very good about that long-term model. Operator: Next question is coming from Zhihan Ma from Bernstein. Zhihan Ma: I have a 2-part one on real estate. So a short-term one, I think, Todd, you mentioned that the remodels are generating about like a 3% to 6% sales lift, which I believe are at the lower end of the previous ranges you've given. So can you just talk about, is there additional upside? What are some of the near-term dynamics you're seeing there? And then longer term, given some of the changes in your competitive landscape with Family Dollar no longer really in the picture, drug stores closing, how does that change your view on your real estate opportunities and the growth rate you're willing to pursue? Todd Vasos: Yes, sure. We're really happy with the remodel program. As you know, we really are just in year 1. We haven't even cycled a full year yet of Project Elevate, and that's given us -- what we've seen so far, has given us a lot of confidence. Matter of fact, as you heard in my prepared remarks, we're going to do another 2,250 of those next year. So hitting right around 3% right now, but we're just getting started. So as we look to even enhance this program as we go into next year, we'll continue to look at ways to ensure we even get a better comp out of it. But 3% is very strong and is well within our guidance and our guidelines here to continue to move forward. It's a strong, strong return at 3%. And then on Project Renovate at 6%, again, we're just getting going good there. We've been doing, obviously, these projects for many, many years. As we continue to rationalize our SKU base, our coolers, we see real opportunity to continue to drive long-term sales growth in these, albeit probably closer to 6% than the 8% that we have seen in the past. But again, I'll take a 6% comp any day of the week with the investments that we're putting forward on these. So again, gives us a lot of confidence to do another 2,000 of those next year. So really feel good about each of those. But we're retailers, we're never satisfied with the comps that we put out, and we're going to continue to push even harder. And then long term, on your second part of the question, I would tell you, we still feel very good. We got 11,000 opportunities in the continental United States to put a Dollar General store in. Obviously, as we said, we won't get all those. But your question pointed to the reason we're bullish on getting a lot of these is that our competition today is really not opening a lot of stores. And for that, we don't feel compelled to have to rush to open a lot of stores. So we believe that the right mix right now, 450 stores, still very strong for the year. The right mix of remodel and new we believe is the right thing, taking care of that mature store base as we go forward is also strong. But with still close to 17% returns on new stores, we feel very bullish about what the future looks like with that 11,000 opportunities. And when we feel it's appropriate, we have the opportunity and the capacity to step it up from there. Operator: The next question is coming from Matthew Boss from JPMorgan. Matthew Boss: Congrats on a nice quarter. So maybe 2-part questions, Todd, first, how would you assess current health of your low to middle income customer, maybe leveraging your latest survey work? And what's the traffic versus basket interplay that you've historically seen in similar economic backdrop? And then for Donny, if you could maybe just touch on any puts and takes to consider as it relates to next year just relative to the target to return earnings growth to 10% at 2% to 3% comps and tying in the moderated real estate plan for next year. Todd Vasos: Okay, Matt, yes, thank you. I'll start out. Yes, as we exited Q3, I would tell you that, that low middle end consumer continues to be stretched. She is definitely being very mindful of where she shops and what she shops for, making trade-off at the shelf in many instances. The great thing about Dollar General is that we offer extreme value here with a very convenient place to shop and that is obviously resonating with the consumer with a 2.5% comp for the quarter. And I believe most notably, much different, by the way, than our competitors have put out there a 2.5% traffic number. And if you think about it, when you think about traffic, we've always said here, traffic is the real measuring point, right, because that's the sustainability of the comp as we go forward. And we can leverage that additional traffic that we're seeing into long-term sustainable growth here at Dollar General. So stay tuned for that. We know how to also go after these customers. We've already started that retention program to ensure that we continue to keep the customer, the new ones that we're seeing into the brand, both from the middle and the high end. And then lastly, on that low-end consumer, when you think about where we sit in price, we have a very -- we feel very good about our everyday price, very good positioning there, a solid and balanced promotional cadence which is always important for that low-end consumer. But the most important that she continues to tell us through our survey work, Matt, is that we've got over 2,000 SKUs at $1 or less every day inside of our stores. A matter of fact, the team did a great job this year leveraging that low-end consumer work with our holiday performance. And as you think about holiday this year, we have 20% of our SKUs are at $1. We have 70% of the entire mix of holiday at $3 or less. So it's going to resonate pretty well. And I will tell you that we're off to a very nice start here in Q4. Donny Lau: And then in terms of your question on 2026 and long-term framework, Matt, we'll plan to provide more formal guidance on our Q4 earnings call in March. But overall, based on where I sit today, I do think it's fair to say that we're tracking towards the time lines contemplated in our long-term financial framework. And if you just take a step back at a high level, I feel really good about our ability to deliver against the long-term financial framework targets. I'm especially excited about the progress we're already making against some of the key targets. And so the way I think about it, Matt, is given all the great work the team has accomplished around our Back to Basics strategy, we've essentially stabilized the core, right, and the business is once again on really strong footing. Obviously, a lot of work to do still particularly around sustainability, but we're now able to execute better against certain what I call value drivers. And the great news is we're making great progress across many of these drivers. And I think that was reflected right in our strong Q3 operational and financial results. And so when you add it all up to me, we really are building momentum across many aspects of the business. We're ahead of schedule versus some of our initial targets that we laid out, and we'll continue to accelerate where we see opportunity. And so overall, I think there's a lot of reasons to be optimistic as we move ahead. Operator: Next question today is coming from Seth Sigman from Barclays. Seth Sigman: My question is on digital and the incrementality that you mentioned. Can you talk about the value proposition? What is appealing about your offering for the consumer for delivery today? And if you can, maybe frame the contribution to total comps growth from delivery, how is that starting to help? And then just taking a step back, how does this change the economics of the business over time? Obviously, it's an important part of the long-term margin story. And so I think it'd be helpful to sort of lay that out. Todd Vasos: Yes, I'll take the first part. I'll let Donny talk briefly on the economics. But Seth, we're very proud of where we are on our -- in our digital journey. Again, as we talked about our media network being in the very early innings, the second inning, I would tell you our digital journey in totality is probably just in the second inning. So we're really just starting our journey. But I would tell you that we're off to a really nice start. It was a very nice contributor again this quarter. But as I step back and think about our digital piece and what it looks like, when you think about the proposition for our core customer and quite frankly, for the customer just in general, what we're seeing early on is still very high incrementality rates of shoppers in the digital program, over 70% incrementality on how we're measuring it, which is a very, very strong piece, getting new customers. We're seeing much larger basket sizes through our digital properties, which really does, again, show that it's a different type of customer than our core, but also that we're starting to see more signs of a stock up versus what we normally see inside of our brick-and-mortar of a fill-in. So we feel good about that incrementality piece, good about the extra piece. Our real opportunity here is to continue to deliver to rural America. I think that's our value proposition at this point. And I believe we are off to a great start there. And by the way, we have a unique opportunity. We own rural America out there across the United States. And today, even in the second inning that we're in, over 70% of our orders that are done are delivered to an individual's front door in an hour or less, even in rural America. And that is a strong proposition that no one's been able to touch. And we'll continue to foster that and look at ways to even gain momentum across those properties. Donny Lau: Yes. As Todd alluded to, we're especially pleased with the incrementality. I think the other way to think about that is we're introducing new customers to the Dollar General brand, right? And the great news is, as they engage with us, they engage more across our digital properties, right, which makes the DG Media Network even more attractive to our brand partners, which is fantastic. And so what I'm really excited about is we're seeing good growth here, and it is sales and profit accretive, which is obviously fantastic to see. Operator: Next question is coming from Michael Lasser from UBS. Michael Lasser: Donny, welcome back. My question is on the comp. You've now settled into a few quarters in a row of 2% comp. Is this as good as it's going to get? And does it provide enough margin of safety looking forward to next year when SNAP could become a headwind and other factors are going to be at play in the overall environment? If that's the case, might you have to become more promotional, do more things like offer $5 off of $25 basket in order to drive the comp and you'll have to sacrifice some margin in order to drive the top line? Todd Vasos: Thank you, Michael. I'll start it out and have Donny wrap that up. But we feel great about the 2.5% comp. As I indicated in an earlier question, the comp was strong at 2.5%. We've been well over 2% now, a few quarters in a row. And as I think about Q4, we feel very good about the numbers we put out for full year guidance that would also portray a stronger comp in Q4. And as I think about the comp, the composition is so important, Michael. You know that. You've been with us on this journey for quite a while now, many years. And anytime we can turn a 2.5% comp into a 2.5% ticket -- I'm sorry, traffic number, that is a very strong showing, and it bodes well for what the future holds in comp. We're retailers. We're never satisfied with where we are. And I would tell you that we strive to turn in even higher numbers. But the great thing about how I look at this business is that we always look for sustainability, not a quick win on the comp side. And I believe that's how we've put this together and what we're seeing as we go forward. And then lastly, I would also tell you that from a promotional cadence perspective and what we see in the future, we believe we're uniquely positioned today and rightfully positioned. We don't see that changing at least in the near term into next year, we don't see a need to be more promotional. We think the way we have approached this with a great everyday price, a good balance of promotional cadence opportunities that we already have in place. And again, that very, very important $1 price point that we continue to offer the consumer puts us in a real unique position to drive comps. Donny Lau: Yes. And the only thing I'd add, too, Michael, is I also have -- we have a lot of confidence, right, in the 2% to 3% growth over the time period that we've outlined in the long-term framework. I think the great news is we're able to deliver against our long-term framework targets within this range. And I think the other thing to point out is the new stores and the remodels, they're expected to contribute about 150 to 200 basis points of that, right? And then on top of that, you layer in the growth we're seeing in new customers, trade-in, higher income, the playbook we have to retain them. I'll tell you, overall, we feel really good about our plans to build on our sales momentum, balance of year and beyond. And then we touched on this earlier, too, but on the margin line, overall, I'll tell you, I think we have more tailwinds than headwinds as we move into 2026 and beyond. Operator: Next question is coming from Simeon Gutman from Morgan Stanley. Simeon Gutman: Donny, my question is on getting back to 6% plus margins. Can you think about the construct? Should there be linearity to it? It sounds like retail media will be a big piece of it, but maybe not in the immediate year or so? Or is that the wrong way to think about it? Donny Lau: Yes. Maybe I'll let Todd touch a little more on the media network. I think we touched on it earlier. But at a high level on the margin side, Simeon, I'll tell you, I feel really good here also in terms of our ability to deliver against that margin target. We talked -- we touched on this a little bit, but there are a lot of drivers we have in place that we expect will contribute to margin expansion over time. I do want to note that while the focus is on the op margin line, right, gross profit obviously expected to be the more meaningful contributor to margin expansion over this time period. Within gross margin, we do continue to expect shrink and damages will contribute at least, right, 120 basis point expansion. We talked about this, but the great news is shrink is already improving at a faster and higher rate than we were initially anticipating. A lot of reasons to think we can deliver continued improvement over time on that front. In terms of damages, right, they're trending in line with our expectations. Overall, really pleased with that progress. On the DG Media Network, as Todd alluded to, kind of early days. We do think it's going to be a meaningful contributor over time. The great news is we're just beginning to really build momentum against our initiative here. And just remember there's a lot of other drivers in place that we expect to contribute as well, whether it's further reductions in kind of markdown risk and greater efficiencies across the supply chain, continued growth in the non-consumables business. We're seeing good growth coming out of private brands. And so overall, I'll tell you I just feel really good about our ability to drive continued gross margin expansion as we move ahead. Todd Vasos: Yes. And Simeon, I would tell you that is we do believe the media network as we go into the outer years of our long-term framework will be a substantial contributor. And the reason that we feel that way is we already are seeing nice large double-digit gains quarter-over-quarter or year-over-year. And I would tell you that as we pick up momentum on our native myDG digital platform, as those start to grow even more, what we start to see there is more first-party accounts which then translates and we're able to monetize that with our vendor partners. They see a lot of value in that because, again, uniquely positioned here because we own the data for lower end to middle-end consumers in rural America, where it is very difficult, if not almost impossible for anyone else to have replicated what we know about that customer and then how we monetize that over the long term. And for us, we believe that uniquely positions us to be able to deliver on that long-term framework as it relates to the media network. Donny Lau: Yes. And then just quickly, too, Simeon, just because we haven't really touched on this, but in terms of SG&A, just as a reminder, the goal here is really minimize the deleverage and I think we're really well positioned to deliver against this target as well. Just briefly, as a reminder, for this year, we do expect outsized incentive comp of approximately $200 million this year. So that should benefit next year as we -- I think it's fair to expect for us to plan for a more normalized rate there. But in addition, right, the accelerated remodel program is expected to mitigate future R&M expense. In the meantime, we do expect to drive additional efficiencies through our work simplification efforts. And so overall, we feel really good about our efforts on the SG&A front as well. And the one thing we really haven't spoken about at all is really AI, right? And I do think this provides a potential opportunity to maybe drive greater efficiencies and more sales as we move ahead. In fact, we recently hired a new Head of AI to accelerate our efforts here. And in the meantime, in the background, we are laying the foundation to enable AI at scale, right, with our IT modernization efforts. And importantly, what I would say is these additional efficiencies and potential opportunities for more sales growth that are associated with AI aren't captured in the framework today. Operator: Next question is coming from John Heinbockel from Guggenheim Partners. John Heinbockel: Todd, 2 related questions. Where do you think the greatest opportunity is on labor productivity? Because I don't think financially electronic shelf labels work in the Dollar Store setting or correct me if I'm wrong with that. And then secondly, do you think you can get shrink down to 1% or so without adversely impacting sales? Or there has to be a natural floor that you don't want to go below? Todd Vasos: Yes, John, thanks for the questions. Yes, I would tell you, I'll start when you think about the shrink numbers, we feel good about where we're headed here. We had set our sights on, around the 2019 levels of shrink. We felt really good about that. We are recalibrating to a better number because we're seeing even more opportunity. And I think you're leaning toward, and I think importantly for me to point out is that our SKU rationalization efforts have really produced some of this outsized shrink opportunity on the good side that we've seen so far. And it should be the gift that keeps on giving because we believe that as we move into '26 and stay tuned as we talk about '26 when we come out with our fourth quarter results. But rest assured that SKU rationalization and just inventory in totality will still be very top of mind in 2026. And with that, we believe that there's opportunity for even lower shrink numbers as we go forward. That's why I mentioned earlier that I feel that in that long-term framework we can benefit probably from even better shrink than we had first anticipated. And if nothing else gives us great assurances that we can deliver on that long-term framework. But stay tuned, a lot of time ahead of us, but we feel good about that. Operator: Next question is coming from Scot Ciccarelli from Truist Securities. Scot Ciccarelli: And Todd, I think you started to touch a little bit on this, but you've had almost 2 straight years of inventory declines. Obviously, there's a major working capital benefit. I have a 2-part question. One, can you guys size the positive margin impact that the lower inventory levels have had on both markdown activity and shrink? And then two, at what point do you need to start rebuilding your inventory levels? Todd Vasos: Yes, I'll take that. We're not going to quantify it, but I would tell you that what we've seen is -- and you mentioned it, we've intentionally gone out with SKU reduction. We've reduced over 2,500 everyday SKUs over the past couple years. We've got more to go, and I would tell you that any good retailer does this over time. We don't believe there's a need to rebuild current inventory levels. We believe we're in many categories at optimal levels, but we also believe there's a lot of categories that we can still optimize and that's what we'll be going after in '26 and beyond. So stay tuned and should benefit us on the shrink line and most importantly on the damage line as we go forward. The great thing I think we can all agree upon at this point is all those efforts have not hit us on the top line. As a matter of fact, we've continued to produce fill rates that are at some of our highest levels that we've seen in years here for the consumer. And obviously you see the 2.5% comp this quarter and the traffic number. And that traffic number is a real good indication that she has a lot of confidence to continue to come into Dollar General and find what she needs. So we feel good about where we are. We don't believe for a moment that we're finished and more to come. We think that this, it's a real opportunity for us and a strong opportunity on that gross margin line, probably even more so, as Donny indicated, than we even had first contemplated in that long-term model. Operator: Next question is coming from Chuck Grom from Gordon Haskett. Charles Grom: Welcome back, Donny. I have 2 questions, just one near term, one long term. On the near term, Todd, can you just amplify on the strong start to November and the more positive outlook for the fourth quarter? How much of that's traffic driven? Have you seen any improvement in ticket? And then longer term, there's a lot of concerns out there about Amazon and Walmart+, can you talk about some of the key tenets of your competitive moat in the rural landscape and how you can compete more effectively? Todd Vasos: Yes, Chuck, thanks for the question. Yes, I would tell you, while we're not going to give you a ton of color on Q4, I would tell you we are off to a good start, a great start, quite frankly, we feel very good about that even in the face of some of the SNAP benefit holdbacks due to the government shutdown. I'll give you a little color around that, which I think is important because SNAP as we go into next year may have some headwinds to it, but we still see OB3 as a complete in totality, a tailwind for us. And here's one reason on the SNAP side is what we saw was the consumer still needed to feed her family. She still has to do that. And she used cash as a tender with us in the -- during the shutdown time where she didn't get her benefit. And then as those benefits flowed in, we also then got the SNAP benefit on the second part of the month. So quite frankly was a net positive for us as we moved through November. And not only in those areas, but she also bought a lot of the non-consumable categories and holiday is off to a really good start as well. So feel bullish, but always keep in mind, a lot of quarter still left ahead of us with the important Christmas holiday selling season upon us at this point. But we feel, as Donny indicated, we have a fair amount of momentum heading into that holiday season and into next year. And then lastly, your question around our competitive moat. I tell you, we feel good about the competitive moat. We have spent years, Chuck, and many, many dollars, as you know, not only building, but strengthening that competitive moat in rural America. And with 80% of our stores in those small towns across America, very, very difficult to replicate, whether it be brick-and-mortar or whether it be on a digital basis. And again, we didn't sit back. We moved swiftly once we saw that our core consumer was starting to venture into her digital journey. We've always said our core customer, she's a fast follower. She'll get there, and she's starting to move that way. So we move that way. And the great thing is we move that way with a lot of intentionality and that intentionality was really centered around rural America and be able to deliver that customer an hour or less where no one else can touch that at this point. We feel that's a very strong competitive moat, and we'll continue to do that, but also build on our ability to have a very strong and sustainable brick-and-mortar business as well as that digital business as we go forward. Operator: Our final question today is coming from Spencer Hanus from Wolfe Research. Spencer Hanus: I just wanted to circle back on the remodel program. The updated lifts you provided was helpful, but just curious what you think the tailwind could be in year 2, if there's any tailwind coming. And then just in terms of the price gaps, you called out that 3% to 4% gap versus [ math ]. Have you seen any change there and how you guys are coming in from a pricing standpoint versus some of these other guys out there? Todd Vasos: Yes, I'll take those. I would tell you on the pricing piece that we feel very good about where we are, as I indicated earlier, not only our everyday price still falling within the bounds that our core customer looks to us to be able to provide her, but also around those promotional cadence. Our TPR program, temporary price reduction program, and our ad program, all deliver solidly to our core consumer and it's evident by those traffic numbers that we're seeing. And then lastly, I keep emphasizing this because it is such an important component to the low-end consumer and that's that dollar price point is so, so important to that consumer. And with that gives her a halo effect on price in totality within the Dollar General organization. So I would tell you that our price perception numbers through what we see in our consumer data is on the increase while others may not be. And we feel very strong about that positioning as we go forward. And then our programs around our new store programs, our remodel programs, we again feel very strong about where we're headed and the long-term possibilities that those hold, including our pOpshelf in Mexico banners. We feel good. We're in test and learn mode on those 2, but we're seeing very nice sales gains. The customer is resonating with each of those brands, but more to come there as well. Operator: Thank you. We reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
Hugh Duffy: Good morning, everyone. Thanks for joining us. Our presentation this morning will commence with me, Group CEO, Brian Duffy. I'll be taking you through our first half highlights, talking about our growth initiatives in the first half. I'll then be followed by our CFO, Anders Romberg, who will give you more detail and color on the numbers. Then me again to give you a bit more background on our growth pillars and where we stand, and then we'll open things up for your questions. So the top line numbers for the first half year that ended in October, our sales is GBP 845 million. For the half, we were up 10% in constant currency for the group, driven by a very strong performance in the U.S., plus 20% in U.S. dollars. U.K. was decent at plus 5% when we adjust for the store closures that we had last year. All in all, a good half year in terms of sales. In terms of profits, EBIT came in 6% ahead of last year at GBP 69 million in constant currency. Our leverage is 0.6x, EBITDA leverage to debt. Our free cash flow of GBP 48 million was 71% better than last year. Our expansionary CapEx, GBP 37 million following all of our projects. I'll be talking more about in detail as we go through. We completed our GBP 25 million buyback, GBP 14 million were actually going through in the first half of this year. At ROCE, we were up 80 bps at 17.3%. So our pillars of growth much delivered first half year numbers. Showroom investment, both new projects and refurbishment of our existing network. We spent GBP 37 million in total. We completed 8 projects in the half year. We've already done 6 projects in the start of the second half, obviously getting ahead of the holiday period. We applied disciplined hurdles in terms of payback when you look at all of these investments. And as usual, we have a strong pipeline going forward. Certified Pre-Owned has been a really strong business for us, strong both in the U.K. and in the U.S. Rolex Certified Pre-Owned has become our #2 brand in both the U.K. and the U.S. Non-Rolex Certified Pre-Owned is also going well, and clearly well established in this growing category. Ecom, we're delighted with our ecom results that we've had in the half year, up 17% in constant currency. We had good year-on-year growth in the U.K. and then very high levels of growth in the U.S. where we're coming from a smaller base, and having invested in resources in the U.S., both a localized team and a conversion to Shopify platform. So I'm very confident about ecommerce and the prospects that we have for growth. Luxury branded jewelry, clearly, our #1 focus is Roberto Coin in the U.S. where we had a very strong half year at plus 16% in wholesale. And everything about Roberto, we love, there's been a great response to the campaign that we've done with Dakota Johnson. We'll be opening 3 boutiques in November, December and January, and we've launched a new website on Shopify. Here in the U.K., Mappin & Webb Luxury Jewelry Boutique in Manchester, St. Ann's area, we got opened successfully. In terms of acquisitions, our focus clearly last year has been on Roberto Coin and Hodinkee in the U.S., both going well, both really well positioned for growth. And of course, we continue with our discussions and opportunities on further acquisitions in the U.S. market. Client-centric excellence, something that we've always done at Watches of Switzerland Group. The opening of Rolex Bond Street last March really gave us the opportunity of stepping up our focus on clients. We did an extensive training with our team there that allowed us to redefine our Xenia program and Xenia 2.0. And it's working very, very well in Bond Street. We have a Net Promoter Score, as you can see, of 94.5%, which is very, very high. And we're now taking this program and applying it through all of our store network. Additionally, we stepped up our events program, both here in the U.K. and in the U.S. really focusing on our top clients and collectors, and more about that later in the presentation. Now over to Anders. Lars Anders Romberg: Thank you, Brian, and good morning, everyone. I'm Anders Romberg, CFO for the group, and I'll now take you through the financials. Starting with the income statement. This is presented on a pre-IFRS 16 basis and excludes exceptional items. The reconciliation to the statutory numbers are included in the RNS. Our revenue was up 10% versus last year in constant currency or 8% at reported rates, driven by strong U.S. performance. Net product margin for the half was 90 basis points down versus last year, reflecting adverse product mix and a reduction in brand margins due to U.S. tariffs. Our adjusted EBIT for the half was GBP 69 million or plus 6% compared to last year at constant currency or 4% as reported. This gave an adjusted EBIT margin of 8.1%, down 30 basis points from last year due to the net margin rate decline as just mentioned. This was partially offset by leveraging showroom costs and overheads. The effective tax rate was 27.5% for the half, a reduction to last year driven by lower levels of non-tax-deductible items. Our adjusted EPS was 19.6p, an increase of 8%. Statutory profit before tax of GBP 61 million increased by 50% on last year, as prior year statutory profit was impacted by noncash in parallel. With statutory basic EPS improving by 57% or 6.9p per share, benefiting from the share buyback program, which completed this year. Looking at the breakdown of sales in the half, the U.S. was the biggest growth driver. U.S. retail was up 21% in constant currency with robust demand across brands and categories, supported by the expansion of our showroom network. In the half, sales was driven by good volume growth as well as some pricing on average about 4%. We're pleased with the performance of Roberto Coin wholesale with sales growth of 16% in constant currency. There's been a positive market response to new product and the advertising campaign that we launched at the start of the year. U.K. sales grew by 2%, but was impacted by the showroom closures we made around year-end last year. Adjusting for showroom closures, new figure with 5%, a resilient performance in a challenging market, underpinned by the stability of the luxury watch segment and the success of our flagship boutiques. Across both markets, our ecom business continued to do really well and grew by 17% in constant currency. The Rolex Certified Pre-Owned program is doing well and is now the group's second largest brand in terms of revenue. The first half adjusted EBIT came in at GBP 69 million or plus 6% on last year at constant currency. Adjusted EBIT margin was 8.1%, which is 30 basis points down on prior year due to product margin rate decline, partially offset by leverage of fixed costs. The U.S., including Roberto Coin wholesale is the major growth area. And on 48% of group sales, it represents 59% of adjusted EBIT. U.S. retail had product margin contraction due to U.S. tariffs, but this was offset by leveraging the fixed cost base. In the U.K., product margin was impacted by adverse product mix with limited leverage on cost base. Roberto Coin wholesale had an increase in marketing costs due to the production of our new advertising campaign. Product margin remained stable over the half. As shown, Roberto Coin wholesale is quite accretive for the group's profitability. We've delivered strong free cash flow in the period of GBP 48 million, which was up 71% from prior year. Free cash flow conversion was 53%, and I'm expecting the free cash flow conversion for the year to come in between 65% and 70%. Adjusted EBITDA was GBP 91 million, an improvement of 4% year-on-year. In constant currency, it was up 7%. The working capital outflow was GBP 30 million represents the seasonal build of stock for the holiday season. We expect the working capital build to unwind in the second half in line with seasonal trends. We continue to invest in the showroom expansion and refurbishment program, which drives long-term sustainable sales growth. In the first half, our expansion or CapEx was GBP 37 million, and our full year expectation is between GBP 65 million and GBP 70 million. The final payment for the Roberto Coin Inc. acquisition was also made in the half, and we completed our GBP 25 million share buyback program. Our balance sheet shows continued strength. Inventory increased to GBP 503 million, an increase of 5% versus last year, reflecting the higher average unit cost of stock from gold prices in U.S. tariffs. Underlying terms continues to improve. It's important to remember that there is no obsolescence risk in the inventory and very low cost of storage. The reduction in payables is driven by timing of supplier payments. Our net debt was GBP 112 million at the end of the half, a reduction of GBP 8 million from prior year. This gives a net debt to adjusted EBITDA leverage of 0.6x excluding leases. Just a reminder of our capital allocation policy, which was set to optimize capital deployment for the benefit of all stakeholders focusing on long-term growth. We continue to prioritize growth in our business through investment in our showroom expansion. We expect to spend between GBP 65 million and GBP 70 million in this fiscal year, with GBP 37 million spent in the first half. Second is, strategic acquisitions are a key pillar of our growth strategy. Acquisitions must deliver return on investment in line with our disciplined financial criteria within an appropriate time frame. We'll continue to maintain balance sheet flexibility and to be opportunistic for investment in acquisitions and showroom developments. Surplus capital above and beyond the requirements for these investments will be returned to shareholders. We were pleased to complete the GBP 25 million share buyback program in the period. The second half of the year has started well. We're trading in line with our expectations and are well-placed as we enter the holiday trading period. Today, we are reiterating our full year guidance of 6% to 10% revenue growth at constant currency with an adjusted EBIT margin percentage flat to 100 basis points down on last year. As noted previously, capital expenditure is expected to be between GBP 65 million and GBP 70 million. Our guidance reflects that FY '26 is a 53-week year. It includes visibility of supply of key brands, and it reflects confirmed showrooms, refurbishments, openings and closures, but it excludes uncommitted capital projects and acquisitions. With that, I'll hand you back to Brian. Hugh Duffy: Thank you, Anders. Just again, a headlines of our growth drivers for our business, showroom investment, Certified Pre-Owned, ecom, luxury branded jewelry, focus on acquisitions and clearly, our focus on our clients. In terms of showroom investment, looking firstly at the second half of last fiscal year that clearly benefits this full year. The center piece of our program from the last fiscal year was obviously the opening up the flagship Rolex Boutique in Bond Street. It's been a great success. It's exceeding our expectation, and the client feedback about it is absolutely fantastic, 4 floors of retailing, 1 of Certified Pre-Owned, then we have a service area and then 2 floors of regular retailing. The team are fantastic. The client feedback really couldn't be any better. Looking at some of the other projects that we did in Tampa, Florida. We relocated to an enlarged space, and that really is the best space in the malls between LV and Tiffany and a wonderful presentation of Rolex and the other brand partners that we have there. Our Betteridge store in Colorado and the ski resort of Vail, we again took the store next door, allowing us to expand the presence of everyone there, including Rolex, as you can see, beautiful alpine design. At the bottom there, you can see Lenox in Atlanta, Atlanta, Georgia. This was previously a multi-brand space for us with a very nice Rolex shop-in-shop. We were so successful with Rolex that we agreed to convert the entire space to Rolex boutiques, now 3,000 feet. It's fabulous and really doing good. We love the town of Atlanta. And I'll show you later what we did with the brands that we effectively displaced in the multi-brand. Top right is Jacksonville, Florida. We had come out of Jacksonville because of the location wasn't ideal. It took us a bit of time to get back in again, but it was worth the wait, as you can see from that store top right that we opened in February. Bottom right is our first venture into Texas. We love Texas as a market and as a state. We had bought a store that didn't have Rolex or Cartier and other top brands, and we now do in this wonderful execution that we have of Watches of Switzerland that opened back in March. Looking then at the first half of fiscal year '26, we opened this beautiful house, the Manchester in King Street. It's spectacular. It's a joint venture with our partners from Audemars Piguet. We refurbished and expanded in Goldsmiths Kingston. The next one along is the oldest Rolex retailer in the world in Newcastle in Blackett Street, which we refurbished and expanded the retail space in July '25. That's spectacular. The multi-brand in Mayors in Atlanta, which we displaced with the Rolex Boutique, we effectively opened a multi-brand directly opposite as you can see here in August '25. Also in August, Mappin & Webb Cambridge, we expanded in September '25. Merry Hill in Birmingham, again, we expanded the new luxury jewelry boutique in St. Ann's opened in September as did relocation of our Goldsmiths in Peterborough. So the second half, we've been very busy with the opening in the last week of October in Southdale, Minneapolis. A beautiful store, doing well. We've relocated our store in Sarasota, Florida in November. Back here in the U.K., Goldsmiths Oxford, we expanded and converted in November '25. Mappin & Webb Birmingham actually opens this week, an expansion and a conversion. Bottom left, also opening this week as the new multi-brand space in Terminal 5 in Heathrow, directly adjacent to where Rolex currently is. I'd mentioned already the mono-brand stores for Roberto Coin, one opening in November in Hudson Yards, New York in December, in fact, this week, in Las Vegas, and then Miami will open in January. And then in my hometown of Glasgow, we are doubling the space of the Rolex boutique. Work is underway and that should open hopefully, early summer '26. And then bottom right, will be the new Terminal 5 location for Rolex. Work is underway here again in terms of design and planning, and our hope is to get this open also for summer of '26. It clearly is a multiple in terms of size and impact versus where we are today, so that will be spectacular. Certified Pre-Owned continues to do very, very well for our business. We're now well established in this category. We've managed margin well throughout this time and our 2 years into the program. We run all of our Rolex stores in the U.S. We run 26 showrooms in the U.K. And as we continue with our various projects, we will be in all stores in the U.K. So a lot more to come from Rolex Certified Pre-Owned. Ecom, we feel very good about the decisions that we've made. We're up 17% as a group overall. We have a new website and we're converting all of our websites to Shopify in the U.S. Watches of Switzerland is up and running on Shopify. And Roberto Coin up and running on Shopify and the other phase here will happen in the months ahead. Within Pre-Owned, we can offer Rolex Certified Pre-Owned, as you see here, which clearly is an important destination for the Rolex shoppers. You can also see Cartier here, which is our best-selling brand online, both U.K. and U.S. And then in the middle, you can see Hodinkee exclusive that remain available online in the U.S. We've also added other brands as we've gone, and there's a lot more to come from ecom business, both here in the U.K. and particularly in the U.S. Roberto Coin, we love everything about the brand. And you see here some great images of Dakota Johnson, the campaign that we launched in summer and really only kicked in, in the fall and holiday season that we're in now, but great response to the campaign both from end clients and from our wholesale customers. We've been working with the teams in the U.S. about expanding our space in Roberto Coin in-store, both in top department stores and in top independent stores, and that's going very well. Our designers and architects in the U.S. worked with our teams in Italy to come up with a new showroom and shop-in-shop designs, which look great. We've expanded the presence of Roberto Coin in our Mayors stores, which I'll show you shortly. We have the new website and we're also working on opportunities of product merchandising. So a lot of growth initiatives for Roberto Coin. This is to show you how Roberto Coin was presented on the left-hand side in the Mayors stores. It was a great success in Mayors, it was very productive and going very well. But having now moved it to the space, you can see you on the right, that clearly is a huge elevation of the brand. We've actually increased productivity and we've more than doubled sales. So this is good clearly for our business overall, but it's also good as examples that we can now take to our wholesale partners and look to introduce shop-in-shops in other stores. Mono-brand stores that we are in the process of opening. Top left is Hudson Yards, New York, which has opened, has been open for 2 weeks. All going well. The right-hand side is the Forum Shops and Caesars in Las Vegas. We'll open this week. At bottom left is Miami Design Center, which will open in January. This is the website that looks fantastic, very, very user friendly, very easy to navigate, very easy to find your product or to find out information on the brands, great videos both of Dakota Johnson and great videos from Roberto himself about his inspiration and background and product clearly. And there's been a fantastic response to this new website. The luxury branded jewelry boutique in St. Ann's, we opened in September. We had a great event in October, as you can see from the image on the left. It's a fantastic location, listed building and a great response from our clients. On the left, you can see how the Rolex store looks already for Christmas time, and Bond Street looks really spectacular and continues to trade very well and ahead of our expectations. We've been doing wonderful events there, the highlight of which was an event with Roger Federer. He really was a fantastic ambassador of Rolex, really spending time with our clients and a great representative of the brand and our clients were thrilled to be there. You can see the scores that we're getting from our client feedback, 94.5% Net Promoter Score. And of the clients that respond to your questionnaire, 98% say that we either met or exceeded their expectations. By far, the majority are saying we actually exceeded the expectations. Other events that we've done throughout the country with Rolex, and you can see they're pretty spectacular. Our clients love to be there and it really is all part of our client excellence and client-centric focus that we have. Other events, we launched fairly quietly at the AP House in Manchester with our partners at AP leading up to this event that we had in October. This space is so perfect for hospitality and events, as you can see, and really great evening. An example here of us taking over the Aventura store with Roberto Coin, bringing our top jewelry clients along. It was a hugely successful event and it's our sales teams or sales colleagues in the U.S really at their best. And another event in New York in Soho, where we launched the Porsche exclusive product. We did it with Ben Clymer effectively hosted the evening, and we had none other than Orlando Bloom there who's a great enthusiast both for watches and for Porsche, a really great combination. But it was a fantastic event, and we really had to control the number of people that were coming, huge interest and a really great example of us using new partners and connections with Hodinkee. So overall, we have strong momentum across the group. It was a standout performance in the U.S. at plus 20%. Our model is clearly working and approach to our clients, our design of stores and our training of our great teams. Our registration of interest list continue to grow with a high conversion overall. So no change on that. Certified Pre-Owned, clearly well established in line with the ambitious expectations that we had presented to the market before. Ecommerce, very strong U.S. investments that we made are clearly driving a very strong sales performance in the U.S. Great progress with Roberto Coin, a lot more to come. Great progress also with our friends at Hodinkee and we are in the process of developing some important growth initiatives with them that you'll hear more about in our fiscal '27. Great delivery, strong delivery of our catalog of projects with a lot more in the pipeline. We're well positioned for the holiday season. We're off to a good start with the 5 weeks of November and now behind us, and we'd be happy to reiterate our guidance. So let me pass it over for your questions. Operator: [Operator Instructions] Our first question this morning is from Chris Huang of UBS. Chris Huang: It's Chris from UBS. And I have 2 questions. The first one on your FY '26 sales guidance. I mean you commented that you started the second half in line with expectations, and you generally feel good about the holiday trading period ahead. So if we take the midpoint of the sales guidance at 8%, if my math is correct, that would imply H2 to be around 6%. But when I think about the moving blocks within the group, in theory, you should no longer see any meaningful impact from store closures in the U.K. The momentum in the U.S. seems to be still solid double digit. And at Roberto Coin, I would expect the full benefit of the price increase you did in October to help the numbers in H2. So with all of this in mind, and of course, we just started H2. But I'm just wondering if you think there could potentially be some upside for the year? That's my first question. And then secondly, generally on operating leverage. If we really look at your H1 P&L, you actually showed quite impressive OpEx leverage under control, driven by the U.S. retail channel. So I'm curious to know the level of growth you would need generally to start to see fixed cost leverage. I assume it's going to be quite different in the U.K. compared to the U.S. given the product mix. So if you could provide some regional color, please, just to help us a bit more on modeling. Hugh Duffy: Yes. Thank you, Chris, for your questions. I'll take the first one, and Anders will answer the more complicated one on the P&L and leverage. We feel really positive about the second half that after some uncertainties around the U.K. consumer still by no means upbeat and the budget didn't help. So we'll see how that might affect behavior in the Christmas period. Similarly, in the U.S., as we've reported to the market before the consumer seem to ride over the price increases that happened over late summer. But we are moving into the more gifting season. There might be a bit more price sensitivity there. We don't have allocations yet there on a calendar year basis. So we have 4 months of the fiscal year in which we, as yet, don't know what the allocations will obviously be from our key partners. So there's still a bit of uncertainty around there. We are delighted that the tariff situation has improved from the 39% down to the 15%, but that's still a reasonable increase on landed cost of product that's coming in. And again, what might be the response from the brands. And at this point, we don't know that either. So that level of uncertainty is around. Having said that, we have started the season well and we're going to it with good momentum. But putting it all together, we feel that the prudent thing to do is confirm our guidance at this point. And obviously, we'll look forward to updating the market post Christmas. Lars Anders Romberg: In terms of the operating leverage question, we haven't ever been that explicit. But if you look at the leverage that we get historically on our cost base, it's been the factor that's been driving our profitability over the last decade actually, and we'll continue to do so. Product mix is a factor. Obviously, the product margin is the highest cost we have in the business. So the component of Pre-Owned coming into has been somewhat diluted as a percentage. Cash-wise, it's absolutely fine. So in terms of our cost base, it's driven by inflation, obviously, and space expansion and also the 2 major factors, which were partially offset by becoming more efficient in our operations. So I'm not going to say what sales growth we need in order to get the leverage. Operator: Next question is coming from Richard Taylor from Barclays. Richard Taylor: Yes. I see there were some comments recently from the Rolex CEO at the Dubai Watch event regarding the relationship with retailers and how they -- basically, they have no desire to change that. Just keen to understand now that a bit of time has passed since they bought Bucherer, how you would observe Rolex's behaving with regards to their retail partners? I know there's a bit of change in the German market recently, for example, but any insights you may have more generally and obviously, the U.K. and U.S. markets in which you operate will be helpful. Hugh Duffy: Okay. Thanks, Richard. We obviously bet as everybody did, the comments that were publicized that Jean-Frédéric Dufour made at Dubai Watch week. No surprise to us because it's effectively what we said when the acquisition was announced and we did an RNS at the time that was approved by Rolex and the news then was that this wasn't strategic, it was the acquisition was made for other reasons. And nothing would change with regards to how Rolex were managing partner relationships and product allocation and projects. And our experience since then has been exactly that. There's been no change. We obviously work hard at developing our partnership and relationship looking at a number of projects that is always very objective. The discussions that we have and everything has carried on exactly as it was, and it's what we've been consistently seeing and it's what we've consistently experienced from that relationship. So obviously a long, long relationship for our group, get back literally over 100 years. And it's a big part of our business. It's our most important partnership, and I'm delighted that we continue to make the progress that we do and, I'd say, honestly, our relationship has probably never been so good. David might want to comment on the U.S. where he manages the relationship directly. David Hurley: I mean, again, the conversations that we had about this were when the acquisition happened, we've never had it since we've seen -- they've been consistent always in the way that they deal with us. And we've had an incredibly strong pipeline of refurbishments expansions over the last year and some new stores as well like Southdale in Minneapolis that we just recently opened, that's performing very well. Locations like Legacy West in Plano, Texas, where we didn't have Rolex originally. And we continue to have a strong pipeline of projects going forward. So no changes whatsoever. Operator: [Operator Instructions] Now I'll go to Jon Cox of Kepler. Jon Cox: Congrats on the figures. The print looks pretty good. A couple of questions for you. Just starting off with the U.K., and it's been pretty soft for a couple of years. I'm just wondering what your thoughts are going forward. And if you maybe believe that some of the tourists that used to come into the U.K. buying watches have gone for goods with the so-called tourism tax? Or would you be confident that eventually the U.K. should bounce back if you just look at historical trends when for a few years, the U.K. was amongst the strongest growing markets, maybe some sort of post that boom period hangover, and we should start to see a recovery at some point. That's the first question. Second question, just on the T5 Heathrow, just wondering on the sort of size of that. And well, from my own experience, going through airports, ever trying to go into a Rolex store, the room was empty anyway. And even if -- it's very difficult, obviously, we're trying to leave a name at a Rolex store at an airport. Just how we should think about it? Should we think about it as a decent sized store opening in the U.S.? Or is it anywhere near to Bond Street? Or just to give us a bit of a feel what may be happening there? And then the last one, just on -- you keep saying Rolex CPO is now the second biggest brand. I'm just always scratching my head trying to work out how much Rolex and Rolex CPO is a combo of your business. And then in addition, you have Roberto Coin where clearly jewelry is a very strong business at the moment. Just trying to get a figure or some sort of indication, Roberto Coin, Rolex, Rolex CPO, is that close to 70% of your business now? Hugh Duffy: Thanks for your question, Jon. A lot there. The U.K. market I'd describe as having come through a real volatile period. You described it as soft. But if you look back at the kind of tail end of the second half of '23, I think we described it as a bit worse than soft, very, very high price increases. The value was what it was. But from a volume standpoint, the market really was impacted in a way that we had never witnessed before. We've come beyond that. I think the brand is very typically -- they're ultimately very pragmatic and how they look at our market, pricing has been modest, new product introductions have been good. And we see the market as very recognizable, very much normalized. We were plus 6 in the second half of last year, plus 5 in the first half of this, which we regard as clearly very, very stable and consistent. With regards to tourism, obviously, we're way down in tourism, but if you compare us to fiscal '19 or fiscal '20 when the VAT-free was effectively removed. So it's in our base. It's on our comparison numbers. We are 95% domestic in terms of our sales. So that's the category, and I think we've done amazingly well to have obviously refocused our business on domestic successfully. And our view has been consistently and remains VAT-free will come back at some point. I think the arguments on behalf of it coming back are really compelling on behalf of the U.K. economy and the treasury. And if the government keeps saying as they do that they want to support growth, then there's a gold nugget, excuse the pun, lying on a beach somewhere that they could pick up and really have an impact. So we continue to support lobbying and trying desperately to get the government to take a more serious look at it, which I do believe they will do it at some time, but hard to predict when. The new space in T5, can't confirm exactly the space. We're still working with Rolex and Heathrow. It's a very, very prominent location. It's a multiple of size versus where we are today. It's double height. It's really going to be very, very impactful. We make some product available to your point of walking into empty stores. I want to make sure that, that's not the case for this beautiful store we have. It's not quite the case today either with Rolex in T5 and T2. So we're working through all that detail, but it's going to be a really nice store. I think really part of what is a major refurbishment and upgrade that's happening with the luxury retail in T5. CPO is our second biggest brand. We had ambitious goals that we've told the market about for developing the CPO business, and we are achieving those goals, and we're only 2 years into the program. So let's see how big it becomes, but we're learning, we're developing, we're expanding presence. We're putting in more branded areas. I think very importantly, our salespeople are getting very good and very experienced at selling pre-owned. So we feel very good about it. It's a huge market in the U.S., obviously, and it's a big and growing market in the U.K., and we have a very strong position in both markets. Roberto Coin is our big focus in terms of getting into the branded jewelry category in a strong way. It's a huge market in the U.S. and Roberto is a great brand with absolutely great product. And we've got some ambitious plans as to how we're going to develop Roberto in that market. And yes, we'd expect it to become a bigger proportion. But we're not giving any numbers, and we're not obviously talking beyond the current year where we've reiterated guidance. But we will be updating the market in all these growth initiatives in due time. But so far so good in them all. Jon Cox: I want to just follow up on the Rolex CPO. I seem to remember that long-range plan from a year or so back. I think is 20% of Rolex will be CPO in the U.S. and 10% in the U.K. by FY '28? You say that you're ahead of plan. You must be pretty close to those figures. Hugh Duffy: What we said and where we are is that we are in line with the ambitions of that plan, and it was an ambitious plan and delighted that we're tracking very well with the expectations that we had of it. We will update the market in due time about all of our growth initiatives, as I say, so far so good in them all. David Hurley: The other thing I would say about the U.S. numbers for the first half as well is that it wasn't just Rolex or Rolex CPO that supported the growth. You have the other part of our vintage business, but you've also got brands like Cartier, that's been our fastest-growing brand now for the last 2 to 3 years, has a really healthy mix in terms of the sales across all brands and across all price points in the U.S. Jon Cox: You mentioned updating the market. Can I just push you a little bit on when that may be? Hugh Duffy: We don't have an exact date yet. We have a lot going on. We are working hard with our new colleagues at Hodinkee and Roberto Coin, for example, and a lot of other projects. But as soon as we have a date, we'll obviously update the market, but we don't have an exact date yet. Operator: Next question will be coming from Adrien Duverger of Goldman Sachs. Adrien Duverger: Sorry, can you hear me? Thank you so much for the color you provided so far. I have 2 questions, if possible. The first one would be on your -- on the space contributions. So we're seeing an exciting pipeline of projects with both openings and relocations. I wonder if you could help us understand the expected contribution from that space growth for this year and over the midterm in the U.K. and in the U.S. And my second question would be on the margin outlook. So you reiterated the target for adjusted EBITDA margin to be flat to minus 100 bps. Could you help us with the different building blocks implied in there? Because I know that there must be some impact from some of the manufacturers taking some margin points from retail partners. There must be some impact from relatively recent acquisitions with Roberto Coin and Hodinkee. And also if you could help us understand what we should expect in terms of seasonality for this year? Lars Anders Romberg: In terms of our space contribution, it comes down to very much allocation of products from some of our key brands, actually. So we never give space. It's less relevant in our category than you will find in most other retail formats. In terms of our margin guidance for the year, obviously, we haven't seen how some of the brands are going to respond to the tariffs. We've seen some actions taken, and we've sort of modeled out various scenarios of pricing versus margin contraction versus some pricing and no margin contraction. And I think we modeled through every possible scenario we could think of. And at this point in time, we feel that the margin guidance that we've given still holds water. We're up against some tougher comps in the second half in the U.S. We did have a few big boxes opening up. So we had Lenox in Atlanta. We had obviously Plano in Texas, and we have Jacksonville come on stream. So the comps in the second half in the U.S. market is going to be a little bit more tough. We are going to continue to spend a bit more on marketing throughout the year, which we think is driving new clients into the franchise. So it underwrites our strategic growth plans. So all good. Ecommerce in the U.S. has been off to a really, really good start and is growing exponentially. However, we're buying traffic in that sector in order to sort of reach the scale where we started to get the drop-through in terms of margin. So it's somewhat dilutive as you go through that buildup phase. And once we hook in the Hodinkee traffic, we expect that channel to become accretive. Operator: Next question will be coming from Piral Dadhania of RBC. Piral Dadhania: I have 3 fairly short ones. The first is on the U.K. consumer in the context of your current trading commentary. Could you maybe just give us an indication how the U.K. consumer has responded post the budget from a week or two ago? Have you seen any inflection or change in consumer behavior, change in traffic trends, change in conversion rates post that -- the announcement of the U.K. budget? The second is on capital allocation. Maybe just a word on pipeline for M&A. You spent -- your acquisition spend in the last 3 to 4 years has been fairly sizable. It does feel like you're maybe deemphasizing the contribution from future M&A. I just wanted to understand where the priorities may be in that context and whether we should expect a step down in acquisition spend in the next year or two? And if not -- and if that is the case, excuse me, then should we maybe also expect a new share buyback plan to be put in place as you think about the most efficient uses of your cash flow? And then the third and final question is just on feedback in relation to the multi-brand Mappin & Webb jewelry store concept, the multi-brand one. I think it's been a good few months now. Could you maybe just give us a couple of words on how that's progressing and what learnings you can take away from that? Hugh Duffy: Okay. Thanks for your questions. U.K. consumer, November has been fine. And like everybody, we're concerned about the budget and the delay of the budget certainly didn't help the mood of the country by any means. But post budget, it has not got any worse, I would say. And as we've reported, we've started the season well. We have November behind us and the consumers behave in a normal fashion. We did anticipate maybe a bit more interest in value. And so when we planned for the season, we had a slight nuance towards offering a bit more value, particularly online, and that is driving some good performance overall. So probably a bit more reassuring than might have been the case post budget, and the consumer behaving normally, and we are happy with the business that we started the season with. In terms of M&A, just to give you some numbers, I mean, at the end for fiscal year '25, business split down in the U.S., 37% of the business was what we bought, then 36% was us having double the value of the acquisitions. So the sales of the acquisitions that we had made and then the balance was effectively from new projects. So as we go forward, over $1 billion now in the U.S., obviously, as we go forward, acquisition remains a key part. We love what we've done with Roberto Coin and Hodinkee, great people, great businesses and great complements to our portfolio. And we have big plans that we'll look forward to updating the market on when the time is right. And we remain active on strategic acquisitions. We have always had and we still do have active discussions that are going on. There's a bit more realism or pragmatism, if you like, with regards to valuations. And we've got a bit confident that acquisitions will be a key part of our growth in the U.S. market. Share buyback, Anders. Lars Anders Romberg: Yes. I mean, obviously, as you've seen, we're guiding towards GBP 65 million to GBP 70 million of CapEx in our existing franchise and new projects during this year. And that whole reset of our network is going to come towards the tail end once we finish off our next fiscal year. And as a result, the need for capital expenditure in that network is going to decline as a percentage of sales as we go forward. So yes, I mean, we always look at deployment of our capital structure, and we are a growth story, and we continue to focus on that. In case we can't find any way to deploy our funds meaningful with good returns, then yes, share buybacks would be an option. It's something that we always discuss with our Board. Hugh Duffy: And your last question, so we love the stores that we opened in St. Ann's, the Mappin & Webb branded jewelry store, a fabulous team that we appreciate. Our team did a great job, I think, in recruitment and training of the team, great client response. Sales are building and obviously, the month of December is going to be very important. But clients love the store. They love the downstairs area where we've got hospitality and client engagement, and a fantastic portfolio of brands, many of which have never been available outside of London before. So we feel very good about it. Operator: We'll now move to Kate Calvert of Investec. Kate Calvert: A couple for me. First question on Roberto Coin. You mentioned a positive response to the new ranges. Could you give a bit more color on what has gone down well in the new ranges? And I'm just wondering, how current is the stock in the wholesale channel? I mean is there much old stock in there? Or is it quite clean at the moment from your perspective? And I suppose I'm quite interested in your sort of slightly wider thoughts on the U.S. jewelry market running into Christmas. I know it's a slightly different offer to Signet, but Signet were recently a bit more cautious on outlook for the holiday season. So I was wondering if you could give a bit more color on that. And then my final question is on the U.K. that you did see quite a negative mix effect from pre-owned growth, I believe. So as you continue to roll out the Rolex and Pre-Owned should we expect that negative effect to continue into FY '27 or are we past the worst of it? Hugh Duffy: Okay. Okay. Do you want to comment on there? David Hurley: Yes. I mean first of all, in terms of the ranges or what's working, quite honestly, everything has been working at the moment in the first half of the year. We've got such a wide range of products and price points. And we're proving it in our own stores first with the space expansions that we've done and elevating of the brand more than doubling the sales in the first half, and we've seen a great positive response to new products that's gone out there as well in terms of aging of product. We have no concerns in that area at the moment, either in our stores or with our partners. And it's just -- we're really still in our infancy in terms of what we can do with Roberto Coin. So we've proven it first in our own stores, but we've more than doubled the sales, and there's a lot more to do just within our own multi-brand environment. We've opened up our first store in Hudson Yards. We open up our second tomorrow, I think, in Vegas. We're going to continue. And I think it's an open door with some of our partners to expand the brand within the wholesale network as well. It just takes time in terms of green spaces and then building out the shop-in-shops. We've only just launched robertocoin.com. We've seen a positive response to that as the replatforming of that from the old system to Shopify. So a great response to the marketing campaign. So we're very, very optimistic about the brand. I think going through the holiday season, but more particularly in the longer term as we roll out our strategy. Hugh Duffy: Yes. And the package that we are able to bring to the market are putting great emphasis on the collections that Roberto and his team have designed, the 2 biggest collections are Love in Verona and Venetian Princess, and obviously a good featuring of them in the advertising campaign. So you naturally sell in more on the back of that in the sell-out of those collections, that's also super positive. The last thing is we have been in a very different market to Signet, I would say. And the luxury branded jewelry market continues to be -- it's the biggest one in the world per capita and in the absolute. We're delighted to be a part of it, and it continues to be very good. So as we've continually said, so far so good on the season, and we are reasonably upbeat about December. Lars Anders Romberg: In terms of the U.K. mix question, Kate, obviously, yes, as we've accelerated sort of our presence in the pre-owned business that had an adverse impact on our product margin. I think the step-up that we've seen has been extraordinary in the U.K., which is positive is what we wanted. So I think it's going to slow down in terms of dilution. The offset against which we're doing really well in some of our strategic partner brands. So we've put more emphasis on a brand like Tissot for instance, which is margin accretive. And we see some really good new product initiatives coming through in some of the other brands like TAG. So I think the dilution impact on product margin is going to stabilize. Operator: [Operator Instructions] We'll now go to Melania Grippo of BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got 2 questions. One is on your waitlist. I was just wondering if you have seen any changes in terms of consumer behavior and customer signing on it? And my second question is instead on price increases for 2026. What's your expectations in terms of brands increasing their prices for both watches as well as jewelry? Hugh Duffy: On -- sorry, the first question was on registration of interest list. No big change to be honest. In the U.S., we continue to, net-net, add names overall and pretty much all of the business if we so desire in the U.S. could be going to people around the list. I think as we've reported to you before, we have some products in the U.K. that are not fully dependent upon the list. We make some availability of our product in the stores, somewhere between 15% and 20% of the sales that we're now doing is from stock that's in-store, which is a very healthy trend as far as we are concerned. So I mean, demand overall for the brands that we manage through our waitlist remains very, very strong overall. Price increases, yes, we've got to see what the brand response is going to be to the 15% tariffs. I think it's reasonable to assume that the pricing is going to be an element of it. The 15%, if you're going to recover it all through our retail pricing, it'd be somewhere around 7.5%, 8%, something like that. We really don't know at this point. But I think it's reasonable to assume that pricing is going to be there, will it all be in the U.S. or will it more likely, I think, be a spread in different markets. I think probably that's the case. But we don't assume any pricing in our numbers going forward. But yes, my bet would be that will definitely be pricing activity as it always has in January, but it will take into account the tariff situation. Operator: As we have no further audio questions, [ Scott Lichten ] , we're going to call over to you for any questions submitted by webcast. Thank you. Unknown Executive: Thanks very much, George. And we've had a few questions submitted through the webcast. First is from Deborah Aitken from Bloomberg. The question is, U.S. markets, profitability has grown quickly, considering the company is still deep in restructure and expansion. Can you give us your midterm view on profit potential from the U.S. market given it's less mature and with jewelry still to build its share in your total revenue mix there? Hugh Duffy: What I would say is we really have moved beyond the period of having to build our organization resources in the U.S., support from the U.K. We clearly have done an amazing job to go from pretty much nothing to the $1 billion business that we have today. We have invested in resources with our head office down in Fort Lauderdale and offices up in New York, and a very obvious example of that clearly is localizing the ecom team that we were previously supporting out of the U.K. But we've really added to the resources and the infrastructure and feel very, very good about how the business has been managed on a day-to-day basis. We've obviously got our best man on here, the guy to my right. But they're really doing a great job. And our team between the U.K. and the U.S. teams, how we've managed the growth of supporting our business and the operational excellence that we achieved, really I'm very impressed by and very, very pleased with. We will, again, we'll talk to the market about where we are headed going forward. We wouldn't give any midterm indications today, but it's 61% of our profits now coming out of the U.S. There clearly has been leverage at the store level with the strength of the market and the market share gains that we've made. And it's a great growth prospect for us both in terms of top line and profitability. Unknown Executive: Follow-on question from Deborah. Can you share with us plans with some of your key brands pipeline and projects and timings? And are any areas which have not delivered as expected, which strategy rethink might be sought in fiscal 2027? Hugh Duffy: Yes. We prefer not to talk about sort of specific projects at a brand level. We have listed the projects that we've got coming up for the current year. Looking at them as a group, we get good paybacks. Overall, it's been a cornerstone of what we've done over this last 10, 11 years, and it continues to be the case. Of course, there will be some projects that don't quite hit the expectations that we had set for. Unfortunately, there are not too many. And if we look at the overall mix of what we've achieved there are more in which we would say we'd probably overperformed versus our financial criteria than underperformed. But we would talk about specific projects that way. If you want to add, Anders? Lars Anders Romberg: No. I think, obviously, with the acquisition of Roberto Coin and obviously, we've done the segment reporting, so you can all read. If we can get that brand to accelerate growth, of course, it's very accretive for our profitability. So there's no secret there. So that remains a high-level priority, obviously for us. And we have a few things that we are investing in that currently aren't accretive like an ecom proposition in the U.S. market that today is dilutive for profit, but long term, probably will be accretive as we have it in the U.K. So we'll see. David Hurley: I think, yes, we're 8 years young in the U.S. Some of our stores are only opened a couple of months. We're continuing to develop our client base. We're continuing to understand better and better what they need. We're continuing to add new clients. We're making sure that for the super high demand product that we have, where we're giving a significant percentage to new clients. So a lot more that we can do to develop that events have been continue to deliver more and more in terms of ROI. We did some fantastic events this year. Brian mentioned the Porsche event, the Venetian Ball that we did with Roberto Coin just at the end of the half. And there's still some. Brian talked about the growth that we've got from obviously, acquisitions and then how we've developed them. And some of the acquisitions that we've done, we've yet to fully mature. Betteridge, for example, we've refurbished one of the stores in Vail, which is fantastic. But we still have the full story in Greenwich to do. Aspen to do as of yet. And Hodinkee and Roberto Coin are obviously just in very early stages. So just a matter of planning it out and executing it. Unknown Executive: Super. We've got -- that's the end of the questions we have at the present time. Maybe, Brian, if we could hand back to yourself for closing remarks. Hugh Duffy: Okay. Thank you. Thank you, David and Anders, as well, thanks for all your questions. We are really pleased about our first half, pleased about our start of the second half overall. I think it's clear that the category that we're in is a very resilient category that we can see here in the U.K. It's an underdeveloped category in the U.S. I think that's clearly proven and very much responding to investment from us and others in the market and very well positioned for growth. So very happy at what we've done, happy about the start of the second half, delighted with the job that our teams are doing across both our markets, U.K. and U.S. And I appreciate you all joining us this morning. Thank you.
Operator: Hello, and welcome to the SentinelOne Q3 FY 2026 Earnings Conference Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Saad Nazir, Head of Investor Relations. Saad Nazir: Good afternoon, everyone, and welcome to SentinelOne's earnings call for the third quarter of fiscal year 2026, which ended October 31, 2025. With us today are Tomer Weingarten, CEO; and Barbara Larson, CFO. Our press release and an earnings presentation were issued earlier today and are posted on the Investor Relations section of our website. This call and accompanying slides are being broadcast live via webcast, and a replay will be available on our website after the call. Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements about financial performance and future events, including our guidance for the fiscal fourth quarter and full fiscal year 2026 as well as long-term financial targets. We caution you that such statements reflect our best judgment based on factors currently known to us and that our actual results or events could differ materially. Please refer to the documents we file from time to time with the SEC, in particular, our quarterly reports on Form 10-Q and our annual reports on Form 10-K. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons why actual results may differ materially from those anticipated even if new information becomes available in the future. During this call, we will discuss non-GAAP financial measures, unless otherwise noted. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of GAAP and non-GAAP results other than with respect to our non-GAAP financial outlook is provided in today's press release and in our earnings presentation. These non-GAAP measures are not intended to be a substitute for our GAAP results. Our financial outlook excludes stock-based compensation expense, employer payroll tax on employee stock transactions, amortization expense of acquired intangible assets, acquisition-related compensation costs, restructuring charges, gains on strategic investments and income tax provision, which cannot be determined at this time and are therefore not reconciled in today's press release. With that, let me turn the call over to Tomer Weingarten, CEO of SentinelOne. Tomer Weingarten: Good afternoon, everyone, and thank you for joining our fiscal third quarter earnings call. Q3 was another strong quarter for SentinelOne. We exceeded our top and bottom line expectations, demonstrating durable growth and continued operating leverage. Our ARR grew 23% year-over-year, driven by continued momentum in new business generation and expansion with existing customers. Our third quarter net new ARR also reflects positive growth, both year-over-year and sequentially. We're seeing broad-based momentum with new customers, expansion with existing accounts and adoption of our emerging platform solutions. Our operating margin reached a new high in Q3, underscoring continued operating leverage and increasing efficiencies across the business. We've put the company on a path towards sustainable profitability, both on a quarterly and annual basis, an incredible milestone, demonstrating our commitment to profitability. Overall, our Q3 results highlight steady execution, continued business momentum and strong demand for our differentiated AI-driven Singularity platform. We're expanding our market share and gaining traction among the most important domains in cybersecurity. And we're well positioned to lead in both AI for Security and Security for AI, helping organizations advance their digital transformations securely and intelligently. Let's dive deeper into our customer success and platform momentum. We're winning new logos and expanding our footprint across enterprises of all sizes and industries globally. As AI reshapes how businesses operate, companies are turning to SentinelOne for a unique platform experience that combines AI, data and security. The best security is not complex. It simplifies operations and provides a great user experience. Alongside industry-leading efficacy, Singularity's intuitive platform, modern interface and ease of use are key differentiators that are driving strong platform adoption. Our emerging platform solutions continue to scale and achieve outsized growth. In Q3, our non-Endpoint solutions represented approximately half of quarterly bookings, underscoring the growth, diversity and expanding value of our platform. In addition, our ARR per customer reached a new company record in the quarter. This was primarily driven by strong contributions from our data, Purple AI and Cloud Security Solutions. Let me share more details, starting with Purple AI. Purple AI growth continues to exceed our expectations and achieved a record attach rate that surpassed 40% of licenses sold in Q3. Purple's growth is being driven by strong adoption from both new customers and existing customers. It's becoming a cornerstone of modern security operations, enabling analysts to automate investigations, accelerate detection and strengthen response. Reaching this level of adoption so rapidly is a rare feat. At OneCon 2025, we unveiled the next generation of Purple's Agentic AI capabilities, amplifying its ability to triage and remediate threats autonomously in real time. It is a true step towards autonomous security operations where humans and AI work together seamlessly. Q3 was also a standout quarter for data solutions. Bookings growth accelerated to triple digits year-over-year, and we're seeing growing demand for our AI SIEM solution. We're delivering an industry-leading AI-native security data analytics offering that delivers deeper visibility, real-time detection, faster investigations and autonomous response, all with more efficient economics and lower cost for customers. And through the acquisition of Observo AI, we now own the data pipeline that powers modern security operations from data telemetry to AI-driven analytics and response. I'll share more on this later. Q3 also marked our strongest quarter for Cloud Security bookings growth in the last 12 months, signifying rising demand for our comprehensive CWS and CNAPP offerings. As cloud environments grow and AI workloads multiply, so does the need for security. We're delivering comprehensive cloud-native protection that scales with our customers' infrastructure. It simplifies operations and fortifies defenses to a unified AI-powered security platform. In Endpoint, we continue to outgrow the market by delivering industry-leading efficacy, performance and user experience. Customers need a platform that brings simplicity, intelligence and best-in-class security in a single unified offering. Our growth leadership and innovation in the endpoint market are the foundation for further expanding the Singularity platform scope. For instance, our Endpoint Advantage is enabling us to seamlessly enter the data loss protection space, delivering integrated DLP directly from the agent without requiring additional dependencies. On SentinelOne Flex, we're seeing strong momentum as customers adopt the Singularity platform dynamically. Though early, Flex is already helping us secure larger multi-solution deals and longer-term customer commitments. Enterprises need security that combines simplicity, intelligence and dependable protection. Singularity provides that balance, enabling faster response, streamlined operations and stronger defense across the enterprise. We're seeing strong traction with large global enterprises driven by improved win rates and deeper expansion across existing accounts, which reflects our technology advantage and platform value. And our results clearly underscores our strong competitive position and growing product differentiation. Let's look at a few customer wins from the quarter that exemplify this. For Data Solutions, a global hospitality brand adopted AI SIEM to replace its legacy Splunk deployment. The customer consolidated on our AI native platform for its superior performance and user experience. The competitive replacement demonstrates the growing traction of our AI SIEM. More and more enterprises are selecting SentinelOne to modernize security operations and efficiency. For Cloud Security, a SentinelOne Flex deal, a global consumer products company signed a multimillion dollar deal with a 5-year contract to secure tens of thousands of cloud assets with Singularity. The customer chose SentinelOne for its unified AI-driven cloud security. And by leveraging Flex, the enterprise can dynamically adapt our platform solutions as their needs evolve. It shows both the value of Singularity Cloud and the flexibility of the Flex model. In federal, a major U.S. federal agency significantly broadened its deployment across the Singularity platform by adding broader platform solutions, including Purple AI, Cloud Security and Threat Services. This multiyear 8-figure commitment reflects deep trust built over time and our traction in the public sector. Organizations in highly complex and sensitive environments are choosing SentinelOne to simplify operations and drive efficiency at scale. Lastly, one of the biggest deals in the quarter was with a Fortune 500 brand securing hundreds of thousands of endpoints and expanding into new solutions. This customer, like many others, consolidated multiple point solutions onto our Singularity platform for better security outcomes and experience. It's a great example of how large enterprises are simplifying their security operations and standardizing on Singularity for unified AI native protection at scale. These wins highlight our growing traction with large enterprises and continued upmarket success. They also reinforce the industry's recognition reflected in the 2025 IDC MarketScape, which named SentinelOne a leader in worldwide XDR software. On the partner ecosystem front, we continue to expand and deepen our engagements. Our partners are a force multiplier, helping expand our reach and scale. We're seeing strong traction driven by increasing platform adoption across AI SIEM, Purple AI, CNAPP and broader platform solutions. We're strategically scaling adoption in the mid-market while driving operational leverage for partners. As an example, we expanded the scope of partnerships with NinjaOne and Pax8 in the third quarter. Among hyperscalers, we deepened collaboration with AWS and Google Cloud, integrating our technology and platform across their cloud marketplaces and AI services. Together, these alliances are enhancing market presence and positioning SentinelOne as a trusted partner for enterprises worldwide. Now let's dive into the innovation engine that's fueling our growth. We're helping organizations master 2 disciplines at once: AI for Security and Security for AI, so they can innovate with confidence. We're putting defenders in control of the AI era, giving them the tools to build, secure and benefit from AI in a simple, fast and secure way. To extend our innovation lead and further differentiate our AI advantage, we acquired Observo AI, the category-defining data streaming platform for AI-native telemetry pipeline management. Let me highlight a few important points on this. Security is, at its heart, a data problem and legacy rules-based data pipeline platforms simply weren't built for today's ever-growing attack surface and data-intensive security operations. Observo delivers an AI-native real-time telemetry pipeline that ingests, enriches, summarizes and routes data across the enterprise before it ever reaches a SIEM or a security data lake. Importantly, Observo gives us ownership of the data pipeline that powers modern security operations. This lets us manage the entire flow of security data from ingestion and retention to analytics and response, all within a single unified platform. Combined with the Singularity platform, we can deliver significant platform value by enabling fast and seamless data onboarding into our AI SIEM or any other destination. Security teams struggle with costs, complexity and delays created by increasing data volumes, forcing compromises that can reduce visibility, limit protection and slow response. Observo empowers customers to drastically reduce costs, improve detection and act faster. This acquisition accelerates our innovation road map and amplifies our current data offerings, where we saw triple-digit bookings growth in Q3. In addition, for Prompt Security, the response from customers, partners and the broader market has been incredible. Prompt addresses an urgent and growing need. Nearly every organization is now adopting AI tools and every CISO we engage with is focused on doing it safely. As enterprises accelerate their use of generative AI and agentic tools, they're looking for real-time visibility, governance and control. Prompt's technology is seamless to deploy and frictionless to scale. We're seeing healthy early traction in the field. The sales motion for Prompt aligns naturally with our existing go-to-market framework, both as a cross-sell opportunity among existing customers and as an entry point for new customers looking to secure AI usage and technologies. Together with our AI for security offerings, we are well positioned to secure the full life cycle of AI adoption. We're helping enterprises embrace AI safely and confidently, proving that innovation and security can move forward together. At OneCon, we introduced several major innovations that advance our leadership in AI native security. First, with GenAI security powered by Prompt, we're helping enterprises adopt and secure generative AI safely and at scale. Second, we unveiled our new AI-ready data pipeline, powered by Observo AI, which we believe will transform how organizations collect, process and act on security data in real time. Third, we expanded Purple AI's agentic capabilities, giving defenders greater autonomy and precision in detection and response. Purple AI is completely integrated across the entire Singularity platform and delivers a unique out-of-the-box applied AI experience. Purple's newer capabilities include natural language threat hunting, agentic investigations and automated response workflows, driving significant efficiency gains and faster threat remediation for security teams. And we introduced the new Wayfinder Threat Detection and Response Suite of Managed Services designed to give customers the ultimate human plus AI defense against modern cyber risks. Wayfinder embodies this vision by bringing together SentinelOne's Agentic AI and Google's Threat Intelligence with the most elite threat hunters, analysts and incident responders in the industry. For customers, this means faster detection, smarter response and stronger defenses available 24 hours a day. This is how cybersecurity evolves, humans and AI working side by side, learning from each other and responding in real time. At SentinelOne, we're helping enterprises build the foundation for modern, intelligent and resilient digital infrastructure. Importantly, this vision is resonating with customers and partners. The response and excitement at OneCon showed that our approach is aligned with the market needs. The spirit of our innovation announcements at OneCon was well captured by CRN, whose article title stated that SentinelOne partners cheer AI moves for leading the charge on autonomous security. We're laser-focused on delivering true value and tangible outcomes through both AI for Security and Security for AI. As I reflect upon our overall performance, we're continuing to deliver top-tier growth and margin improvement while driving innovations that are shaping the future of cybersecurity. Our technology advantage is clear. We're delivering world-class innovations and leading the industry in AI-native cybersecurity. At the same time, we're making tangible progress in building a stronger sales and marketing engine. The last 2 quarters reflect steady improvement in execution and meaningful progress along that journey. As we look ahead, we remain focused on durable and profitable growth. This quarter, we made tremendous progress towards that goal by putting the company on the path to sustained profitability. I'm incredibly proud of what our teams have accomplished. We're building a stronger, more efficient and more innovative company and leading the way in AI security for the modern enterprise. Before I turn the call over, I want to address the news of a leadership transition. Barbara Larson will be stepping down as CFO to pursue an opportunity outside the cybersecurity industry. I want to thank Barbara for her leadership and partnership. She has been instrumental in supporting our path to surpassing $1 billion in ARR and in guiding our transition to achieve sustained profitability. We are grateful for Barbara's contributions and wish her the very best in the next chapter of her career. We have initiated a search for our next CFO. Barbara will remain with us through mid-January to ensure a seamless transition. Upon Barbara's departure, our Chief Growth Officer, Barry Padgett, will serve as Interim CFO. Barry is a seasoned executive with more than 25 years of experience in operational leadership at companies like SAP and Stripe. He knows our business intimately and is already a great partner for our finance organization. Barry's leadership will ensure a steady hand as we move forward. Importantly, we have an excellent finance leadership team supporting Barry and ensuring continuity. Our Board and executive leadership are confident in a seamless transition and our profitable growth strategy remains unchanged. In closing, I want to take a moment to acknowledge the contributions of all Sentinels for another solid quarter. Their relentless focus, dedication and execution drives our success. And thanks to all of our customers, partners and shareholders for their continued support. Our mission to be a force for good remains unwavering. Thank you again for joining us today. With that, I'll hand it over to our CFO, Barbara Larson. Barbara Larson: Thank you, Tomer, and thanks, everyone, for joining us today. Let's review the details of our Q3 financial performance and our guidance for Q4 and fiscal year '26. As a reminder, all comparisons are year-over-year and financial measures discussed here are non-GAAP, unless otherwise noted. In Q3, we outperformed our guidance on both top and bottom line metrics. Our total ARR grew 23%, and we added net new ARR of $54 million in the quarter, which exceeded our expectations. This outperformance was driven by broad-based momentum across both new customer wins and existing customer platform expansion. We're gaining market share and mind share across our platform solutions, notably AI, data and cloud. These results reflect steady execution and healthy demand across the business. In Q3, revenue grew 23% year-over-year to $259 million. International markets grew 34% and represented 40% of total revenue, reflecting balanced growth and an expanding global footprint. Customers with ARR of $100,000 or more grew 20% to 1,572. Our ARR per customer reached a new company record, highlighting our broader platform adoption and increase in average deal sizes. This reflects the value our customers realize from our platform and our continued success in driving multiproduct expansion. Our net retention rate remained strong and well into expansionary territory, driven by customer adoption of our broader platform solutions, including AI, data, cloud and others. Turning to margins. We maintained an industry-leading gross margin of 79%, highlighting healthy platform unit economics. We also achieved operating profitability of 7% in the quarter, with operating margin improving by nearly 1,200 basis points year-over-year. We also benefited from the timing of expenses as some spending shifted to Q4. We achieved sustained quarterly operating profitability, a significant milestone toward long-term profitable growth, and we remain on track to deliver our first full year of operating profit this fiscal year. We also achieved our highest quarterly net income margin, which increased to 10% in Q3, significantly higher from breakeven in the prior year quarter. I'm excited to share that Q3 also marks an inflection point for sustainable quarterly free cash flow margin. We achieved free cash flow margin of 6% in Q3 and remain firmly on track to deliver our second consecutive full year of positive free cash flow margin, another key milestone that underscores our path toward profitable growth. Complementing this strong performance, our Remaining Performance Obligations grew 35% in Q3, reflecting growth acceleration on both a sequential and a year-over-year basis. Our total RPO reached $1.3 billion in Q3, a clear validation of the trust we've established with our customers and our commitment to innovation. From a capital allocation standpoint, our strong balance sheet and improving margin profile provide the flexibility to allocate capital strategically, fueling growth initiatives while driving long-term value creation. In line with this strategy, we extended our technology leadership with the acquisition of Observo AI, a leader among real-time data pipeline companies. This is a strategic deal, benefiting SentinelOne's competitive position while enhancing value for our customers and partners. Observo's technology is highly complementary to our data solutions and the Singularity platform. The best security starts with clear visibility and Observo enhances that by enabling data to flow instantly into our Singularity data lake. This seamless integration delivers unified AI-driven security and moves us one step closer to achieving truly autonomous security operations. The purchase price for Observo AI was approximately $225 million. We expect the top line financial impact of the transaction to be minimal in fiscal year '26 with immaterial ARR and revenue contribution and an estimated 60 basis point impact to our full year operating margin. We finalized and closed both the Observo AI and Prompt Security transactions in Q3. Turning to our guidance for Q4 and fiscal year '26. For fiscal year '26, we expect revenue to be approximately $1.001 billion, representing 22% year-over-year growth and increasing the midpoint of our prior guidance range by $1 million. For Q4, we expect revenue of approximately $271 million, which represents 20% year-over-year growth. This outlook is supported by a healthy pipeline, continued customer and partner momentum and growing contributions from our emerging products. Cybersecurity remains a top priority across industries, and this is reflected in the strong demand we're seeing for the Singularity platform. As always, we continue to monitor the macro environment, which can influence deal timing and sales cycles. Turning to our outlook for margins. For the full year, we expect gross margin to be approximately 78.5%. And for Q4, we expect gross margin to be approximately 77.5%. Our guidance for gross margin also incorporates strategic investments in cloud infrastructure and capacity expansion. This is a reflection of our growing global scale and platform diversification. For the full year, we now expect operating margin to slightly exceed 3%. This indicates an overall operating margin improvement of more than 600 basis points compared to fiscal year '25. And for Q4, we expect our operating margin to be approximately 5%, representing a year-over-year improvement of about 400 basis points. Our full year operating margin outlook absorbs a combined 130 basis points of impact from the Prompt and Observo acquisitions and an additional 120 basis points from FX-related headwinds we've seen this year. Adjusting for these macro and strategic factors, our guidance implies meaningful outperformance compared to the initial operating margin guidance provided in March. Importantly, we are reaffirming our commitment to delivering positive free cash flow for the full year, which we expect to be a few points higher than operating margin. Taking a step back, our momentum, technology leadership and competitive position remains strong, and we are delivering top-tier growth at scale with continued operating leverage. Our investment approach strikes a thoughtful balance between maximizing long-term growth opportunities and maintaining a strong, responsible and profitable financial profile. In summary, we're executing on our strategy with focus and discipline, delivering strong growth, improving profitability and continuing to invest in the priorities that will shape our long-term success. With a solid financial foundation, a differentiated AI-powered platform and a large and growing market opportunity, we're confident in our ability to drive sustainable, profitable growth and create long-term value for our shareholders. Before we turn to Q&A, I would like to briefly address my upcoming transition. It's been a privilege to serve as CFO of SentinelOne during such a pivotal time. I'm incredibly proud of what we've accomplished together, scaling the business to over $1 billion in ARR and achieving sustainable profitability. I remain a strong believer in SentinelOne's bright future. With its differentiated AI-powered platform and a massive market opportunity ahead, I believe SentinelOne is uniquely positioned for profitable growth and long-term success. I want to thank Tomer for his trust and partnership and the entire SentinelOne team for their hard work. Over the coming weeks, my full focus will be on ensuring a seamless transition. I will be working closely with Barry and our seasoned finance leadership team to ensure a smooth handoff. I leave with full confidence in the company's financial foundation and its future success. Thank you all for joining us today. We'll now take your questions. Operator, please open up the line. Operator: [Operator Instructions] Our first question will come from Saket Kalia with Barclays. Saket Kalia: Barbara, congrats on your next phase. Barbara Larson: Thanks, Saket. Saket Kalia: Tomer, maybe for you, it's great to hear that half of the bookings are now coming from outside Endpoint. Can you just maybe talk about which products outside of Endpoint are kind of becoming the most material from a new business perspective? And to what extent is Flex enabling that? Tomer Weingarten: Of course. Thanks for the question. First and foremost, Data Solutions. That accelerated for us to triple-digit year-over-year growth with both new customers and existing customer expansion. So a lot of momentum in kind of the SIEM replacement space. And obviously, with the acquisition of Observo, this will continue and remove the friction in these transitions and allow us to onboard more and more data into our Data Analytics platform. The second contributor is Purple AI. With no surprise, it's about 40% attached, which is a new record for us. And this is only for the base capability. That really validates our applied AI approach baked in directly into every part of the platform, and that we believe, delivers true customer value and efficiency gains. And obviously, when you think about Flex, that is what's allowing these customers now to have the freedom to consume every part of the SentinelOne platform. So that is also a catalyst, and we're seeing that come up online for us in a pretty nice way. So as the platform goes wider, Flex enables that consumption across the board. And we believe that these are going to be the modules for us, are going to carry growth for years to come. Operator: Our next question will come from John DiFucci with Guggenheim. John DiFucci: Listen, team, this looks like a good strong quarter here, and it's really nice to see that free cash flow. But guide was just a little lighter than we were looking for, and I think the Street was looking for. Is there anything to read into that? I only half-jokingly ask whether it's because Barry is going to be less focused on growth next quarter in his new role. And I just kind of trying to figure that out. And I guess, Barbara, we'll miss you here. And it's -- SentinelOne has become pretty consistent here since you've been there, and I think people are starting to understand the way your cadence has worked out here. But is there anything other than an opportunity outside of cyber that you can say? Barbara Larson: Yes. Well, let me first cover the guidance, which I think you're specifically talking about the revenue outlook. So Q4 revenue outlook reflects steady momentum in the business. It's supported by a healthy pipeline, continued momentum with customers and partners and growing contributions from our emerging products. As you know, Q4 is seasonally the largest quarter of the year. So things like deal timing, in-quarter linearity can influence quarterly revenue. We believe that's a prudent approach to take given that the macro environment continues to be dynamic. And then just zooming out from a full year perspective, our FY '26 revenue guidance implies an improvement of $1 million compared to the midpoint of our prior guidance. Again, steady execution and business momentum. And then on your second question, this is just really a personal decision for me. You can't always time opportunities, but it was an opportunity for me that comes in a space that I'm deeply passionate about. Helping SentinelOne surpass $1 billion in ARR, reach non-GAAP profitability has been a really important milestone for me personally. I just want to be clear, that decision is entirely independent of SentinelOne's outlook. We've built a really strong foundation, achieve profitability, have solid momentum. That's clear by our Q3 outperformance and outlook for FY '26. And I'll just say, I care deeply about the SentinelOne team, which is why I'm committed to staying through mid-January and help Barry and the team with a seamless handover. So thanks for the questions, John. Operator: Your next question will come from Brian Essex with JPMorgan. Brian Essex: Barbara, congratulations from me as well. I guess maybe to piggyback on John's question, could we -- could you touch on gross margin? And it looks like the guide calls for a little bit of sequential gross margin compression. Just would love to get your puts and takes on the drivers of that, what you see in the pricing environment and maybe with the longer-term outlook, how that may or may not have changed after what you've seen this quarter? Barbara Larson: Yes. Thanks for the question. So Q3, we delivered industry-leading gross margins of 79%. We expect to sustain gross margin at the high 70s level. In terms of the puts and takes, our Q4 guide includes strategic investments in cloud infrastructure and capacity expansion. This is really just a reflection of growing global scale and platform diversification. For example, just this week, we announced that Singularity platform is now GA on Google Cloud in Saudi Arabia. So you can see the traction we're having in international markets. Operator: Your next question will come from Brad Zelnick with Deutsche Bank. Nasr Islam: This is Nasr Islam, on for Brad Zelnick. Gentlemen, nice quarter on both the new business and the margin front. As you evaluate the breadth of products in the Singularity platform, do you see the need to add further functionality perhaps through further M&A? And relatedly, what are the guardrails for M&A as you balance growth and profitability? Tomer Weingarten: We believe we have a pretty complete platform. I think if you kind of look at the sum total of all the capabilities we have, it's incredibly competitive in the market. There aren't many platform providers that have the breadth and depth of capabilities that we have. We made these 2 acquisitions in areas that we believe are incredibly strategic, not only for now, but also for the future opportunity in cybersecurity. So as we look at our platform capability set today, we don't envision any big missing pieces. We're always going to remain opportunistic. But at the same time, we've not changed our philosophy around M&A. And we have a substantial part of our platform built in-house. We're going to continue and invest in innovation in-house. And in the areas where we believe there's both opportunity and a strategic gap, we might opt to acquire. But again, nothing impending, and we believe our platform is incredibly competitive at this point. Operator: Your next question will come from Meta Marshall with Morgan Stanley. Meta Marshall: Great. Maybe just in terms of -- you kind of noted improvement in execution and just kind of traction with the Flex deals. Just wondering if you could kind of give more details in terms of where you're seeing kind of that strength and -- with both Flex and with kind of improved execution? Tomer Weingarten: Sure. Definitely steady execution, a lot of platform momentum. Our teams executed above our expectations. And I think what's also clear is that our Technology Advantage is resonating. And at the same time, we're still making tangible progress in building stronger sales and marketing engines. But the last 2 quarters really reflect a steady improvement in execution and meaningful progress along that journey. Second one, Flex, there's just a lot of momentum as customers adopt the Singularity platform in a more dynamic fashion. And it's still early for us, but Flex is already helping us secure larger multi-solution deals and longer-term customer commitments. I think you see some of that through acceleration of RPO as an example. The target is obviously to do more and more larger deals. You can also see that through a record ARR per customer contribution. So the more dynamic licensing capabilities we give to our customers, the more they're able to consume from the platform. So it's enabling our teams to land bigger and with higher efficiency for us. To us, strategically, Flex, again, opens the door for customers to experiment and try more of our platform, and we're seeing that translate into more and more business for us. When you think about these acquisitions that we've done, when you think about the new capabilities that we bring online, Flex allows customers to immediately consume them as well. So it bodes well for our entire go-to-market motion. Operator: The next question will come from Joseph Gallo with Jefferies. Joseph Gallo: It was great to see the net new ARR growth in the past 2 quarters. Just any commentary on 4Q? And then given you're investing so much in capacity, you're clearly confident on the future. Can we expect net new ARR growth to grow again next year? Or how should we think about the glide path of growth into next year? Barbara Larson: Joe, thanks for the question. So while we don't provide formal ARR guidance, for Q4, we do expect net new ARR to be higher sequentially, which would be consistent with what we've seen historically from a seasonality perspective. Operator: Your next question will come from Fatima Boolani with Citi. Fatima Boolani: Barbara, congratulations on your next adventure. I wanted to drill in on the net new ARR performance. So that 1% growth, can you unpack sort of the puts and takes there? And Barbara, maybe if you can help marry that with some of your commentary in the prepared script around net retention rates well into the expansion territory. I'm just sort of trying to reconcile the RPO and bookings strength versus maybe a little bit more on the net new ARR side? Barbara Larson: Thanks for the question. So Q3 net new ARR remains solid. We saw healthy contributions from new customer wins, expansion with existing customers. We also saw record ARR per customer. Really, that's driven by continued adoption of our emerging solutions: AI, Data, Cloud. So continuing to innovate and execute and this quarter is an evidence that our Land and Expand strategy is working well given the momentum we're seeing across our emerging products. And from an NRR perspective, yes, remains in expansionary territory and relatively stable with what we've seen the past few quarters. Operator: The next question will come from Eric Heath with KeyBanc. Eric Heath: Barbara, you mentioned the guide takes some considerations like deal timing and linearity into effect when we talking about Q4. I'm just curious like thus far through the month of November, if linearity was a little bit slower than maybe anticipated. And -- and maybe if there's -- the sales cycles that are possibly getting longer as you introduce Flex deals that are bigger and more strategic in nature? Barbara Larson: Yes. I mean I would just comment on 2 factors that I discussed last quarter that are still relevant to Q4. In-quarter linearity is one of them. We expect it to be a back-end loaded quarter, especially given the U.S. holidays in November and December and then also lower than initially anticipated Services contribution. So as a reminder, Services contributes to revenue, but not to ARR. Operator: The next question will come from Jonathan Ho with William Blair. Jonathan Ho: I just wanted to see if you could give us a little bit of a sense of where we are in terms of AI security adoption and maybe where customers are in terms of that maturity curve for adopting some of these new solutions. It sounds like you've had tremendous success. And I just wanted to see maybe what inning we're in, in terms of analogies? Congrats, Barbara. Barbara Larson: Thank you. Tomer Weingarten: Well, I mean, obviously, to us, AI security is now centered around Prompt Security. The response from customers and partners has just been incredible. It addresses obviously an urgent and growing need. Every organization adopting AI tools and every CISO we engage with is just focused on doing it in the most safe way possible. The use of generative AI and agentic tools is accelerating as anybody can see and everybody can see. And customers are obviously looking for real-time visibility, governance and controls as they deploy AI workloads. So we're seeing healthy early traction in the field. The sales motion for Prompt aligns very naturally with our existing go-to-market framework. It's a great augmentation to our Endpoint footprint, into our AI footprint with Purple. So it's both a great cross-sell opportunity amongst existing customers and an entry point for new customers looking to secure AI usage and the technologies that they onboard. So all in all, really great traction right now. Pipeline looks promising. And all in all, as you can imagine, everybody is looking for ways to deploy AI workloads responsibly and Prompt is just a great answer for that. Operator: The next question will come from Shaul Eyal with TD Cowen. Shaul Eyal: Tomer, what actions are you taking internally to accelerate net new ARR performance? Maybe how do you guys think about hiring into the new fiscal year? Congrats, Barbara. Tomer Weingarten: Yes. I think a lot of what we just discussed. I mean, SentinelOne's Flex is allowing us to just drive with more efficiency, customer expansions. Obviously, continuously investing in the acquired assets is another strategy for us where we continue to scale these businesses as we integrate them. The other, I think, action that is allowing this is also a very rapid integration into our existing platform capabilities. So all of those just result, I think, in more strategic conversations with customers. It's not just about selling AI security or an AI data pipeline. It repositions our entire platform and create more and more competitive differentiation where we're able to come in and fully deliver end-to-end security, fully deliver end-to-end data onboarding, data ingestion, data retention in one solution and one unified platform. So as we think about net new ARR, that's obviously the #1 imperative, which is land bigger and expand bigger. And now we have the capability set and the outcomes to deliver to customers. Operator: The next question will come from Mike Cikos with Needham. Michael Cikos: Congrats on the quarter and best of luck to you, Barbara. I just wanted to sanity check some of the commentary here and appreciate the consistent messaging on what you guys are communicating on macro. But it would be helpful at the margin to hear with respect to deal timing, macro sales cycles, how did that play out in Q3 versus your expectations? And then to the degree you can elaborate, how is public sector? I know it's a relatively small part of your business, but if that in any way impacted how you were thinking about the guidance here as well? Tomer Weingarten: I think that in terms of deal timing, I'm just going to echo what Barbara said. The environment, as you can see throughout this entire earnings cycle is a bit unpredictable. So for us, we felt really the most prudent to solve for that, so to speak. With that, we feel very confident in our ability to execute against our Q4 guide. So all in all, we are just trying to create a more measured approach to what we see out there in terms of deal timing. Barbara mentioned Q4 is our biggest quarter. So there's a lot of business coming in, linearity can change $1 million here or $1 million there, which is the entire gamut of this adjustment. So again, all in all, these are the factors that we're taking into play here as we continue and execute through the year. And obviously, as you can see for the full year guidance, we have taken our guidance up. With regards to federal business, Q3 was in line with our expectations. Overall, we remain mindful that federal opportunities often progress at a slower pace due to procurement cycle and budget dynamics. But at the same time, our engagement in the federal vertical remained very strong with positive demand signals and alignment across our FedRAMP High offerings, which spend all the way from our endpoint solutions and through data and AI. Just this quarter, as we mentioned, we had a meaningful expansion with an existing customer, and we're building durable relationships, advancing the opportunities and solidifying SentinelOne's position as a trusted long-term partner across the entire federal ecosystem. Operator: The next question will come from Shrenik Kothari at Baird. Zachary Schneider: This is Zach Schneider, on for Shrenik. So you noted the minimal revenue and ARR contribution from Observo next year. But just more from a high level, previously, you've talked on how it unlocks a multi-hundred million dollar ARR opportunity by really eliminating third-party telemetry dependencies. So I'd just curious to hear sort of what benefits have you seen since the acquisition and just tactically how you're positioning Observo versus private vendors and some platform peers in competitive bake-offs? Tomer Weingarten: This goes back to my commentary around giving a complete end-to-end out-of-the-box functionality. Not only Observo brings advanced capabilities to ingest data, it's not just another data pipeline, it's a complete AI native data pipeline, which just the pace of onboarding, the level of ease of use that we can provide is already above and beyond everything else in the space. And when you couple that with the ultrafast data lake we have, you kind of arrive in a world where we have the complete data suite from data pipelines and ingestion to data lake and search and data orchestration and hyperautomation. So think about SentinelOne and AI SIEM and our data solutions as a complete one-stop shop to transition away from your olden legacy SOC provider and SIEM provider and into an ultrafast quick-to-deploy type of a solution that's fully AI-enabled. And obviously, if you then take into consideration the amount of automation that we can bring into the picture given that we control that real-time streaming element and the data ingestion pipeline, then you start to understand the art of the possible with deploying more and more agentic-based capability to automate more and more of the tasks in cybersecurity, which obviously has been our vision for quite a while now, and that marriage of data ingestion, data processing and data orchestration really starts to produce this vision of the complete autonomous cybersecurity platform, which is where we're going. Operator: The next question will come from Adam Tindle with RJF. Adam Tindle: And best wishes to Barbara. Tomer, I wanted to just mention, you talked about the partner ecosystem. And just to be very blunt, a competitor called out a pretty big displacement on their earnings call just earlier this week, and that was a partner that you had ramped just earlier this year. They're indicating that there's more to come after this. Just wanted to sort of give you a forum to respond to some of that comments on defending that and the notion of more displacements to come? And if you could tie that into how you're thinking about forward growth from here, the ability to maintain this 20% growth, which you're guiding to in Q4? That would be helpful. Tomer Weingarten: Sure. I think you're going to have to talk to them. I mean we still have quite a lot of licenses going with all of our partners. And at the same time, this quarter, specifically, we doubled down in a very significant way with 2 of our biggest partners with multiyear commitments. So we have not seen any meaningful disruption from whatever competitor that is. Our partner ecosystem is incredibly robust. I mean we have a lot of partners globally. So I don't know exactly what they were talking about. But at the same time, all I see is growth from our partners set as a whole. As for the next year, I think you can look at our Q4 exit rate as a good indicator. All in all, we have a ton of momentum in the business. At the same time, we're trying to balance the macroeconomic environment and how unpredictable and at times volatile it can be. But all in all, we have a lot of confidence in the momentum we're seeing right now in the traction we're seeing with our solutions. And I think more than anything, the customer reception and how well our solutions resonate versus everything else out there just gives us a lot of hope that this is the right solution at the right time and just a great market fit. Operator: The next question will come from Joshua Tilton with Wolfe Research. Joshua Tilton: Hey guys, can you hear me? Barbara Larson: We can hear you, Josh. Joshua Tilton: Awesome. Barbara -- actually, maybe this one is for Tomer. I guess my question is, there's been a lot of talk and a lot of focus and rightfully so about -- I don't know if it's been more focus on the bottom line or just an emphasis on delivering operating cash flow, free cash flow, just more of a conversation around profitability this year. And I know it's only in the interim while you guys conduct a search, but I can't help but notice that you're kind of choosing to replace the CFO that seems to have led this profitability motion with someone whose title is Growth or Growth Officer. And my question, I guess, is just like as we go into next year, is there anything you're trying to signal around a change in focus between how you think between growth and profitability this year versus next year? Or am I just kind of reading too much into a title? Tomer Weingarten: You're absolutely reading too much into it. I don't think there was any intent to signal anything and we'll continue down the same path that we've been executing towards in the past couple of years. I mean, you're seeing us consistently expand operating margin year-over-year, and that's going to continue into next year as well. We're striving to achieve the Rule of 40 as fast as we can, basically. And that is just the way that we look at expansion. And we believe there's obviously more operating leverage in the business that we'll continue to extract. Operator: The next question will come from Patrick Colville with Scotiabank. Patrick Edwin Colville: Tomer, I guess my question is for you, please. when I look at the metric around the proportion of quarterly bookings from emerging products, it's kind of interesting to me that it stayed consistent around 50%. And so I guess that could mean 2 things. It could mean that the core endpoint has like continued to surprise to the upside, and there's still like a decent amount of Trellix, McAfee, et cetera, to go after or it could be that these emerging products have maybe been a bit disappointing versus what we might have hoped. So I guess, could you just unpack that metric? And like what is going on behind the scenes and maybe with a lens towards next year, like what should we expect next year there? Tomer Weingarten: Sure. I'd say, I mean, to us, it looks like a very balanced contribution. We like it where we are. There is definite potential and continued expansion in the core endpoint space, and we definitely don't want to wave that away. I just mentioned we doubled down with 2 of our biggest endpoint partners. So that obviously shows you that there's more to go after in that core endpoint space. And obviously, we're having a lot of success there. We have one of the best products in this space. But then obviously, a lot of our data solutions, which are highly pertinent both for existing customers, but also as we land in competitive state, those are strategic to us as well. So we kind of feel like the 50-50 contribution is a good place for us to be as we continue to execute both on the core endpoint opportunity and starting to extract more and more meaningful revenue from data analytics and from AI. We're also adding more and more capabilities to our Endpoint suite. So it's not only about EDR, creating adjacent capabilities to continue and expand in that core footprint. So all in all, we got multiple growth vectors as we go into next year. Operator: We have no further questions at this time. I will turn the call back to Tomer Weingarten for closing remarks. Tomer Weingarten: Thank you all. Our third quarter results show the solid execution and progress we're making as we scale the business. Customers are increasingly turning to SentinelOne for better security outcomes and value, and we're focused on driving durable growth, expanding margins and continuing to deliver the industry's leading AI-powered security. Again, thank you all for joining us today.
Operator: Good morning, and welcome to EQB's Earnings Call for the Fourth Quarter of 2025. This call is being recorded on Thursday, December 4, 2025. [Operator Instructions] It is now my pleasure to turn the call over to Lemar Persaud, Vice President and Head of Investor Relations. Please go ahead. Lemar Persaud: Thank you, Ludy, and good morning, everyone. Your host for today's Q4 results call are Chadwick Westlake, President and CEO; and Anilisa Sainani, CFO; and Marlene Lenarduzzi, CRO. Also present for the Q&A session is Darren Lorimer, Group Head of Commercial Banking. After prepared remarks, we will open the lines for questions from our prequalified analysts. Please note that while we are excited about the acquisition of PC Financial, today's call, including Q&A session, is intended to be focused on the Q4 and full year EQB results. For those on the phone lines only, we encourage you to also log into our webcast and view our quarterly results presentation, which will be referenced during our prepared remarks. On Slide 2 of our presentation, you will find EQB's caution regarding forward-looking statements, which involve assumptions that have inherent risks and uncertainties. Actual results may differ materially. I would remind listeners that all figures referenced today are on an adjusted basis where applicable, unless otherwise noted. With that, I will now turn the call over to Chadwick. Chadwick Westlake: Thanks, Lemar, and good morning. I appreciate everyone joining us during a busy earnings day and so soon after yesterday's call. To stay on point for this call, I'm pleased to have fiscal 2025 behind us. It was a difficult year and one of significant change for EQB. That chapter is now closed, and our incredible leadership team is energized and focused on tomorrow. There were, however, several notable accomplishments. First, while deemphasizing certain areas due to less attractive economics, we still achieved 10% year-over-year growth in total loans under management on the back of very strong 36% year-over-year growth in our off-balance sheet CMHC insured multi-unit residential mortgage business. Second, EQ Bank, our crown jewel, continued to shine bright, achieving 18% year-over-year growth in customers and 10% growth in deposits, with deposit balances ending the year at nearly $10 billion. Third, we launched our small business banking offering in October, bringing real competition and positive change to an underserved market that deserves better options. This offering has all the Challenger features you would expect, including fully digital account opening, a competitive interest rate, business GICs and no monthly fees. I'm pleased to report that at the end of October, we were already at $140 million in business deposits. That's before dialing up marketing efforts. Finally, we were named the Top Bank Brand in Canada by the Financial Times' The Banker magazine, citing our status as best positioned to grow market share. We have had plenty of moments of change in our history, and each time we emerged even stronger. I believe that is precisely how EQB is positioned now, ready for our next and most significant chapter of growth. I want to thank our deeply dedicated Challenger employees for their tireless work over the past year. Everyone is part of this team because they believe in our purpose and our ability to execute. I believe that applies to our longstanding and prospective shareholders as well. This morning, I have a few key observations on my first 100 days as CEO. When I rejoined EQB in late August, I set out with a clear mandate from our Board to develop a future focused plan that concentrates capital and talent at the point of highest return, with the goal of achieving our long-term potential. With my leadership team, we've made a clear-eyed assessment of our competitive strengths and growth opportunities, strategies and supporting cost structure. There were no preconceived notions, no sacred cows, only a pledge to make the tough decisions and execute with velocity. This resulted in a few early actions. First, I spent a lot of time traveling across Canada, to meet hundreds of employees, partners, brokers and shareholders. It is important to understand what people love about our company and where we can do better. What I found was a workforce that is energized as ever to win, customers that love our products and services and conviction in our ability to take our Challenger to its full potential while returning to our traditional ROE profile of 15% to 17%, which is important to our shareholders. I also said coming into this job, we have return to efficiency as a competitive advantage. We would complete our product shelf and move back to our industry-leading ROE profile, even with the competitive disadvantage of standardized capital treatment. I've also learned more about important areas for growth that matter for Canadians. Importantly, for example, our de-cumulation business. This portfolio increased 36% last year and remains poised to continue delivering double-digit growth, supported by market share gains and demographic trends, including the movement to age in place. Second, my team dug deep into the fundamentals of our bank to reduce pressure points, specifically focused on margin, efficiency and credit. For margin, we took a closer look at our funding costs. The intention of our bank is still to provide Canadians with a highly attractive everyday interest rate. However, we recognize that with the Bank of Canada moving interest rates down another 50 basis points in the quarter, we have to more dynamically adjust our interest rate offering. It's all about striking the right balance to ensure we are continuing to grow profitably while expanding EQ Bank deposits to become the largest part of our funding stack. With the build-out of our EQ Bank product shelf, we will attract more Canadians to our bank and grow share of wallet, a proven strategy to capture more value from our customer relationships and deliver greater value to our customers. A win-win situation. The outcome for Q4 was progress with NIM expanding 4 basis points sequentially to 2.01%. On efficiency, we took decisive action. And while we cannot control the macroeconomic environment, we can control our costs. This resulted in the first-ever restructuring charge for EQB. Anilisa will speak to more detail shortly. The benefit is not in our Q4 results as it was executed at the end of October, but it will become evident in Q1 results. We needed to focus our efforts on the highest-return initiatives with clear benefit to earnings, to drive improvements in efficiency and positive operating leverage. With respect to credit, PCLs in Q4 might be higher than some expected, but our intent as a refreshed team was to dig deep into our lending book. We carefully considered macroeconomic variables for Moody's to inform our forward-looking indicators, and we ensured we are appropriately provisioned for all current risks. The good news is, assuming no significant changes or deterioration from our forward-looking indicator macro drivers, we enter fiscal 2026 from a position of strength. Marlene will comment on credit further in her remarks. Our businesses are well positioned to deliver growth and resilience in credit despite the challenging macroeconomic backdrop. And third, we spent time thinking through our strategic focus in the market. Contextually, we can all agree that Canada is one of the most profitable banking markets in the world, but there are millions of underserved Canadians and a real need for greater innovation and stronger competition to the incumbent biggest banks. We are here to bring that change, competition and innovation. We are here to disrupt and become a better everyday option, focused on Canadians. Our interest is in building a better banking system, offering unique products, including many low and no fee options with EQ Bank. And we championed the concept of Challenger with our trademark brand literally being Canada's Challenger Bank. Our addressable market is significant, and our growth opportunities are tremendous. All at the same time, we remain significantly undervalued. I've always believed our goal should be to focus on doing a few big things well, rather than be everything to everyone. That is what it means to be a Challenger bank at its core. Our PC Financial acquisition and Loblaw partnership are going to be game changers. This is anchored in purpose and a lead towards our full potential as the largest Challenger in Canada. That should be clear from last night's call. 2025 was a challenging year for housing as the market was characterized by elevated levels of economic uncertainty following the trade dispute with the U.S., tariffs, rising unemployment and lower consumer confidence levels, even as the Bank of Canada cut interest rates. There is strong structural demand in Canada for homeownership and supply issues remain. Looking into 2026, we are cautiously optimistic we will see a rebound in housing. We think it's less of a question of if, more so when will the market recover. When it happens, you can expect it to result in revenue growth given that over 60% of our on-balance sheet loans are single-family residential. And with a 13.3% CET1 ratio, we have the capital to fund this growth. To get the market really going, we will need to see the combination of lower rates, lower unemployment, which we saw recently, and better GDP growth. We have already seen the Bank of Canada respond by aggressively lowering interest rates. And finally, with the 2025 Federal budget focusing in on infrastructure investment, we are hopeful we can see positive impacts on GDP growth. We think commercial loan growth will follow confidence in the broader economy, and our pipeline now is twice what it was this time last year, with a very busy start already to fiscal 2026 across all segments. This includes our multiunit residential portfolio. To support the supply of affordable housing to Canadians, the government announced an increase in the CMB issuance limit to $80 billion, up from $60 billion, in the latest Federal budget. This increase, which is tied exclusively to multiunit housing across Canada, will benefit EQB. Combining all of this, with OSFI's engagement on reducing restrictions on capital to support business investment, a move which should directly impact our bank, I remain excited for the future of EQB. As part of that future, I'll offer a few strategic comments. One, we're focused on winning in our core franchise. We are reviewing and driving more changes to ensure we hold the #1 position in single-family lending. In 2025, we achieved record broker satisfaction scores in our uninsured business, partly driven by recent technological investments and improved customer retention. We are also focused on expanding origination partnerships. Being the leader in reverse mortgages is a priority, and we are not standing still. This past Monday, we launched even more enhancements to increase our competitiveness while maintaining strong risk management. We remain the market leader in CMHC insured multi-unit residential and operate attractive and well-run commercial businesses as a choice lender to other lenders, a commercial real estate alternative lender and top provider of services to credit unions. Finally, the growth and sustainability of our diversified funding stack anchored in EQ Bank will be critically important as we intend to get the full attention it deserves as we bring focus to our priority lending areas. Two, we're completing our product shelf and taking EQ Bank to its full potential. I've said before the gaps here are payments and [ wealth ]. We are addressing payments with PC Financial. All of this will be plugged into our world-class EQ Bank platform. I want to be clear, we're focused on delivering a successful integration, which will allow us to achieve our full value from this historic transaction. But the remaining ingredient of wealth will remain a priority. Three, we're expanding our capabilities and challenging the market. We will continue to leverage our digitally-native platform to drive best-in-class efficiency. This will be achieved through the rigorous expense discipline we introduced in Q4 to invest in a few big areas and ensure that, as the bank grows, we invest significantly, but also at pace with revenue growth. We will grow our capabilities to reshape the market by investing in AI enablement, championing our technology and working with partners, government and regulators to enhance competition. Our acquisition of PC Financial advances our strategy here as well as they're bringing best-in-class personalization capabilities and tools and a 300-plus employee workforce with complementary skills to drive product innovation. With the addition of their pavilions, it offers us a unique edge to serve millions of Canadians and meet them where and when it's most convenient for them. Finally, given the passing of the's Federal budget, we are one step closer to the creation of a made-in Canada consumer-driven banking system. EQB is uniquely positioned for this new era as a long-time supporter of open banking. We look forward to sharing more of our strategy at our 2026 Investor Day. Moving to the next slide where we present our medium-term financial objectives. You will see that we are reaffirming our objectives, so this should be familiar to everyone. We have better aligned our categories to be more comparable to peers. For 2026, our outlook excludes the impact of PC Financial. And I would expect ROE to improve materially from the 7.5% we reported for Q4. What that looks like is highly dependent on the macroeconomic backdrop, but we feel, based on our estimates today, that could look something like approaching 12%, increasing even higher later in fiscal 2026. Diluted EPS growth could land within our medium-term range of 12% to 15% growth. We expect to see improvements in our efficiency ratio and be within our medium-term range of flat to slightly positive operating leverage and exit next year with strong capital. We expect to continue delivering on our very strong dividend growth projection. Anilisa and Marlene will provide a more specific outlook on key income statement line items in their sections. Now over to Anilisa to go through the 2025 full year and Q4 results, her first quarterly call as the CFO of Canada's Challenger Bank, and I could not be more thrilled and excited to have Anilisa in this chair. Anilisa Sainani: Thanks, Chadwick, and good morning, everyone. As a reminder, my comments will be on an adjusted basis, and you can find a summary of these adjustments on Slide 27 of today's presentation. Starting on Slide 9 for a review of the fiscal 2025 results. Operating environment headwinds, including a soft housing market and rising unemployment, weighed on our results. Diluted EPS for the year was $8.90 and return on equity was 11.3%, both reflecting higher provisions for credit losses. In addition, higher expenses and investments also impacted full year results. Against the backdrop of more modest revenue growth, operating leverage was negative 12.5% and the efficiency ratio increased by 570 basis points. Moving to Slide 10. Diluted EPS for the fourth quarter was $1.53, and ROE was 7.5%. The decline in fourth quarter results as compared to last year reflected lower revenues, expense growth and higher provisions for credit losses. Compared to last quarter, pre-provisioned pretax earnings were down a modest 1%, with higher provisions for credit losses, partially offset by NIM expansion and contained expenses. We announced an increase in the quarterly dividend to $0.57 per share, up from $0.55 last quarter and $0.49 last year, as we continue our strong track record of dividend increases. We also repurchased a record 731,000 shares in the quarter as part of our strategy to return capital to shareholders. And we expect to continue buybacks next year. Before we get into key drivers, a note on the restructuring program on Slide 11, for which we recognized a final pretax charge of $92 million. The program sharpens our focus on top growth priorities, ensures efficient capital allocation and manages third-party spend and other costs with discipline. Going forward, we expect approximately $45 million in annual expense savings in fiscal 2026. These savings will be reinvested in continued strategic growth initiatives as we remain committed to investing in our future and maintaining our robust risk management framework. As a result, we expect total expense growth to be in the low single digits next year, inclusive of the restructuring program savings. We also expect to deliver positive operating leverage with a low 50s efficiency ratio, with additional upside as the revenue environment picks up. Now I'll break down the results of the quarter, starting with the balance sheet on Slide 12. As a reminder, we look to loans under management or LUM as a key performance metric as we are the market leader in ensuring multi-unit residential mortgages. Our LUM increased 10% year-over-year and 1% sequentially to $74.5 billion, with continued strength in our multiunit residential portfolio, solid growth in the context of a difficult economic environment. And as a reminder, we intentionally pulled back from certain portfolios. For example, insured single-family residential and some equipment financing portfolios, as we managed overall risk-adjusted returns. Conventional loans, which are LUM excluding off-balance sheet loans and insured single-family residential portfolios and are the primary contributor of net interest income, grew 7% year-over-year and 1% sequentially, reflecting continued growth in our de-cumulation business and uninsured mortgages. Looking forward to 2026, we expect growth in LUM in the high single digits to low double digits. Turning to deposits. Balances increased 9% year-over-year and 1% sequentially to $36.1 billion, reflecting strong growth in EQ Bank. Growth in EQ Bank's demand deposits was strong, increasing 38% year-over-year and 3% sequentially. Within that portfolio, growth in the notice savings product was strong, while growth in payroll deposits moderated in the quarter as we adjusted interest rates in response to Bank of Canada cuts. Wholesale funding was relatively flat in Q4 as repayments of covered bonds were offset by increases in our deposit note program. Wholesale funding remains an important source of our diversified funding stack and it expands our investor base. At the same time, we are focused on our funding mix sourcing a higher percentage from lower-cost sources, including deposits, which are sensitive to management actions and can be used to manage margins more actively. Overall, we are pleased with our mix progression. Turning to NII on Slide 13. Net interest income was $265 million, down 2% year-over-year and up 1% versus last quarter. Net interest margins were down 8 basis points versus last year, but expanded 4 basis points sequentially. The sequential margin expansion primarily reflects lower funding costs and a shift towards higher-yielding uninsured mortgages, partly offset by higher liquid assets and lower prepayment income. Looking forward to 2026, we expect margins to remain around the 2% plus level. Turning to Slide 14. Noninterest revenue of $43.5 million was down 15% from last year and 9% from last quarter, largely due to hedging activities and also lower gains on sale from securitization activities as volumes normalized. Turning to Slide 15. Noninterest expenses increased by 11% compared to last year. Areas of increase were concentrated in our Challenger staff and growth-related investments. In addition, higher premises costs played through the second half of this year as we moved into our new Toronto headquarters this past spring. As a reminder, these occupancy costs will have a full year impact in 2026. Compared to last quarter, both noninterest expenses and the efficiency ratio were largely flat as we thoughtfully managed controllable costs. We are pleased with this result considering the timing of the restructuring activities being late in the quarter and especially in the context of what is normally a seasonally higher expense quarter. As mentioned, overall, we expect low single-digit expense growth into 2026. Finally, turning to capital on Slide 16. Internal capital generation was offset by the impact of the restructuring program, and the bank's CET1 ratio was flat at 13.3%, well above target and regulatory minimums. Our capital allocation approach continues to prioritize reinvestment in organic growth, steadily increasing dividends and the maintenance of capital flexibility to pursue strategic inorganic growth. I will now turn the call over to Marlene to take us through risk. Marlene Lenarduzzi: Thank you, Anilisa, and good morning, everyone. I'll start on Slide 18 with an overview of allowances for credit losses. Against the continued uncertain macroeconomic backdrop, credit losses were elevated in Q4 2025. Higher performing PCLs in personal and commercial lending were primarily driven by deterioration in the forward-looking indicators. This was partially offset by a release in equipment financing due to improved credit quality on the remaining [indiscernible] portfolio. By business, PCLs were $7.8 million in personal, $11.8 million in commercial and $0.2 million in equipment financing. Along with PCLs on impaired loans, realized losses and write-offs, our ACL rate increased to 41 basis points, up 8 basis points sequentially and 9 basis points year-over-year. This was primarily driven by an increase in performing allowance, leaving the portfolio appropriately provisioned. We will continue to manage our allowances as the macroeconomic conditions evolve. Turning to Slide 19. Impaired PCLs were 30 basis points, up 11 basis points sequentially and driven by increases across all businesses. On single-family residential, we continue to experience weakness stemming from larger loans in areas of Toronto and surrounding suburbs where residential real estate prices have declined significantly from their peaks. This does not appear to be a systemic issue across the portfolio. In commercial, provisions were primarily driven by existing longer-standing impaired loans. The increase reflects deterioration in values and elongated resolution times. And finally, increased provisions in equipment financing are driven by continued downward pressure on asset values. Turning to Slide 20 and a discussion of gross impaired loans. Macroeconomic conditions have contributed to an increase in gross impaired loans of 7% quarter-over-quarter to $871 million. Gross impaired loans and personal lending increased to $368 million this quarter, a 4% increase from Q3. This was largely driven by continued credit migration. On the positive side, however, early-stage delinquencies are trending positively over the year. Gross impaired loans in commercial lending were up quarter-over-quarter, primarily driven by one commercial loan where a provision is not currently required. We are seeing stability in equipment financing as impaired loans increased only 3% or $1.4 million relative to last quarter. Now I'll provide some thoughts on how I see credit evolving in 2026. The impacts of the 275 basis point reduction in the Bank of Canada's overnight rate since recent peaks are starting to work their way through the economy, and we see signs of credit improvement in the portfolios. We are also encouraged by the recent Federal budget announcements, which we expect will contribute to greater economic growth and improved market sentiment that will benefit performance in the latter half of 2026. On single-family residential, we are seeing some improvements with lower early-stage delinquencies. However, we expect that we'll continue to operate in an environment of elevated global macroeconomic uncertainty in fiscal 2026. On the commercial side, resolution time lines continue to be long. These loans tend to be larger in size and there could be noise within any given quarter. In our equipment financing business, we are seeing the credit benefits of repositioning towards prime and the deemphasis on long-haul trucking originations, resulting in improved credit performance. Having said this, we should be cautious that this outlook is highly dependent on macroeconomic conditions and based on the expectations that we will avoid a deep recessionary scenario. In terms of PCL expectations, I would expect more relief in the second half of the year. Despite the headwinds of this past year, we remain confident in the credit quality of our lending portfolios and our prudent approach towards managing risk through the cycle. And with that, I'll turn it back to Lemar for the Q&A portion of the call. Lemar Persaud: Thanks, Marlene. [Operator Instructions] With that, operator, can we have the first question from the line? Operator: Your first question comes from John Aiken with Jefferies. John Aiken: Marlene, thanks for the color on the commercial portfolio ex-equipment financing, it's what I'd like to focus in on though. You had mentioned that the incremental provisions in the quarter related to loans that were previously classified as impaired. Do you have any sense in terms of how long the process will be for resolution until you can actually get the -- get these files off your desk? Marlene Lenarduzzi: Yes, it has been longer as we've said in the past, and it's approximately taking anywhere between 12 to 18 months. It can take a while to resolve. John Aiken: And then just as a follow-on, Chadwick, in terms of the strategic review that you've done since you came back onboard, can we expect to see any changes in terms of the composition of the commercial portfolios? Chadwick Westlake: Well, we have an excellent commercial business. When you think of the commercial bank, over 80% is insured and our priority has been the CMHC insured multi-unit as our top focus and being a #1 alternative CRE lender. All those principles will stay the same. And Darren Lorimer, our Group Head of Commercial Banking, is just exceptional. And he's here, and I don't know, Darren, if you want to add any other additional comments. Darren Lorimer: Yes. We continue to have a high level of conviction that we're going to see strong CMHC-insured lending growth into next year, both on the term and the construction side. We have great capabilities there. When you look ahead in our CMHC construction, most of that is based on commitments that we already have in place. So we have good visibility into that. And we expect also to see an improvement in the uninsured commercial real estate lending as well. We're starting to see some early stages of growth there first -- the last 2 or 3 months, our pipeline has started to grow. I wouldn't want to extrapolate that over all of next year, but I think it's a good sign nonetheless. Operator: The next question comes from Gabriel Dechaine with National Bank Financial. Gabriel Dechaine: I would like to ask about the credit stuff, of course. And get maybe a bit more specific on your outlook. And I guess, generally, you expect the phase of -- or the pace of PCLs to moderate over the course of the year. That's pretty consistent with what I'm hearing from other banks. But like where -- like if we look at the impaireds, is this a high watermark and it grades down? Or are we going to be stuck at this level in the residential mortgage portfolio specifically? Marlene Lenarduzzi: So I would say we are continuing to see elongated resolution times even in the residential mortgage portfolio where it can be 6 to 12 months to resolve. What we are encouraged by, and we show that in the graph in the appendix, is that the early-stage delinquency in that portfolio has been moderating, and you can see that decline over the year. Maybe a little bit of fluctuation quarter-to-quarter, but it's on a general downward trend. That will eventually result in lower gross impaired loans. And we even see the growth in gross impaired loans slowing quarter-over-quarter, if you look over the last 6 to 8 quarters. So I don't have a crystal ball, of course, but I would say that all of those factors lead us to believe that, towards the end of the second half, we'll see those gross impaireds come down. Gabriel Dechaine: Okay. And the -- I think it was $12 million of impaired PCLs in the resi mortgage portfolio. How much of that was on new impairments? And I don't know if that is actually still the case. How much of it was on previously impaired loans where you're finding yourself with a longer resolution, you're going to pay someone on [ Mobile On], pay their property taxes, whatever, or maybe not [ Mobile On ] this time of the year, but you know what I mean. Marlene Lenarduzzi: I would say when I look at that portfolio, the impaired portfolio in SFR, a lot of it is still stemming from the segments I've been talking about for several quarters. It's the GTA suburbs, it's in that 2022 vintage. And those are -- and if you look at our formations in that portfolio, which we also provide to you, the formations are also coming down as well. So the formations represent the new that's coming in. And yes, so -- but largely out of that $12 million, a large chunk of that, more than half, is related to that segment that we continue to monitor and provide against. And we feel that we're appropriately provisioned. Gabriel Dechaine: So new formations from the same area codes and vintage, not top-up provisions, that's my terminology, but it's not that? Marlene Lenarduzzi: Part of it is top-up. Yes, there is a -- it's a mix of top-up and new formations. Gabriel Dechaine: Okay. Now as far as the cost savings go and thank you for the clarity on the expense target, the growth target and all that. And I guess, should I interpret that the cost savings emanating from that restructuring that's all benefiting the bottom line with no reinvestment stuff? I know you got to reinvest in your business. But just from a -- if we ring-fence this particular number, that's pure cost savings to the shareholder, yes? Anilisa Sainani: Yes. Thanks for the question, Gabe. You would have already seen the discipline come through this quarter, but you're quite right that the bottom line, that $45 million I was talking about in the subsequent reinvestment, that will play through 2026. You can expect to see the reversal in the expense growth trending right from the get-go. You're seeing it now, and you'll continue to see that into Q1. Gabriel Dechaine: Okay. Great. And then the last one I've got here, the PC Financial. Just a follow-up, I didn't get to ask yesterday, I think of asking. Do we have a -- if you have the ballpark, I'd really appreciate that, when you close, what your target core Tier 1 position will be? Chadwick Westlake: Well, I'd say just plan for a strong consistency right now, Gabriel. It will be -- we expect second half of next year, but we have strong capital ratios, and that will continue, especially the focus on 15%-plus total capital and strong CET1. Operator: And the next question comes from Mike Rizvanovic with Scotiabank. Mehmed Rizvanovic: I want to start with Marlene, just on your reserves. So the 41 basis points, how should we look at the 41? Like it's been built up pretty substantially here the last couple of quarters. And we tend to hear a similar narrative on your confidence in being well reserved. So is the 41 a new normal? It seems like there might have been a bit of a step change here in terms of where you want to sit. Or is it just a function of GILs being elevated for now? And as they come down -- what I'm trying to get at ultimately is as PCLs come in on the impaired side, do you offset that with some reserve releases and get that coverage ratio back down over time? Or is it a new level? I'm just trying to decipher if that's the case. Marlene Lenarduzzi: Yes. Thanks, Mike. I would say that when we look at this quarter, you saw that we have -- based on our forward-looking indicators, we have an increase in our performing provision. And that was driven because of the outlook on the macroeconomic factors, which show unemployment rising to 7.3%, shows GDP contracting even to small degree and staying relatively low and close to 0 for the rest of the year. And so with that in mind, and not expecting the outlook in Q1 and those forward-looking indicators to deteriorate materially more than that, we shouldn't expect another large growth in that -- or a large performing provision in Q1. Does that help answer your question? Mehmed Rizvanovic: Yes. And then just as far as the actual coverage ratio, so that 41 basis points, is that somewhere where you're comfortable sitting at? Or can you see that coming back down in a more positive credit environment, I guess, is what I'm getting at. Marlene Lenarduzzi: Yes. If the credit environment improves, for sure, we would see that coverage -- that 41 basis points come down. Mehmed Rizvanovic: Okay. That's helpful. And then, Chadwick, just a quick one on the PC Financial. Just curious on -- and thanks for the P&L that was provided, the high-level P&L on that business that's being acquired. In terms of -- it looks like about a 4% loss ratio on that portfolio, and that's trailing 12 months. And I'm wondering if you have any -- anything you can offer in terms of like what's the parameter there? Like is that 4% current in terms of the macro outlook being a little bit uncertain? Is it a little bit elevated? Like what is it normally at. I don't have color on if that 4% is a bit high right now or if it's right where it should be as a run rate. And then like where does that tend to go when things get really concerning on the consumer side in terms of risk? Chadwick Westlake: Yes. Thanks, Mike. So I would say it's -- it does reflect the current environment. The normal level would be more in the -- even last year more in that 4.6% range. Trailing 12 months was about 4.2%. I would say -- you asked me this question last time, I'll say again, these -- is there a different type of borrower, right? Is that higher FICO Score, credit score than the Canadian average, high household income, high digital enablement, attractive customer base and over -- well over 80% are prime and super prime. So it is a different quality and well below their loss rate thresholds. So does it reflect in our models, the current credit environment? Yes. And I think you could see this continued trend level. But in our models, do we model it for different scenarios? Absolutely. And it still makes a lot of accretive sense either way. Mehmed Rizvanovic: And then just out of curiosity, are you able to give us a sense of the capital that backs that business just in terms of dollar terms? I'm just trying to get a sense of the ROE of that acquired business. I'm not sure if you're able to provide that right now, but thought I'd ask. Chadwick Westlake: I'd say it's a different way. There's a high CET1 capital position in that, but that's not really the way to think about the business. The way to think about the business is how we're going to close it. And that's where we pegged it at, at 13% at closing. And that's why you're going to see this hurdle really well from a base case and then with even the modest synergies, let alone all the upside from there. Mehmed Rizvanovic: So fair to say that it's a very, very good ROE business in relation to the lending business. Chadwick Westlake: Yes, sir. It is. Operator: And the next question comes from Darko Mihelic with RBC Capital Markets. Darko Mihelic: My questions are for Marlene. The first one is with respect to the residential mortgage impairments. I was just curious if you can talk a little bit about the nature of these formations. In other words, what I'm trying to better understand is, is the primary reason for the formation job loss, or is it simply the weight of the mortgage payment and the over indebtedness of the consumer that eventually has them fall behind and go impaired? And as a follow-on on to that, as we look forward into 2026, is the vast majority of the renewals that are occurring, will they be at a higher payment or a lower payment in 2026? Marlene Lenarduzzi: Okay. Those are great questions, Darko. Thank you. I would say a couple of things. One, when we look at the formations and the reason codes, if you will, for customers who are going to default, it's a bit of a mixed bag. Some of it is related to job loss, some of it is just customers we're holding on for a long time and having a harder time as the macroeconomic environment shifts. As you probably are aware, about 66% of our customers are self-employed. So as there's less activity in the macroeconomic environment, GDP slows, their businesses are impacting and -- are impacted, rather, and we see that happening. In terms of like industry segments, these are industry segments that we see across the portfolios. Construction is impacted. Those working in transportation are other areas that are impacted. And then in terms of other segments, we talked about the -- what was the second part of your question? Can you repeat that, Darko? Darko Mihelic: The potential payment shock on renewals in '26, or relief. Marlene Lenarduzzi: Yes. I've got that. So in terms of renewal, the segment that -- this more vulnerable segment that we've been talking about, the sort of GTA suburb, as you can imagine, the renewal rates have been higher. But that portfolio has actually come down about 26% year-over-year. And in terms of renewal rates, they are renewing into lower rates for the most part, because, you recall, our duration is quite short. And so our customers who were originated in 2022 at those very low rates did -- have already renewed into higher rates and actually have started to renew -- they've renewed into the lower rate and some of them have renewed again into lower rates. So duration is like 1 to 2 years generally. Darko Mihelic: And sorry, is it meaningfully lower or just modestly lower in terms of [indiscernible]? Marlene Lenarduzzi: It's meaningfully lower. Yes. The payments would be meaningfully lower. Darko Mihelic: Okay. And then a follow-on question in -- maybe, I mean sort of -- I just want to make sure that I'm interpreting your remarks. With respect to the forward outlook, I recall last year thinking about a range of 12 basis points or so for losses overall. Are you willing to talk about sort of what's the range for '26? Marlene Lenarduzzi: Not at this time, Darko. Darko Mihelic: Okay. And then my last question is in relation to the transaction, and again, it's aimed at you, Marlene. Does this in any way, assuming the transaction closes as per plan, does this in any way slow down your ARB approval work? Or would that just continue on and you would separately look to eventually get the P&C moved over to ARB more futuristically? I'm just curious if there's any impact at all on your work there. Marlene Lenarduzzi: No, it hasn't. We actually are fully committed to our ARB strategy, and we are moving ahead with our plans on the existing portfolio. And then we will assess the PC Financial portfolio and likely make plans for that moving into ARB remaining standardized. And I would expect it would, based on the outcome of that analysis, then we'll decide. Chadwick Westlake: Darko, what I'd say as well on the question, so our capital allocation and our development plans here continue. We've been working on that for a long period of time. It is important. But also look at the regulatory environment and our regulators have been very open about ARB support or they could also still end up being an ARB late or further changes in risk floors. We don't know yet, but I think we certainly got the sentiment that there will be progress here that will be supportive to greater competition and ensuring we can get investment back into businesses and to consumers. Operator: And the next question comes from Etienne Ricard with BMO Capital Markets. Etienne Ricard: So credit cards will become a new product at EQB. How would you contrast the long-term growth potential of the card portfolio relative to mortgages? The reason I'm asking is I tend to think of EQB's long-term loan growth track record to be in the low double digits for mortgages. And I think we're all aware of the industry tailwinds in that space with the shift to mortgage brokers and the growing size of the alternative market. Now credit card appears more GDP-driven. Would you agree with this statement? Chadwick Westlake: I think a couple of things to think about. So we'll -- after we close, we'll share more -- a better outlook for the business. But what I would say is don't just think about this as a credit card. I think about this very much as payment solutions for Canadians and a truly valuable, in many cases, low fee, no fee card and payment solution for Canadians. And importantly, backed by the power of the PC Optimum program with those 17 million members that is the best in this country, and it brings so many options for Canadians. So they are going to want to grow. We are going to grow cards and customers because of the payments with the loyalty, because it adds more value for people in this country. So there's a huge upside potential there for us, and that includes with existing EQ customers where there's going to be a benefit here, plus we can do more for PCF customers as well as they come into our ecosystem. It's a win-win on both sides. But I see payment as growing as a fundamental need for Canadians. And these are -- this is going to give us the tools to grow that either way. And that will then drive revenue, of course too, when you think of the noninterest revenue. This is not just about [ NII ] or cards. This gives it all, backed by PC Optimum. And we have the exclusive position with that PC Optimum. So it's really important, I think, to keep that as front of mind. Etienne Ricard: And does the transaction impact your capital allocation policies, whether that's share buybacks heading into closing or maybe the dividend payout looking longer term? Chadwick Westlake: No. And as you heard Anilisa say, we have a buyback plan and intent for 2026, and we have a great, strong capital position, and that will all continue. Operator: And the next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe I could just follow up on that theme, Chadwick. Can you just explain, if you're offering as an exclusive financial partner here with PC Optimum, you're going to be offering loyalty points to your EQB customers, I assume, outside of just the credit card. How should we think about the economics there? Will this be a cost to you that you offset with greater deposit growth and ultimately lower NIM? But is there also a benefit here from higher interchange payment fees that ultimately help pay for these loyalty costs? Chadwick Westlake: Yes. I think it's a combination of the factors. So there'll be higher cash rewards. There will definitely be a higher growth in our funding capabilities. Obviously, we'll have higher interchange over time. But this will become part of the value proposition overall, where if we have PC Optimum and our existing customers can use it, that will encourage them to want to deepen their relationships and do more business with us. That's really the underlying factor. I think we -- if you think of the full shelf, we have the notice savings accounts, excellent FX transfer, U.S. dollar accounts, registered accounts, excellent payroll accounts. Everything will come into that platform and then we can cross-sell more from there that will drive positive economics. Graham Ryding: Okay. So ultimately, greater penetration on the deposit side, which helps your NIM? But also on the revenue side around the interchange fees. Chadwick Westlake: That's correct. Graham Ryding: That's how you offset the loyalty costs. Okay. And then my second question is just when you think about the sort of cross-sell opportunities here, selling that PC MasterCard into your existing 600,000 EQ Bank customers, is that potentially an easier synergy to execute on versus increasing that EQ Bank customer base through either leveraging PC loyalty program or just the distribution infrastructure that PC Financial has? How do you think those sort of different synergy opportunities? Chadwick Westlake: Well, both. I think as a customer, you're going to love it when you have the PC Optimum loaded into the EQ account. You're going to see the integration, that you're going to have all that and the platform to drive the growth. So it is both of what you said. And what I want to say again, it's -- when -- it's a little early for us to give all the details, there's going to be more to come as we get closer to close. This is an excellent deal for our shareholders, for customers, for employees. There's hurdles at the 15%-plus ROE with very, very modest savings. All of what you're talking about there is the full potential upside still for us and our franchise. And really, this is about Canadians first and the product shelf and the value that everyday Canadians have. And this is going to complete that in a very significant way. So it's Canadians first. And by doing that, we're going to do really well for our shareholders here and a lot more upside to come as we get closer to close on this. Graham Ryding: Okay. And just my last question, you gave us some guidance on loan under management, I think, mid to high single digits growth. Sorry, high single to low double digit. What is your growth expectation for on-balance sheet loan growth for next year? Anilisa Sainani: Yes. Happy to take that one. Obviously, as we look ahead to 2026, we see the green shoots for economic recovery and growth. From a LUM perspective, as we said, high single digit to low double digits range for 2026, so very consistent with what we've delivered this year, though skewed to the latter half of the year. On the personal SFR side, so that's all on balance sheet, we see an improved rate environment not relying on future cuts, but the cuts that came through certainly in the last quarter, combined with pent-up housing demand to be quite strong. De-cumulation, we see to be strong momentum as we see Canadians wanting to age in place and executing their estate planning. And so overall, we expect kind of medium single-digit growth in that portfolio. As a reminder, I would just call out, we are continuing to intentionally and strategically pull back from the insured single-family residential. So there is declines in that portfolio that offset some of the growth that we're seeing in the uninsured piece. And that's, again, as we balance total risk-adjusted returns. In commercial, we see market demand for multifamily residential that's expected to continue to grow. There continues to be a need for affordable housing, and the rate environment plays through there as well. And I know you're focused on the on-balance sheet, but just one final point on the off-balance sheet. We have the -- in the Federal budget, we were really pleased to see the expansion of the CMB pool limits, and we stand to benefit from that as we do have a market-leading securitization provision. And so that allows us to kind of lean in into even more capacity on that side. We expect, roughly speaking, mid-single-digit million growth there. Operator: And the next question comes from Doug Young with Desjardins. Doug Young: Chadwick, I guess, both of these are probably for you. But on the wealth priority side, you talked about it in your prepared remarks. And that's not new. I think you talked about it before, wanting to build some form of wealth platform. I assume this is not organic, that you would do this in an inorganic manner. Can you do something else before you close PC and before you integrate PC? And can you maybe just remind us what it is that you're interested in as you talk [indiscernible]? Chadwick Westlake: First, I'm going to repeat again though that, obviously, for sure, we've highlighted that wealth represents an important strategic gap we're looking to close over time. I don't think it's appropriate for me to speculate on M&A, but I would say it's -- there's different pros and cons to building versus buying in the wealth space. And our current focus though will remain on the successful integration of PCF first. And then it's the remaining ingredient is wealth. The simplest way I can say is for a complete successful Challenger, you need the best day-to-day offering, the best payments offering and now we're getting loyalty, we have that, we'll have a direct reach to millions of customers. And then what could be most constructive within the EQ Bank offering is a higher-yielding offering integrated into the digital lineup, that really gives Canadians more choice for to put their money outside of, say, higher interest savings accounts and GICs and more. So a real long-term perspective on how to generate more yield integrated into the lineup is one of the ways to think about it. And then outside of that, when you step back and think of EQB, remember, we have an excellent alternative asset management company called ACM Advisors. We have one of the top trust companies in Canada that's performing really well. So we have various ingredients. But we'll bring that concerted focus back to EQ Bank and that integrated wealth offering to give more choice to customers all within the platform. Doug Young: I assume this is more distribution than manufacturing. Chadwick Westlake: Yes, distribution -- so it is distribution. We represent distribution as well now. So there is -- we need the product and the solution on our distribution shelf, is one way to think about it as well. But it is more anchored in our expertise in distribution, but bringing the product into the shelf is really important. Doug Young: Okay. And then you can correct me if I'm wrong, second question here, I think you talked at the potential ROE approaching 12% by the end of fiscal '26. And when I kind of look at the math, it's hard to get there unless you have a material improvement in the PCL versus what we saw. And I'm talking like a PCL half of what we saw in Q4. And so I'm just trying to get a sense, is that -- am I reading that right? Did you talk about 12% by the end of the year? Like what would be some of the drivers to get there? And is it mostly PCLs? Obviously, expense growth, kind of deposit operating leverage would be key. Just trying to kind of understand a little bit more about that. Chadwick Westlake: Yes, I'd say a couple of things. So what I did say is 12%, but I said higher than that by later next year. And step one is the expense side that analysts have spoken about that we've delivered on. We can control the cost. You haven't even seen that benefit roll through yet. That will start rolling through in Q1. And that's the most significant component of it. And we're planning and ready, if it is a slower market, if it is a lower revenue market, then we get along there just with the expense side. And then as the revenue environment picks up, that will improve, especially with the net interest margin discipline that we brought in and how we brought more expansion back to that. And then your other ingredient is PCL, as you said, and we -- you heard Marlene's sentiment on that. Again, we do think we're at a position of strength and there's a lot of factors to consider, but we would expect that improvement later next year. So when you add all those up, plus then you think about your denominator, right, and what we're doing with capital and our intent to continue with buybacks to further accrete ROE and really put the capital to work, all those ingredients combined, I think you see -- we would expect, in our base case, you see that higher by later next year and then moving towards our medium-term objectives into the following year at pace. Operator: And the last question comes from Stephen Boland with Raymond James. Stephen Boland: Just one question. When you talk about pulling back on the insured single family, I always thought that was a tool you use to basically retain the customer and maintain broker relationships as well. Like you go into a broker and they have prime and you can insure it, but they also have alternate traditional single family and you underwrite all of them. So has that changed? Has the consumer behavior changed or a change in thought? I'm just curious about that. Chadwick Westlake: Yes. Thanks. So pull back, sure, we're -- our focus is growing the uninsured. Our focus is supporting the mortgage brokers. The mortgage brokers, we always still say are the best ways to get a mortgage in Canada. They are vital partners and we're going to support them and serve them really well. And first priority is the uninsured. And in some cases, yes, you have some insured. But insured is a thinner margin. It's very competitive, and we want to focus our capitals as well where we can win. We're doing really well for Canadians. So it's a bit of a combination. We pull back more. It's not a new thing. It actually goes back probably a year or 2. So you'll still see some, but it hasn't been a priority. And I think that's often why our asset growth is misperceived. People just look at OSFI data and say assets are down. Well, it's because we deprioritized lower profitability. We're not chasing volume. We're putting on thoughtful, profitable growth, underpinned by Canadians needs first. So that's what we're doing here as we go forward. Stephen Boland: And how has the broker reaction been to that, that you would do those types of loans and then you're kind of saying, no, we don't really want to do it anymore? Chadwick Westlake: It's not new news. This is longstanding. I think you're just seeing some of that play out, this was, call it, over a year ago. I'd say our partnerships with brokers, our strength -- the strength of our relationship with brokers has never been stronger. They fully understand our model and where we can best serve them. So I'd say it's very positive, Stephen. Operator: Thank you. And that concludes our question-and-answer session. I would like to turn it back to Chadwick Westlake for closing remarks. Chadwick Westlake: Thank you, everyone, for joining us today. We'd like to thank everyone for their continued support and wish everyone a safe and joyous holiday season. Anilisa, Lemar and I look forward to seeing some of you early in the new year at the RBC Capital Markets Bank CEO Conference on January 6. Thanks very much. Have a great day. Operator: And this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Aurubis Analyst Call. [Operator Instructions] Let me now turn the floor over to Elke Brinkmann. Elke Brinkmann: Good afternoon also from my side and a warm welcome to the conference call on the full year results of the fiscal year 2024-'25 of Aurubis AG. We, from Investor Relations are here with our CEO, Toralf Haag; and our CFO, Steffen Hoffmann, who will present the figures for the 12 months of 2024-'25 and current developments at Aurubis. After the presentation, the floor will be open for questions. [Operator Instructions] Before we begin, a brief reminder of the disclaimer on forward-looking statements. Today's capital markets presentation contains forward-looking statements about Aurubis plans and expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Let me now turn the floor over to Toralf Haag. Toralf Haag: Thank you, Elke, and welcome, everybody, to our conference call for the full year results for the fiscal year 2024-'25. Aurubis looks back on a successful year in which our competitor strengths have once again been the foundation of our resilience. The past fiscal year was characterized by a highly dynamic market environment with unprecedented shifts in the market. The concentrate market swung into a deficit, motivating Asian smelters, in particular, to substitute copper scrap for concentrate. Developments that send TC/RCs and scrap RCs on a downward trajectory. Thanks to our multimetal excellence, our sustainability leadership but also our closing the loop activities with our customers, we were able to fully supply our primary and secondary recycling smelters. At the same time, demand for metals searched where trade measures redirected material flows and created local deficits. As an integrated copper producer, we were able to reliably supply our customers and ensure the flow of critical metals to strategic relevant industry sectors. Overall, we managed market challenges well, while also achieving key milestones in our strategic growth agenda. One was first melt Phase 1 of Aurubis Richmond. We are well on track and our robust business model was a cornerstone of our resilient performance in the past fiscal year. On the next page, I would like to give you an overview of the key financial highlights for fiscal year 2024-'25. In line with our sharpened guidance range, operating EBT came in at EUR 355 million. As highlighted before, this result was achieved in a challenging economic environment and includes the successfully completed major shutdown in Pirdop. EBITDA was at EUR 589 million versus EUR 622 million in the prior year, reflecting our solid operational performance. Operating ROCE decreased to 8.8% compared to 11.5% a year ago. This is primarily due to our ongoing strategic investment program, which is increasing capital employed until the full earnings contributions come through. Net cash flow was a strong EUR 677 million, significantly above the prior year's EUR 537 million level driven by the robust earnings situation and a clear improvement in working capital. Q4 was outstanding with EUR 319 million net cash generation alone. On the back of a healthy cash generation in Q4, free cash flow, pre-dividend improved by more than EUR 100 million from minus EUR 219 million in the previous year to a minus EUR 95 million. On this basis, we are proposing increasing the dividend to EUR 1.60 per share, up from EUR 1.50, which underlines our confidence in the business and its cash generation. Looking ahead to the next fiscal year, we are confirming our forecast of an operating EBT between EUR 300 million and EUR 400 million, which is expectedly roughly on par with the 2024 and '25 level, as well as free cash flow in a positive territory. Turning on the next page to our production figures. I would like to highlight once again that Aurubis is much more than just copper. We have a wide array of strategically relevant metals. On the input side, we processed around 2.2 million tonnes of concentrate a slight decline of 4% year-over-year, reflecting the planned maintenance shutdown in Pirdop and operational issues in Hamburg at the beginning of the year. At the same time, we increased copper scrap and blister input by about 3%, totaling 510,000 tonnes, demonstrating our ability to source and process secondary raw materials. Other recycling material throughput was down by 6% to 510,000 tonnes. On the output side, copper cathode production was stable at 1.1 million tonnes. In line with concentrate throughput development, we reduced roughly 2 million tonnes of sulfuric acid. The picture for other industrial metals, along with precious and minor metals is mixed. While some quantities exhibited fairly stable development or even increased, other metal quantities such as gold dropped versus the prior previous year, which is, to a large extent, a collection of the feed mix in connection with lower throughput levels. Our output of wire rod and copper shapes was on par with the prior year level. Flat rolled products and specialty wire volumes, however, were down 31%, mainly because of the previous year figures included volumes from the Buffalo plant, which we sold. Overall, our smelter network showed a solid operational performance. Our unique smelter network allows us to supply high-quality products from both primary and secondary sources with a high share of recycled content. As you can see, the share of recycled content in Aurubis copper cathodes has increased by 1 percentage point to 45%. And all of our copper products contain a sizable share of recycled content as well. We recovered 20 different metals and elements that are contained in our raw materials, such as tin. And here, we achieved even 100% recycled content, which highlights our strong position in circular economy solutions. This is the key strength of our network of plants in Europe and North America and is also a clear competitive advantage in securing supply and delivering sustainable products. Let me now run through the market environment of our main products and raw materials. Starting with the downstream side. European copper premiums increased significantly after the U.S. tariff decision. And although they came down from the elevated levels in Q4, they stayed clearly above last year's level. Sulfuric acid prices declined from prior year peaks but stayed stable at a relatively high level, supporting our earnings in the CSP segment. On the raw material side, according to industry reports, treatment and refining charges for copper concentrates on the stock market had fallen into negative territory in the recent quarters. They have now stabilized but remain at very low levels, reflecting the tightness in the concentrate market. This has been strained further by major main disruptions -- mine disruptions towards the end of Q4. Furthermore, tightening scrap markets led to declining refining charges for recycling materials, particularly in Q4. Overall, we saw favorable development on the product side but faced headwinds from raw material markets, especially for concentrates and scrap. However, please bear in mind that there are no direct one-to-one correlation with our P&L. We are actively managing to remain independent for short-term fluctuations. Let me now turn to the price development of -- for key metals in the U.S. dollar. As you are all aware, gold and silver prices increased sharply in Q4 of '24-'25 up 44% year-over-year and at new all-time highs, driven by macro and geopolitical factors. In comparison, copper prices remained relatively stable with a moderate increase towards the end of the quarter. This favorable development of key metal prices positively contributed to our metal result as we will see later. The U.S. dollar euro exchange rate moved into a tight range over the period with the U.S. dollar depreciating from the levels at the beginning of the year. Aurubis long U.S. dollar position remains unchanged at approximately USD 530 million for the fiscal year with 54% of the U.S. exposure hedged at a rate of 1.125 for the fiscal year '26-'27, around 40% of the exposure is hedged at a rate of 1.188. And now I hand over to Steffen Hoffmann for more details on the financials. Steffen Hoffmann: Thank you, Toralf, and a warm welcome from my side too. Let me take you through the financial details of fiscal year '24, '25 and touch on the KPIs in this chart. Our revenues increased by 6% to EUR 18.2 billion, mainly reflecting higher metal prices. Gross profit decreased slightly by 4% to EUR 1.6 billion as did EBITDA, which came in at EUR 589 million, which is minus 5%. Operating EBIT came in at EUR 358 million and operating EBT at EUR 355 million, 14% below the prior year. Compared to the EBITDA, the decrease of the EBT was more pronounced as in '24-'25. Depreciation increased by EUR 20 million as planned due to our strategic projects. A higher metal result significantly increased earnings from sulfuric acid a robust contribution from product sales, as well as lower legal and consulting costs positively impacted the result. However, lower concentrate throughput and reduced TC/RCs lower earnings from processing of recycling materials and the anticipated higher ramp-up costs and depreciation for strategic projects weighed on the results. Net cash flow improved significantly to EUR 677 million from EUR 537 million, underscoring the strong cash generation of our business. Our operating ROCE for fiscal year '24-'25 was 8.8% against 11.5% the year before, reflecting the investment phase we are currently in. Looking on the next chart at quarterly performance. Q4 showed clear improvement over Q3. Our operating EBT increased by 19% to EUR 68 million. Higher concentrate throughput following the successful completion of the Pirdop shutdown in Q3 supported earnings despite lower TC/RCs. Please keep in mind that the shutdown was completed in Q4, so a minor portion of the shutdown still affects Q4. In Lunen, we recognized a EUR 10 million environmental provision in Q4, while Q3 was impacted by EUR 12 million additional depreciation on the at equity investment. Net cash flow almost doubled quarter-over-quarter to EUR 319 million, mainly due to the significant improvement in net working capital. Moving on to the split of our gross margin, which is a nice representation of our multimetal strategy and the diversification of our earnings drivers. You saw this breakdown at our Capital Market Day, and we decided to provide you with the same breakdown for the 12-month period as well. In total, gross margin was at around EUR 2.077 billion, broadly in line with the prior year level of about EUR 2.1 billion. Please bear in mind that our former FRP site in Buffalo was still included in the overview for fiscal year '23-'24. Compared to the previous year, the metal result share increased mainly on account of strong precious metal prices but the higher copper price contributed as well. Here, we see again that Aurubis is more than just copper. We are multimetal and we will continue to strengthen this profile through targeted investments. However, declining concentrate TC/RCs weighed on the overall gross margin, while the scrap RC share remained stable. Still, our strategy of building on long-term partnerships and more complex materials shielded us to some extent from the extreme developments visible on the spot market. In products and premiums, higher asset prices supported the group's gross margin, partially counteracting the TC/RC decline. And with respect to product premiums, I'd like to reiterate that Buffalo was still included in the previous year. Overall, the balanced mix of these earnings drivers helped us to mitigate volatility in individual markets and once more underpins the resilience of our business. Let me now go into segment performance, starting with Multimetal Recycling. MMR generated an operating EBT of EUR 13 million compared to EUR 79 million in the previous year. Operationally, the throughput of recycling materials was slightly above the prior year level. However, in an environment of declining refining charges for recycling materials. The second half of the fiscal year was characterized by a challenging market environment with an impact on RCs, volume and mix. Additionally, compared to fiscal year '23-'24, the segment's performance was impacted, in particular, by higher ramp-up costs for strategic projects, especially at Aurubis Richmond, and furthermore, as we've alluded to, an impairment on an equity investment in the amount of EUR 12 million and a provision for a planned environmental measure in the amount of EUR 10 million weighed on the segment's performance and can be treated as a one-off. The ROCE declined from 5.6% to 0.9%, reflecting both the lower earnings level and the increase in capital employed, mainly due to Richmond. Overall, we are not happy with this level at MMR and we'll focus on improving the financial performance going forward. Turning to the segment's gross margin. Overall, the gross margin increased slightly to around EUR 640 million versus EUR 623 million in the prior year despite the tightening scrap markets. This increase is attributable mainly to the segment's metal result which benefited from higher metal prices. refining charges for recycling input were stable and contributed roughly 45%, very close to last year's 46%. Contribution of products and premiums in MMR remained flat compared to the previous year. Let's now take a look at the Custom Smelting & Products segment. CSP delivered an operating EBT of EUR 446 million versus EUR 458 million, so almost at the prior year level despite the deterioration of concentrate TC/RCs. The ROCE for the segment was 18.2% compared to 19.6% last year, influenced again by a higher capital base due to investments. Concentrate throughput was at 2.18 million tonnes and sulfuric acid production at roughly 2 million tonnes, both slightly below the prior year due to the major plant shutdown in Pirdop. Cathode output rose slightly to 582,000 tonnes, and rod and shapes volumes remained broadly stable. FRP products and specialty wire volumes declined to 90,000 tonnes mainly due to the sale of the Buffalo plant in the prior year. Overall, CSP showed good operational performance in a challenging market environment and delivered earnings broadly in line with last year, despite the Pirdop shutdown. Looking at the gross margin. This, in CSP highlights the different moving parts. Total gross margin was approximately EUR 1.44 billion, slightly below last year's level, reflecting lower global treatment and refining charges, as well as lower concentrate throughput. Accordingly, treatment charges for concentrate and recycling input contributed around 18% of gross margin, down from 24% in the prior year, mirroring lower TC/RCs and subdued scrap RCs. The metal result increased to 34% from 27% in the prior year, driven in particular by higher precious metal prices and higher copper prices. Products and premiums contributed 48%, roughly in line with last year's figure. This reflects significantly higher earnings from sulfuric acid and robust demand for copper products and here again, the reminder is that last year's figures included Buffalo for 11 months. So while TC/RCs were under pressure and throughput volumes were lower due to the shutdown in Pirdop, we successfully compensated with a stronger metal result and product contributions. Let us now take a look at cost development in the group. Total group costs were around EUR 1.9 billion, slightly below the EUR 1.98 billion in the prior year. Distribution among the cost categories was quite similar to last year. The decrease in total cost is largely due to the sale of the Buffalo plant and thus a lower asset and cost base. Personnel costs represented about 33% of total cost slightly increasing due to higher headcount, mainly for strategic projects, as well as wage increases. Our energy costs declined mainly on account of the sale of the Buffalo plant. For the remainder of the group, energy costs were stable due to energy management. Consumables and external services, both around 12% and at 22%, other operating expenses like logistics or maintenance were stable versus previous year. Depreciation and amortization increased as expected due to our strategic investments, bringing total D&A to about 12% of the cost base. Excluding D&A, our total cash costs decreased to EUR 1.665 billion from EUR 1.764 billion in the prior year, reflecting our cost discipline and portfolio adjustments. Turning to cash flow. We saw a very strong development in '24-'25. Starting from left to right, operating EBITDA of EUR 589 million is the starting point, reflecting our robust financial performance. Net working capital improved significantly driven by higher liabilities, partly offset by higher inventories. Tax payments, however, increased to EUR 92 million on account of the application of the global minimum tax rate in Bulgaria, as well as deferred taxes. This led to a net cash flow of EUR 677 million, clearly above the prior year's EUR 537 million. Cash outflows for investment activities remained high at EUR 754 million, mainly for Aurubis Richmond, complex recycling Hamburg and the planned Pirdop shutdown. Free cash flow before dividend was at minus EUR 95 million, which is a marked improvement versus the previous year's minus EUR 219 million figure and reflects that the peak of our investment phase is now behind us. In total, we paid dividends in the amount of EUR 66 million, which results in a free cash flow after dividends of minus EUR 160 million. Overall, we focused on strengthening the cash flow profile while executing large strategic projects. I would now like to move on to some of our balance sheet KPIs. Our equity ratio is 53.5%, slightly below almost 56% last year but very comfortably above our 40% target and above. Our net leverage is again very low at 0.5% and well below our maximum target of 3x EBITDA. Please take note that the capital expenditure of EUR 771 million on this slide includes capitalized own work. And for this reason, is slightly higher than the cash figure shown on the previous slide. Capital employed increased to roughly EUR 4.1 billion from around EUR 3.7 billion, reflecting the investment program. The net cash flow, as mentioned before, improved to EUR 677 million. So I think it's fair to say overall that the balance sheet remains very solid despite the high level of investments and the financial leverage remains low, giving us ample flexibility. The next slide is meant as a quick reminder of our updated capital allocation policy and our clear commitment to maintaining a strong balance sheet while pursuing disciplined growth and shareholder returns. Besides aiming to keep the equity ratio above 40% and maintaining a maximum net leverage of 3x EBITDA at the fiscal year-end, we provided guidance on how to allocate available capital among approved growth projects and baseline CapEx, as well as dividends. For the latter, we sharpened our dividend policy at the CMD and foresee a payout ratio of up to 30% of the group's operating consolidated net income in the medium term for fiscal year '24-'25, we stated that we would aim for a 25% payout ratio since the last fiscal year was still marked by high investment activity. So what's now our concrete dividend proposal on the next chart. Our operating EPS was at EUR 5.97 in '24-'25, down from EUR 7.66 in '23-'24. Main reasons for the decline were the lower operating EBT, as well as higher tax payments due in part to the higher corporate tax rate in Bulgaria, which I mentioned before. Despite the lower earnings base, we propose increasing the dividend to EUR 1.60 per share up from EUR 1.50 per share last year, continuing the gradual upward trajectory in absolute terms. This would correspond to a payout ratio of 27% which is above the 25% target for the transition year that I've just mentioned. It once more underscores management's confidence in the business and its outlook. While this would increase the absolute dividend, the dividend yield is lower than in previous years due to strong share price performance. Still, the absolute dividend amount and our policy reflects a clear commitment to shareholder renumeration. Looking ahead to fiscal year '25-'26, the mix picture for our main macro drivers that we presented at the CMD remains largely unchanged. Raw mat supply is not ideal but manageable thanks to our long-term contracts and market position. As many of you are aware, concentrate supply remains tight, and we remain cautious despite some hopeful news flow in recent weeks. Hence, we expect TC/RCs to remain at the low level of the recent months. For RCs for recycling raw mats, we expect a stable outlook, although recent months presented more of a mixed picture. Keep in mind that visibility in these markets is generally limited. The euro-U.S. dollar exchange rate remains affected to watch as it has developed less favorably for us in recent months, but we manage our exposure through our hedging and commercial policies. The sulfuric acid market is of a more short-term nature as well. And prices have normalized from previous peaks but are still at a sound level. We continue to see healthy demand from the chemical and fertilizer sectors, although with more volatility compared to the previous year. Metal prices and demand for our products are expected to remain supportive overall, especially given structural trends such as electrification and infrastructure investments. In total, we expect a challenging raw mat environment, though with positive contributions from metals and products. Despite the somewhat mixed macro picture, we expect a sound '25- '26 fiscal year. We maintain our outlook for operating EBITDA between EUR 580 million and EUR 680 million and an operating EBT in the range of EUR 300 million to EUR 400 million, roughly at '24-'25 level. Bear in mind, please, that the EBT level mentioned includes higher depreciation in the order of EUR 50 million. For CSP, we expect an operating EBT of EUR 280 million to EUR 340 million. On the one hand, this range reflects the lower TC/RC level that affected fiscal year '24-'25 only in part and will now affect '25-'26 on a full year basis. On the other hand, besides headwinds from the euro-U.S. dollar rate we anticipate higher costs for footprint expansion due to strategic projects like CRH or Tankhouse expansion Pirdop. Higher depreciation will weigh on the segment's financial performance as well. On the other side, increased material prices, high demand for copper products and improvement in operational performance will offset the challenges but only partially. Still, considering that we are only 10 weeks into the new fiscal year, there might also be scenarios in which the segment's EBT comes in at the upper end of the guidance. For MMR, our expected operating EBITDA range is EUR 80 million to EUR 140 million. From today's perspective, we do not expect negative one-off items like last year and ramp-up cost in Richmond to impact the segment's performance in fiscal year '25-'26. Furthermore, increased metal prices and high demand for copper, as well as an improvement in operational performance should support the segment's earnings level. Regarding the development of recycling raw mat markets, we maintain a more cautious view and higher depreciation at segment level will partially counteract the positive items. Also here, they are still 40 weeks ahead of us in this fiscal year. We anticipate net cash flow in the range of EUR 640 million to EUR 740 million, driven by a strong operating performance and further working capital management, which would translate to free cash flow before dividend at breakeven, reflecting the combination of reduced investments and cash generation improvements. Operating ROCE is expected between 7% and 9% with CSP at 11% to 13% and MMR at 6% to 8%, mirroring the increased capital employed from the investment activities mentioned. Overall, we confirm our previous guidance and expect another solid year. To help you frame the guidance, this slide, which we presented in detail at the CMD, schematically shows how our price change of 10% versus our assumptions for fiscal year '25-'26 would impact our EBT, a 10% change in concentrate TC/RCs, recycling RCs or sulfuric acid prices. Each translates into a low double-digit million euro impact on operating EBT for '25-'26. A 10% change in the euro-U.S. dollar rate or the copper premium would lead to a low to medium double-digit million change of the EBT. The highest sensitivity is visible in the metal result, a 10% price change across the entire metal portfolio would translate into medium to high double-digit million euro impact. Again, this illustrates that the diversified set of drivers influences our results and the drivers that may have been expected to have a higher weight in the earnings composition I refer to TC/RC turn out to be less dominant. At the same time, we actively manage these exposures. On CapEx, we are now moving beyond the peak of our current strategic investment program. More than 75% of the existing EUR 1.7 billion strategic CapEx program has already been spent. And the remaining strategic CapEx will phase out gradually as shown here, basically almost everything of the remainder in the new fiscal year. You can see that total CapEx peaked in '23-'24, declined in '24-'25 and is expected to decline further in '25-'26 as major projects are completed or enter commissioning. Therefore, we are planning with the strategic CapEx in the amount of EUR 350 million, EUR 100 million lower than in fiscal year '24-'25. At EUR 320 million, our expected baseline CapEx falls at the lower end of the EUR 300 million to EUR 400 million range, reflecting our CapEx discipline and the change in our primary shutdown cycle. As strategic projects come on stream, depreciation and amortization will gradually increase, reflecting the higher asset base. As mentioned before, DNA is anticipated at EUR 50 million above the prior year level. And with this, I'd like to hand back over to Toralf. Toralf Haag: Thank you very much, Steffen, for taking us in detail through the financials. The next slide we presented to you at our CMD at our Capital Market Day, and I would like to briefly repeat our path forward to frame the next slide. The decade of metals has begun and megatrends such as electrification, energy infrastructure, artificial intelligence, and global security are supporting long-term demand for our products and capabilities. Our ambition is to forge resilience and to lead in multimetal delivering impact across five strategic pillars: focused growth, innovation, efficiency, commercial excellence and impact from our investments. We are targeting value-creating growth, where we hold a leading competitive position, and we aim to maximize multimetal yields through innovation in metallurgical know-how. We continuously optimize our operations for peak efficiency and strengthen our commercial excellence to deep market access and competitiveness. This is underpinned by three key enablers. Sustainability leadership, our performance culture and financial strength. In the fiscal year, '24-'25, we successfully advanced projects into the in-commissioning phase. Including Bleed Treatment Olen Beerse, Aurubis Richmond Phase 1 and the third Solar Park in Pirdop. BOB has already started commissioning in December '24, and the first phase of Aurubis Richmond celebrated first month in September '25 and is now in the early stages of hot commissioning. Looking ahead to the current fiscal year, important projects such as Complex Recycling Hamburg, Aurubis Richmond Phase 2 and the Tankhouse expansion in Pirdop are planned to go into commissioning and expand our multimetal network. Projects such as Slag Processing in Pirdop and the new Precious Metal Refinery in Hamburg are still further out with commissioning scheduled in the fiscal year, '26-'27. These projects will create impact by enhancing our recycling capacity improving efficiency and supporting our sustainability and growth ambitions. In the next few minutes, I would like to highlight the 3 key projects for '25-'26 in more detail. First, Complex Recycling Hamburg or CRH, is expected to start commissioning in the first half of the current fiscal year and will further optimize the metallurgical network in Hamburg. The facility will show -- will allow for about 30,000 tonnes of additional external recycling input per year, increasing our ability to process complex secondary materials. From a gross margin perspective, the project will contribute to strengthen the metal result, as well as our earnings from TC/RCs and RCs. Second, Phase 2 of Aurubis Richmond in the U.S. will double the intake capacity for complex recycling materials to 180,000 tonnes. Commissioning will be followed by a technical ramp-up phase, after which we expect a material contribution to earnings. Once fully ramped up, Aurubis Richmond will contribute to increasing TC/RCs and RCs, as well as the group's metal result. Third, the Tankhouse expansion in Pirdop will enable us to process Pirdop's entire anode production directly on site, adding around 50% more refined copper production capacity at the site. This additional cathode production will mainly add to the group's earnings from product and premiums, while also supporting the metal result to a lesser extent. Together, these projects support our multimetal strategy, strengthen our footprint in Europe and North America and further enhance our resilience. Our commercial excellence pillar, specifically target strengthening the relationship with our partners, downstream but also upstream in particular. Secure competitive raw material supply is crucial for Aurubis. Here are some of the key agreements we concluded. With Troilus Gold in Canada, we signed an offtake agreement for 75,000 tonnes of copper-gold concentrate based on a positive feasibility study supported by a German government financing package. Our metallurgical capabilities and ability to process complex raw materials allow us to unlock resources and create value together with Troilus. With Viscaria in Sweden, we have agreed on 25,000 tonnes of copper concentrate deliveries from 2028 to 2035, with an option for extension. This mine project has a strong ESG profile and strengthens European supply. With Teck Resources, we signed a memorandum of understanding, collaborate on responsible mining and sustainability, focusing on traceability, transparency of ESG performance and credible certification frameworks, building on our long-standing partnership. In our collaboration with both Viscaria and Teck, our authentic sustainability leadership has been key to building and further strengthening the relationships. These agreements support our long-term raw material security, enhance our ESG positioning and contributes to the resilience and competitive of our supply portfolio. To summarize, 2024-'25 was a successful fiscal year for Aurubis. Despite planned maintenance shutdowns, one-off items and a challenging market environment, we delivered a solid EBITDA of EUR 589 million and an operating EBT of EUR 355 million, which was comfortably within our guided EBT range. Cash generation improved significantly as is reflected by net cash flow of EUR 677 million, and we aim to improve it further going forward. We reached key milestones in our strategic product including the first melt at Aurubis Richmond. The proposed dividend of EUR 1.60 per share represents a payout ratio of roughly 27% and reflects our confidence in the business and its long-term prospects. For 2025-'26, we expect an increased metal result and higher contributions from our product business. This will compensate for challenging raw material markets. With declining annual CapEx, we expect free cash flow generation to improve to a breakeven before dividend, while we confirm our guidance for an operating EBT of EUR 300 million to EUR 400 million, broadly at the '24-'25 level. Overall, we are well positioned to benefit from structural megatrends and to continue delivering on our performance 2030 strategy. Let me close the presentation by reiterating what makes Aurubis stand out. First, we have a strong market outlook. The decade of metals has begun, and megatrends are expected to drive double-digit growth in our end markets by 2035. Second, Aurubis holds a leading position as a top copper and multimetal producer in Europe and the U.S., with a unique setup of capabilities in primary and secondary metallurgy. Third, our strategy focused on growth and resilience, leveraging multiple earning drivers to increase our leadership in multimetal and our impact, efficiency and robustness. Fourth, we deliver strong financials. On the back of a world-class operations and focused investments, we aim for steady EBT growth and a 15% long-term ROCE target. Fifth, we are clearly committed to a shareholder value, combining value-accretive growth projects with an attractive dividend policy and potential additional returns of excess cash. In short, performance, resilience and multimetal leadership define Aurubis investment case. And with this, I would like to hand over to Elke Brinkmann. Elke Brinkmann: Thank you, Toralf and Steffen. I would like to provide you with an outlook on the next event following our Q4 publication. We will publish our Q1 2025-'26 results on February 5, followed by the Annual General Meeting on February 12, '26. And with that, I would like to ask the operator to take over for your questions. Operator: [Operator Instructions] And first up is Boris Bourdet from Kepler Cheuvreux. Boris Bourdet: My first question would be on the recent developments you alluded to in your presentation regarding the recent discussions on TC/RCs. We've heard that the Chinese CSPT was committed to reduce the production by 10%. I was wondering whether that would change your view on TC/RCs marginally. And can you share with us where you would expect the benchmark to land, if any? And also from Slide 11 on TCs, I can make a rough calculation that -- it meant -- lower TCs meant EUR 90 million downward contribution this year. Is it the same kind of contribution you expect next year? That's the first question. Toralf Haag: I'll start with the first question, and then Steffen can take on the second question. Yes, you're right, Boris. There was also a publication that the Chinese smelters plan to reduce the capacity, the production output by 10%. And we have not felt that in the spot TC/RCs. But we expect a slight recovery of the TC/RC level. But again, it's going to be a slight recovery in no major recovery.. But this is positive news which unfortunately only will have limited impact so far. Steffen Hoffmann: And Boris, on your second question relating to TC/RCs, right? We are flagging that also for this year, we see an impact of declining TC/RCs for copper concentrates. So basically low TC/RC levels are rolling into our Aurubis average terms. You do know that, obviously, a big chunk of our contracts is already concluded. So call it, at this stage, roughly 85% of the contracts are concluded. So our exposure to direct spot rates is limited but some of the contract language has a certain link to recent market levels. And yes, the overall impact this year is around in the vicinity, let's say, from a year-over-year impact in an EBT bridge, it's a similar impact as we've seen last year versus the year before. Boris Bourdet: And maybe 2 others. One question would be on yesterday's announcement by the European Commission about the RESourceEU program. It doesn't seem like copper is -- copper scrap is part of what is being discussed at the moment, but could be -- can you share your view on what could be expected from this and discussions you might have with the European Commission? Toralf Haag: Well, as you said, this recently announced RESource program does not have copper in the focus. We are more relying on the Critical Raw Materials Act, which was published a while ago, and we are in constant discussions with the European Union to secure more raw materials in Europe, number one, by focusing and allowing -- permitting more mine projects in Europe; and secondly, to limit the export of secondary material out of Europe. So those are the two cornerstones of increased raw material availability in Europe but these discussions are taking their time. Boris Bourdet: Okay. And regarding the one-offs you mentioned during the call, so the EUR 12 million impairment on the JVs plus the EUR 10 million provision at Lunen. Was that already part of the guidance? Or was that a last minute surprise, meaning that without this, you might have ended up quite above consensus expectations for the full year results? And what exactly is that equity impairment for the JVs? Steffen Hoffmann: Boris the two one-offs that you have alluded to that we disclosed separately have been baked in the full year guidance. For example, when we were exchanging with you and the capital market around the CMD, we included that. So we were not surprised by that. On the equity adjustment or the participation. We have said it's in the MMR segment. It's in the recycling segment. it's related to a battery recycling participation. And in the annual report, you can also find the name. So that's why I don't ask you to go -- to find it out yourself, the company is called Librec, it's a Swiss participation that we are engaged in the battery recycling environment. Obviously, we all know that some of the key premises on the battery recycling market in EU are developing -- are moving time-wise a bit more to the right. So we felt that it was right to take a correction here. Operator: Next up is Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: My first one is on Richmond. So I'm basically just wondering whether everything so far is going according to plan. And are there any roadblocks which have come up -- which have come up since you started the smelting process? And are you also generally happy with the metal KPIs and the performance from what you're seeing so far? That is my first question. Toralf Haag: Yes, Bastian, yes, Richmond is going according to plan. We are now, as we have said, in Phase 1, we had some charges where we were smelting simple scrap. Now we are in the process of smelting more complex recycle materials. Right now, we don't see any major roadblocks, but it's too early to say if we meet our metal KPIs or not because we are still in the ramp-up phase. So we still need to have experience on two sides on the one -- the material mix we are getting in the U.S. in our recycled materials and number two, the production efficiency, that's still too early to say. But so far, it's on track. Bastian Synagowitz: Okay. Great. And then on your supplier structure and portfolio, is this coming together as well as you were hoping to? And are you still confident that the availability for the materials you're actually looking for is there in the market and as good as you were expecting? Toralf Haag: Yes. I mean we had experience in the U.S. market before because we had contact with suppliers for the supply of scrap material and recycling material for Europe. So they have been long-term relationships. The supplier structure is coming into place. We're getting the mix of different recycling materials in. So normal copper strap, also cables, but also more complex recycling materials like circuit board. So the supplier structure is there. The different materials are there. Like I said before, it's too early to make statements about what result we get out of this material and the efficiency. Bastian Synagowitz: Okay. Great. Then my next question is on cash flow and probably one for Steffen. I guess when we look at cash flow in the fourth quarter, you performed actually quite well. I'm wondering whether this has raised the bar for the target for breakeven this year as well? Has this become more ambitious? Or is this very much as you expected, and you're still very confident to hit that target as well. I know you kept that target for breakeven, I guess, to some extent that answers it, but I wanted to just understand how far this may have become a bit more of a stretched target now. Steffen Hoffmann: Yes. I think I can say that the way we could end the last fiscal year was slightly ahead to what we initially had in mind. So we had small smile on our face, let's put it that way. Now talking about '25-'26 and cash flow, we are expecting a net cash flow of EUR 640 million to EUR 740 million. And we've also said that the cash relevant CapEx would be expected to go down versus last year by roughly EUR 100 million. So depending on the point in the range that is chosen from a net cash flow guidance perspective, free cash flow breakeven could be rather modest or more significant I mean we still have 40 weeks ahead of us in the fiscal year. So let's not nail ourselves down on whether it will be exactly a breakeven before dividend or whether there is a slight upside, we are at the guidance where we are, and we are confident that we will achieve the targets. And that's what I think we can say at this stage. Bastian Synagowitz: Okay. Great. Fair enough. Then my last question is just on, I guess, your maintenance schedule, and I saw that you've been bringing forward the smaller maintenance still set in Hamburg now into November, I think originally, there was scheduled for May. Was there any particular reason behind it? I guess it's a small one, so I wouldn't think so, but just wanted to understand what's been driving this. Toralf Haag: No, Bastian. This is normal maintenance planning where we have different influence factors, the availability of materials for the maintenance. So it's a combination of many factors why the maintenance planning was adjusted, but no major incidents. Operator: And we're coming to the next questioner, It is Adahna Ekoku from Morgan Stanley. Adahna Ekoku: Can you help us with some more detail on the mix picture you're seeing for recycling RCs? How are the levels now as compared to the summer where I think European scraps RCs were at around EUR 250 per tonne. So where do these kind of stand now? And have you seen any green shoots at all to consider going into next year? Thank you. Toralf Haag: Yes, Adahna, we have seen a slight recovery of the recycling markets when it comes to -- also when it comes to scrap when it comes to the tonnage and also a slight improvement of the RCs, but we have not seen a substantial improvement. Adahna Ekoku: And maybe just to follow up on that, is that improvement from kind of any increase in economic activity or slightly lower exports or just kind of general improvement? Toralf Haag: We think it's mainly the function of, again, a higher copper price and therefore, higher availability of copper scrap. Operator: And the next question comes from Felicity Robson from the Bank of America. Felicity Robson: Could you provide some color around timing on commissioning for a strategic project for next year, especially around the second phase for Richmond, please? Toralf Haag: Well, Felicity, as we said in the presentation, we plan the commissioning of Phase 2 in the year -- in the calendar year 2026, it strongly depends on how we process now with Phase 1. So our current assumption is that we will commission it in the mid -- in the summer of 2026. Operator: [Operator Instructions] And we have a follow-up question coming from Boris Bourdet from Kepler Cheuvreux. Boris Bourdet: Thank you again. One broad question and one technical. The first is, what would you say has been the main change since the 8th of October where at the time of the CMD you have observed in the market? That's one question. And the second is on the tax rate, since there is a higher tax rate in Bulgaria. Would you share any guidance for the tax rate into next year? Toralf Haag: Well, on the first question, what was changed since October 8? There are no major changes in our assumptions there's maybe slight changes that we have a little bit improved situation like we discussed before on the availability and on the RCs on the recycling market. And we have some positive news on the concentrate market when it comes down to China capacities but we have not seen a big recovery in the TC/RCs for concentrates. So very slight changes, no major changes. Steffen Hoffmann: And Boris, on the tax rate, absolutely right, in '24-'25, we had a higher tax rate. I was alluding to that, 2 reasons one-off special item related to Buffalo on the deferred taxes. Secondly, a topic that's not a one-off, which is a topic to stay higher tax rate in Bulgaria, according to Pillar 2 now with a 15% minimum tax rate in Bulgaria. All of that resulted with the mix of results that we have from our footprint resulted to a tax rate of 26% and in last fiscal year. And I would assume that we are in the same ballpark also for this fiscal year. Operator: [Operator Instructions] Thank you. There are no further questions. Elke Brinkmann: Okay. Thank you. The IR team will, of course, be happy to answer any further questions you may have. We would now like to close today's conference call, and thank you for your attention. We wish you a pleasant rest of the day and a beautiful Christmas time. Thank you and goodbye.
Operator: Good afternoon, and welcome to the Jewett-Cameron Trading Company's Review of Financial Results for the Fiscal 2025 Full Year and Fourth Quarter ended August 31, 2025. Please note, this event is being recorded. I would now like to turn the conference over to your host. Please go ahead. Robert Blum: Thank you very much, operator, and thank all of you for joining us today to discuss Jewett-Cameron's operational and financial results for the fiscal 2025 full year and fourth quarter for the period ended August 31, 2025. With us on the call representing the company today are Chad Summers, Jewett-Cameron's Chief Executive Officer; and Mitch Van Domelen, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will address questions that have been submitted to the company. Before we begin with prepared remarks, please note that statements made by the management team of Jewett-Cameron during the course of this conference call may contain forward-looking statements within the meaning of U.S. securities laws. Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, planned, will, should, expected, anticipates or similar words. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those identified in the forward-looking statements as a result of various factors and other risks identified in the company's 10-K for the fiscal year ended August 31, 2025, and other filings made with the Securities and Exchange Commission. A webcast replay of today's conference call will also be available online on the company's Investor Relations page. With that said, let me turn the call over to Chad Summers, Chief Executive Officer for Jewett-Cameron. Chad, please proceed. Chad Summers: Thank you, Robert, and good afternoon. I appreciate the opportunity to speak with everyone here today. As I stated in the press release, we began fiscal 2025 with a positive outlook and a focus on continuing to increase sales, improve margins, lower costs, introduce innovative products and monetize surplus assets. Throughout the first 2 quarters of the fiscal year, many of management's key objectives were achieved. Specifically, our metal fence business was on a clear growth trajectory, resulting in first half 2025 revenue growth compared to the first half of 2024. This momentum was driven by the continued success of our Lifetime Steel Post and Adjust-A-Gate products, the expansion of our innovative in-store display placements and the launch of new offerings. Further, our new supply source partners were increasing production to support our sales, lessening our dependence on China and the higher tariff impacts. With new Lifetime Steel Post displayers in place in the right stores in the right aisles, we were set for seasonally strong second half of the year when professionals and do-it-yourselfers are most active leveraging our products to enrich outdoor spaces. Unfortunately, the rapidly escalating and unpredictable across-the-board tariffs first announced in February of 2025 on sourced goods created unprecedented market turmoil, which resulted in deferring retailer purchases, straining logistics and driving higher costs, all of which significantly impacted our second half results. It was not just our ability to understand and calculate the complex and rapidly changing executive orders, but also getting our customers to accept price increases in a timely manner. For the past number of months, we have taken aggressive steps to mitigate the impacts of the tariffs in the short term. Some of these, we were able to move quickly and decisively on, including realignment of our workforce through the reassignment of some employees to new roles and an overall headcount reduction in 2025 of 27% year-over-year. Further, the actions taken over the past couple of years to institute multi-country sourcing initiatives have allowed us to somewhat mitigate a portion of these new tariff costs by shifting production away from China as the highest tariff country. We believe that retailers are becoming acclimated to the new tariff environment and the realities of new associated costs. Our customers are increasingly accepting the new prices, which will help alleviate a portion of this cost pressure going forward. We will continue to work with our suppliers and customers to find solutions to these tariff challenges while reducing our cost as much as possible. Furthermore, we are working with our customers to better align our costs with the price we charge for our products. This structural alignment is critical to ensuring our long-term profitability and minimizing the risk to the business against future volatility. While the tariffs had a short-term impact on our business during the second half of fiscal 2025, it further forced us to accelerate our internal strategic review. For years, Jewett-Cameron Trading Company had been a collection of businesses, products and brands that included pneumatic tools, seed cleaning, engineered plywood flooring as well as dog kennels, gates and fence sports. As the world evolved, we began to shift our long-term strategic focus to the business we felt could scale and deliver meaningful profits. We shut down the pneumatic tool business, closed down our seed cleaning facility and rebranded Jewett-Cameron to capitalize on our strengths of differentiation, innovation and channel presence with a focus on improving the lives of pros and do-it-yourselfers in the backyard. Our metal fence products remain our best margin-producing category and not only maintained their growth trajectory post pandemic, but matched last year's sales even with the tariff volatility this year. Jewett-Cameron fence will continue to be the primary focus of our operations and resources as we expand our in-store presence and introduce innovative products. With thousands of display units already deployed and our Lifetime Steel Post program on track to be in over 500 stores, a small fraction of its potential, we see significant opportunities to grow through broader retail placement, new channels and continued product enhancement. As global conditions stabilize, we believe a significant opportunity remains to accelerate growth and rebuild margins by deepening key partnerships, improving purchasing discipline and bringing our core fencing products to more customers than ever before. Mitch will touch more on this section -- in his section, but it's important to note that despite the challenges from tariffs for the year, metal fence products were essentially flat compared to the previous year. Let me expand on each of these actions just a bit more. First off, on the overhead and administrative expense reductions, we are executing on a plan to initially reduce operating expenses by approximately $1 million to $3 million. It is our intent to match our operating expense level with our gross profit levels to achieve profitability in the long term. Jewett-Cameron was originally founded as a lumber brokerage business and has maintained strong lumber sales for many years. In 2023, we had the opportunity to help one of our larger customers who had recently lost their primary source of Western Red Cedar fence tickets, and they asked us to assist by participating in their lumber consignment program. This program helped stabilize the year-over-year lumber sales fluctuations we were commonly experiencing as a secondary supplier to multiple big box retailers. However, the increased demand to keep sufficient quantities of inventory on hand, the inflexibility to accept price increases and longer cash conversion cycle greatly reduced the profitability of our lumber program. Under the consignment arrangement, we were required to purchase and warehouse increased volumes of inventory to support the quick replenishment of stock at our customers' distribution centers, which placed a significant liquidity burden on the company as it had to outlay cash, but would not receive payment until store supplies were replenished. Our lumber consignment customer recently provided notice of their intention to transition away from our consignment arrangement in calendar 2026. Although the consignment arrangement provided us with meaningful revenue, it was low margin, demanding of internal resources and not as profitable as we would like. We are currently in discussions with this customer as well as other third parties regarding the purchase of our remaining lumber inventory, which is -- which, as mentioned, adds warehousing and other costs to maintain. On the pet product front, as we have communicated for the past few years, demand for certain of our pet products remains slow as the pet market continues its overall weakness. As a result, we continue to have excess pet inventory at our warehouse. This excess inventory has placed a strain with working capital tied up in inventory. In recent months, we have successfully implemented programs that are beginning to accelerate sales of our pet products. Additionally, we are working with third-party liquidators to sell the remaining high-quality but slow-moving inventory, which will provide us with cash and clear our warehousing costs for these products. We are working to sell most, if not all, over the next few months. Because we expect to sell this inventory at lower prices, we have increased our allowance for obsolete inventory by $650,000 in fiscal 2025 over our allowance in fiscal 2024. Going forward, we are reviewing potential changes to our pet business as we expect the overall pet industry to remain challenging in the foreseeable future. At Greenwood, sales in fiscal 2025 rose by 2% over our sales in fiscal 2024. Although demand for transit-focused products continues to rebound from the pandemic lows as more workers return to the office, a transit seat shortage during fiscal 2025 restricted new bus construction and orders for our transit products. Demand for these transit products improved as the stat shortage was largely resolved by the fourth quarter of fiscal 2025. We have recently realigned some personnel to provide support to Greenwood by working to open new sales channels and add new customers. We believe this segment has significant growth potential in both our primary transit sector and in new industrial markets. While our Greenwood subsidiary is generally a lower risk profitable business, it is somewhat outside of our core differentiated operations and may present more value to us as part of a strategic collaboration. Thus, we are in the process of reviewing transactions that would enhance overall value for our industrial wood products subsidiary and our company. If our preliminary discussions materialize into something more definitive, we will provide appropriate additional disclosures at that time. Transitioning to MyEcoWorld. While we have seen good growth since we rebranded, we have not matched our $2.5 million in sales when we first launched our compostable dog waste bags a few short years ago. One part of our growth strategy for this line was to enter the grocery store segment. During fiscal 2025, we secured our first placement with the launch of pet waste bags into 59 tops friendly markets across the Northeast beginning in late February. However, the imposition of the new tariffs first announced in February 2025 made our products less price competitive and growth in the grocery segment much more challenging. Instead, we will be focusing on expanding upon our successful introductions into big box stores where we have existing strong supplier relationships and into foreign markets that are unburdened by the U.S. tariffs, making these products more competitive. A big value opportunity is clearly our seed cleaning property. It sits on our books for just $566,000 unencumbered, and it is our belief that the value of this facility is much higher. That said, the current sluggish economic conditions within both the nearby cities and in Greater Portland has reduced the previously perceived need among the nearby cities to quickly expand the urban growth boundary, which prioritize our property throughout the consideration process. Therefore, any inclusion of this property in expanded urban growth boundary or reclassification of the property from its limited rural industrial classification now appears less likely in the short term, given the prevailing economic and political environment in the surrounding area. Accordingly, we have relisted the property based on comps, its corner location along a major highway and its unique zoning classification at a price of $7.223 million. In addition to our seed cleaning property, we also own a property in North Plains, Oregon, we refer to as our innovation studio that contains a photo studio and meeting space, which we are listing at a price of $795,000. This property is also unencumbered. After a promising start to our fiscal year 2025, the second half experienced unprecedented challenges that required us to shift our focus. As I hope you can hear, management and the Board are highly focused on evaluating strategic alternatives that prioritize the company's and shareholders' overall value. Obviously, there can be no assurance that any strategic discussion with third parties will result in definitive agreements or the completion of any transaction, but we recognize that the status quo is not an option. We will provide further updates on these preliminary discussions if and when a definitive agreement is reached, of which there can be no assurance. As we look forward, we believe there is value to be created in our business. Our goal, first and foremost, is to create an operating structure that gets us to operating profitability as quickly as possible. While the market is still tough, we believe the best pathway forward is by focusing on our core strengths by improving the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces and leveraging our extensive distribution footprint with the industry's leading home improvement retail locations. Through a focused approach that allow for a better correlation between our cost and the prices we sell our products for, reduction in our exposure to carrying excess levels of inventory by adding direct import sales, which reduces our working capital needs and a lean operating structure, we can exit fiscal 2026 in a dramatically improved financial position. And then as we monetize certain noncore assets, we can deliver added value to shareholders. With that, let me now turn the call over to Mitch to review the financials in a bit more detail. We will then look to address your questions. Mitch? Mitch Van Domelen: Thank you, Chad. Good afternoon to everyone on the call today. My comments will focus on adding some color to key areas and events that had material influence on the fiscal year and the fourth quarter. Now let's start on the revenue line. For the year, total revenue was $41.3 million, down $5.8 million compared to the $47.1 million from last year. For the fourth quarter, revenue was $10.4 million versus $13.2 million for the fourth quarter of last year. Despite the impact from the tariffs, our metal fence business was essentially flat from last year. This highlights our rationale to lean into our differentiated metal fence operations as the normalization in the market occurs, and we come to the other side of this with better contractual structures with our retail customers. Looking at the remainder of our operations, our lumber sales were down due to supply challenges and profitability to support this program remain undesirably low due to the customer resistance to accept new prices in a timely fashion. As Chad mentioned, our primary lumber customer gave notice of their intention to transition away from our consignment arrangement in calendar 2026. We currently have about $5 million in excess lumber inventory, which we acquired to meet the needs of the customer under our consignment arrangement. We are currently in discussions with this customer as well as other third parties regarding the purchase of this excess lumber inventory. Our pet business was $4.3 million compared to $7.6 million last year, reflecting the overall weakness in the pet industry in general. Our Greenwood industrial wood business saw 2% growth for the year, coming in at $3.8 million compared to $3.7 million, while the sustainable or MyEcoWorld business had revenue of $800,000 versus $1.5 million in last fiscal year. Turning to gross margins. Overall, gross profit margins for the year were 15.1% compared to 18.8% in fiscal 2024. For the fourth quarter, gross margins were 8.2% compared to 14.5% in Q4 of last year. The decline in gross margins were due to a combination of higher tariff costs, higher shipping costs, expenditures on the continued rollout of in-store display units and a shift by customers towards lower-margin products during the quarter. Our 2025 margins were also negatively affected by an increase in our obsolete inventory reserve of $650,000 to $1.2 million from the $550,000 in fiscal 2024. We've made strenuous efforts to adjust our selling prices to correctly reflect the new tariff rates, but the rapid and unpredictable announcements of new rates has made that process extremely difficult, which is largely dependent on our customers consenting to these higher prices in a timely manner. Chad had mentioned this process in his remarks, but progress has been made, and we expect prices to normalize as the global economic situation stabilizes. Turning to operating expenses. As a result of our cost reduction initiatives implemented through fiscal year '25, operating expenses decreased from $10.7 million last year to $10 million this year. For the fourth quarter, operating expenses were $2.3 million compared to $2.2 million in Q4 of 2024. As Chad mentioned, we have initiated a plan to further reduce operational expenses by an additional $1 million to $3 million annually moving forward. Net loss for the year was $4.1 million compared to $722,000 net income last year. Looking specifically at the fourth quarter, net loss was $2.2 million compared to $191,000 net loss for the fourth quarter of fiscal year 2024. For the year, the impact of tariffs was the primary driver that impacted the decrease in both sales and gross margins. Please remember that the last fiscal year also included a $2.45 million gain from a settled arbitration case against one of our former distributors. Finally, a few comments on the balance sheet. Our inventory balance at August 31, 2025, was $15.9 million. And yes, that does include the obsolete inventory reserve of $1.2 million. We are currently in discussions with the lumber customer as well as other third parties regarding the purchase of the remaining lumber inventory. We are also working with third-party liquidators to sell our high-quality but slow-moving pet inventory, which will provide us with cash and clear our warehousing and maintenance costs for these products. As I communicated last quarter, based on the seasonality of our normal cash cycle, we typically see our working capital needs spike in the early spring as we transition our inventory to sales and collection. For this reason, coupled with the slower movement of certain inventories, we once again draw on our credit line at the end of fiscal year. We had drawn $2.1 million against the credit line. However, as of November 28, 2025, our borrowing under the credit line was about $4.3 million. Under the current terms of the credit line, our lender, Northrim, provides a short-term operating capital by purchasing the company's accounts receivable invoices and as a loan against our inventory position. The maximum we may borrow against the line is $6 million. We are currently discussing with Northrim to adjust the credit line to increase the maximum borrowing computation, which would provide us with additional financial flexibility and to raise the maximum amount available to us. As Chad discussed, we will continue to focus on our operational strengths while reducing costs where possible in our efforts to increase our sales and margins and return to profitability. In addition, we are currently evaluating several different strategies to strengthen our liquidity position, many of which we discussed during this call and are otherwise detailed in our public reports. With that, let me turn it back over to Chad. Chad Summers: Thanks, Mitch, for the overview. Clearly, fiscal 2025 didn't go as we or anyone else expected. The results of the first half of the year versus the second half show a tale of 2 stories: one pre-tariffs where we were in a growth trajectory and one post tariffs, which highlighted a significant slowdown in sales and impact on our gross margins. Our goal, first and foremost, is to create an operating structure that gets us to operating profitability as quickly as possible. We are executing on a plan to further reduce operating expenses by approximately $1 million to $3 million annually and through a lean operating structure, we can exit fiscal 2026 in a dramatically improved financial position. I look forward to communicating with you in the months to come as we continue to execute on these reformulated strategic initiatives. I thank you all for your continued interest and support of Jewett-Cameron, and we'll now be happy to take any questions. Robert, can you let me know if there are any questions? Robert Blum: Yes, Chad, there's a couple of questions here. First off, can you provide maybe some more details about the customer slow adoption of your price adjustments? Anything you can expand upon there? Chad Summers: Yes, absolutely. Our customer relationships are such that any of our price increases must be consented to by the customer. The customer may not agree to any increase or negotiate lower price increases and any change may only be accepted after 30 to 90 days or longer, if at all. Ultimately, many of our customers did not immediately accept higher prices for our products, which we adjusted in response to the increased costs associated with the tariffs and global trade disruption. The frequent changes to tariff rates since February also caused some of the price changes we instituted in response to become obsolete before we could even pass them on to our customers. This forced us to spend time to recalculate the new prices and begin the process of presenting them to and negotiating with our customers again, which further affected our ability to recapture our higher costs through increasing our sales prices. Robert Blum: All right. The next question here is, maybe you can discuss why your lumber customer decided to move forward without you. Chad Summers: Yes. Good question. At Jewett-Cameron, we have a long history of being a reliable secondary supplier of cedar fence boards, able to step in and fill gaps if and when primary suppliers face delays or challenges. We were honored to be able to step in and help our customer in a time of crisis when they were in need of a primary supplier for multiple distribution centers. However, as I mentioned earlier, the consignment model slowed our cash flow, reduced our margins and demanded additional internal resource to support the program, in addition to greatly increasing our lumber inventory requirements and tying up our capital. I presume their decision to switch suppliers aligns with their long-term strategic direction for the category. while the program did provide meaningful revenue for our business, we believe this transition will reduce our inventory burdens and allow us greater focus on our metal fence products moving forward. Robert Blum: All right. Maybe you could expand on your decision to focus on the metal fence business as sort of the go-forward strategy here. Chad Summers: Yes. Well, the Jewett-Cameron fence products best represent our innovative abilities to deliver functional solutions to both pros and do-it-yourselfers. For example, our patented Adjust-A-Gate family of products is virtually unrivaled as it prevents gates from sagging and provides an adjustable gate frame kit to perfectly fit the opening. Our latest innovation, the Adjust-A-Gate Unlimited, is the only complete four-corner gate on the market and its low-profile design offers a no-sag technology that is low profile, so the metal is barely noticeable on a wood gate. Developing these differentiated products that deliver value to end users is something Jewett-Cameron has excelled at throughout our history. Jewett-Cameron fence continued to grow post pandemic, as I mentioned earlier, and held steady in the midst of the tariffs this past year. We believe there's room to grow. Our existing customers are requesting us to expand our fence products into thousands of stores. Our sales team is actively pursuing expanding channels and prospecting to make our products available wherever pros and do-it-yourselfers want to buy these products. I would add too, that our fence category offers diversity of products that are well positioned for growth, such as our perimeter patrol, temporary fencing and our high-quality, low-maintenance composite Euro fence products in both existing and new sales channels. Robert Blum: All right. Thank you for that, Chad. Maybe we could talk a little bit about the time line for any asset sales. Chad Summers: Yes, asset sales. As I mentioned earlier in my prepared remarks, we are engaged in a variety of preliminary discussions, and we'll provide additional disclosures if and when definitive arrangements are entered into. Robert Blum: All right. There's a couple of additional questions here. Maybe we could expand a little bit on the increase in the credit line usage from $2 million to $4 million. Is there anything that could be expanded upon there? Mitch Van Domelen: Well, I can take that. What I'd say is to fully capitalize on reformulated business strategy, we're actively pursuing strategic financing to accelerate our business plan to fund the core growth initiatives and to ensure robust operational capacity in the face of continuing global economic volatility. So securing the capital is key to maintaining our ability to consistently purchase and deliver products, thereby supporting our customers in the normal course of our business and their business. Robert Blum: All right. Very good. Next question here is specifically as it relates to collateral for the Northrim line of credit. Is there anything you can expand upon there on what specifically is the collateral? Mitch Van Domelen: Currently, our agreement with Northrim provides for the sale of accounts receivable and an advance against current inventory. And that's how we currently have that structured and that would remain in place. Robert Blum: All right. Very good. Maybe you could discuss what range of cash do you estimate freeing up in the next 6 months from pet product liquidation and excess lumber inventory to the extent that you're able to provide any details on any of that? Chad Summers: Yes. Mitch, I can speak to that. We won't be able to disclose that beyond what we've already kind of highlighted in the 10-K. I can't guarantee the value we're going to receive for that. But again, as previously mentioned, we are motivated and we'll be able to share that at a later date. Robert Blum: All right. Very good. I think we're sort of at top of the hour here on questions. If there's any additional questions, we'll look to get these addressed directly. I guess with that, I will turn it over to management for any closing remarks. Chad Summers: Well, again, thank you again for your interest in Jewett-Cameron, and I look forward to communicating with you in the months to come as we continue to execute on these reformulated strategic initiatives. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone. Welcome to the TD Bank Group Fourth Quarter 2025 Earnings Conference Call. I would now like to turn the meeting over to Ms. Brooke Hales, Head of Investor Relations. Please go ahead, Ms. Hales. Brooke Hales: Thank you, operator. Good morning, and welcome to TD Bank Group's Fourth Quarter 2025 Results Presentation. We will begin today's presentation with remarks from Raymond Chun, the bank's CEO; followed by Leo Salom, Group Head, U.S. Retail, after which Kelvin Tran, the bank's CFO, will present our fourth quarter operating results. Ajai Bambawale, Chief Risk Officer, will then offer comments on credit quality, after which we will invite questions from analysts on the phone. Also present today to answer your questions are Sona Mehta, Group Head, Canadian Personal Banking; Barbara Hooper, Group Head, Canadian Business Banking; Tim Wiggan, Group Head, Wholesale Banking; and Paul Clark, Senior Executive Vice President, Wealth Management. Please turn to the next slide. Our comments during this call may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. The bank believes that adjusted results provide readers with a better understanding of how management views the bank's performance. Ray, Leo and Kelvin will be referring to adjusted results in their remarks. Additional information about non-GAAP measures and material factors and assumptions is available in our 2025 annual report. With that, let me turn the presentation over to Ray. Raymond Chun: Thank you, Brooke, and good morning, everyone. We ended the year with another strong quarter, which I'm looking forward to discussing in a minute, along with the progress we've made against our new strategic pillars. First, I'd like to share my perspective on the external environment. There continues to be a high degree of uncertainty around tariffs and Canada-U.S. trade dynamics with important impacts, particularly to industries facing the highest tariffs such as steel and aluminum. While economic uncertainty has impacted business and consumer confidence, Canada's economy and employment remain largely resilient. New government actions such as the Canadian Mutual Recognition Agreement, defense spending increases, the major projects office and other measures to incentivize private sector and foreign investment will help support economic activity as Canada prepares for CUSMA renegotiations. As one of Canada's largest employers serving 1 in 3 Canadians, we will continue to work with our clients and governments to build a stronger economy. In the U.S., the economy continues to perform with businesses and households benefiting from regulatory and monetary policy changes, and we're seeing a pickup in investment activity in some sectors. With the strong presence across the Eastern Seaboard of the U.S. serving more than 10 million American businesses and households, we are focused on helping them achieve their financial goals. Across our business, TD is well positioned to manage through this period and help our clients successfully navigate a changing landscape. Now before I move to our performance, on behalf of all of our colleagues on the Board, I want to share our deepest condolences with the family and friends of Nadir Mohamed. We were fortunate to have him as a director from 2008 to 2023. And like in all of his other professional endeavors, he made a tremendous and lasting impact on our organization. Our thoughts are with everyone who had the privilege of knowing him. With that, let's turn to the next slide. At our Investor Day, we described our strategy to deepen relationships, make TD simpler and faster and execute with discipline. I'm looking forward to providing updates on our progress each quarter. Our single greatest growth opportunity is to deepen relationships with clients across our businesses. This year, we achieved record personal credit card penetration rates and delivered record closed referrals from the Canadian Personal Bank to wealth, and we're just getting started. In TD Securities, we are leveraging our platform to provide a full suite of services to our clients, including acting across advisory and financing products for National Fuel Gas' recent acquisition of the CenterPoint business. As you heard at Investor Day, AI is a massive opportunity for TD, and we have concrete plans that are already delivering clear outcomes. This year, we implemented approximately 75 AI use cases that generated $170 million in value. These use cases span from transforming loan underwriting to creating intelligent leads to deepening relationships to meet more of our clients' needs. For next year, we expect the AI use cases to generate $200 million in incremental value, including use cases to reimagine end-to-end processes as described at Investor Day. We are prioritizing our AI investments with use cases focused across categories such as customer acquisition, customer insights and risk management. We are also delivering disciplined governance and controls. In fiscal 2025, fraud losses were down 26% year-over-year, driven by ongoing investments in fraud modernization across capabilities, data, systems and processes. We have a clear strategy that will accelerate growth and returns and drive long-term shareholder value. I remain confident that we will achieve the medium-term targets that we laid out at our Investor Day. This year, we delivered 5% earnings growth, much stronger performance than we anticipated at this time last year when we expected it would be challenging to deliver earnings growth through a transition year. Our year-over-year expense growth moderated this quarter, and we delivered positive operating leverage. We are on track to deliver 3% to 4% expense growth and positive operating leverage in fiscal 2026, aligned with the targets we shared at Investor Day. TD delivered a strong Q4, and we are carrying that momentum into fiscal 2026. We expect to achieve the 6% to 8% EPS growth and 13% ROE targets for fiscal 2026 that we provided on Investor Day. And we see potential upside to these EPS and ROE targets from our strong business momentum and the outcomes we are driving by deepening relationships, delivering a simpler and faster bank and executing with discipline, supported by tailwinds if positive macroeconomic conditions continue and from PCLs if trade and tariff uncertainty reduces. Both Ajai and Kelvin will provide more details on our fiscal 2026 outlook in their remarks. Please turn to Slide 3. In Q4, the bank delivered a strong quarter with earnings of $3.9 billion, EPS of $2.18 and ROE up 110 basis points year-over-year. We saw robust fee and trading income in our markets-driven businesses and volume growth year-over-year in Canadian Personal and Commercial Banking. TD delivered positive operating leverage this quarter. PCLs were stable quarter-over-quarter, reflecting strong credit performance. Ajai will share more details shortly in his remarks. We have moved from an annual dividend review cycle to a semiannual cycle to support alignment of shareholder return with earnings growth. Today, we announced a $0.03 dividend increase, bringing our dividend to $1.08 per share, reflecting confidence in TD's future growth and earnings power. As we shared at Investor Day, we expect earnings growth to accelerate over the medium term. The bank's Q4 CET1 ratio was 14.7% with strong capital generation in the quarter. As of quarter end, we were over 3/4 of the way through our current $8 billion share buyback with 65 million shares repurchased for a total of over $6 billion. We continue to expect to complete this share buyback by the end of the first quarter of 2026. At that time, we will announce -- at that time, as we announced at Investor Day and subject to regulatory approval, we plan to initiate a new share buyback of $6 billion to $7 billion. Through these 2 share buyback programs, we will effectively return all the capital generated from the Schwab sale to our shareholders. For fiscal 2025, we delivered a total payout ratio of 93%, including share buybacks and common share dividends. Please turn to Slide 4. In Q4, we saw strong momentum across our businesses. Canadian Personal and Commercial Banking delivered record revenue, deposits and loan volumes. We had a record year in digital sales for day-to-day banking products, continuing our momentum in mobile leadership. Real estate secured lending posted robust sequential growth, delivering higher origination margin and record Q4 originations. In cards, we delivered strong momentum with the best year of cards acquisition in nearly a decade. In the Business Bank, loans were up 6% year-over-year, reflecting growth across our commercial business. We also saw strong small business checking account openings, up 10% year-over-year. In U.S. retail, we delivered continued momentum and core loans were up 2% year-over-year. U.S. bank card balances were up 14% year-over-year with the strongest account acquisition in 7 years. In our U.S. wealth business, total client assets were up 10% year-over-year with mass affluent client assets up 21% year-over-year. In addition, for the ninth year in a row, the bank ranked #1 in small business administration lending in its footprint as we continue to serve our communities from Maine to Florida. Leo will provide updates on our U.S. balance sheet restructuring and AML remediation in his remarks. Wealth Management delivered record earnings and assets. We had a particularly strong quarter in direct investing with new accounts up 27% and trades per day were up 37% year-over-year, respectively. As you heard at Investor Day, direct investing is an acquisition engine for the bank and drives outsized opportunities to deepen relationships. This year, we saw record flows, $3.9 billion from direct investing to advice. We saw record sales of $1.6 billion in ETFs this quarter. For the year, TD's ETF market share is up 48 basis points. In Insurance, we continue to build on our position as Canada's leading digital direct insurer. This quarter, we saw record digital adoption, supported by the launch of the new usage-based program for auto insurance. This quarter, Wholesale Banking delivered a record $2.2 billion in revenue, showcasing the power of our client franchise and breadth of capabilities as we benefited from a more constructive backdrop, especially in capital markets. We also generated record net income and ROE over 12% and executed on RWA optimization opportunities to grow revenue well above RWA growth for the quarter and fiscal year overall. Another indicator of our strong momentum, we rose to #6 in the U.S. corporate access rankings, which demonstrates the strength of our relationships across corporate and institutional clients and our ability to deepen our share of wallet. Please turn to Slide 5. Before I turn it over to Leo, I want to thank our colleagues across the bank. Every day, you come to work with a commitment to our clients and the dedication to our bank that is truly remarkable. At Investor Day, we outlined a clear strategy to accelerate growth and deliver peer-leading performance. You, our colleagues, are the source of TD's strength and why I'm confident we will deliver. With that, Leo, over to you. Leo Salom: Okay. And thank you, Ray, and good morning, everyone. Please turn to Slide 6. It's now been more than a year since we announced the global resolution, and we've made significant progress against our U.S. AML remediation program. As you've heard me talk about previously, we have an outstanding AML leadership team guiding us through this critical work, and we've completed a number of key milestones this year, such as the deployment of the next-generation transaction monitoring system, improved technology for investigation practices and the implementation of our first AI-powered financial crimes automation platform and machine learning case triage model, which improved our team's productivity and risk assessment accuracy. This quarter, we deployed another round of machine learning enhancements to our transaction monitoring system. These AI and machine learning tools are not only improving the efficacy and accuracy of our program, they are important levers in creating an efficient and sustainable program that will serve us well into the future. We also introduced a new and enhanced system for submitting unusual transaction referrals, improving the end-to-end process from intake through investigation through reporting. UTRs are a key tool in facilitating early detection and by increasing both the accuracy and efficiency with which our teams submit these reports, we are doing our part in detecting, reporting and preventing criminal activity. Turning to our look-back activities. I'm very pleased to say that this quarter, we made good headway against the suspicious activity look-back reviews required under the OCC Consent Order. Importantly, thanks to the hard work and dedication of our teams, we've completed the majority of our U.S. management remediation actions this year, in line with our previous commitment. That being said, we're not at end of job and AML remediation remains our top priority with significant work ahead and important milestones to come in 2026 and 2027. For fiscal 2025, total U.S. BSA AML remediation and governance and control investments in the segment were $507 million, in line with our guidance. And while investments will fluctuate from quarter-to-quarter, we continue to expect similar investments in fiscal 2026. Now I'd like to give you an update on the balance sheet restructuring activity. So please turn to Slide 7. You will recall this effort has 2 critical objectives. First, to strictly comply with and maintain a buffer to the asset limitation; and second, to ensure that we can continue to serve our clients and communities as their needs evolve. We made meaningful progress against our objectives this quarter. At the end of the fiscal quarter, total assets were $382 billion, reflecting continued runoff of noncore lending portfolios. We've achieved and exceeded the 10% asset reduction that we announced on October 10th, 2024, creating $52 billion of capacity versus the asset limitation. With the actions taken to date, coupled with selective actions in fiscal 2026 and beyond, U.S. Retail has the capacity to grow core loans at a rate consistent with our historical performance through the medium term without risking a breach to the asset limitation. As disclosed in the third quarter, we completed the U.S. investment portfolio repositioning by selling lower-yielding investment securities and reinvesting the proceeds into similar composition of assets at higher rates. During the fourth quarter, we identified additional bonds and sold approximately $7 billion notional for an upfront loss of $274 million pretax. In the aggregate, through our investment portfolio repositioning, we have sold approximately $32 billion notional for an upfront loss of $1.6 billion pretax. The investment portfolio repositioning generated an NII benefit of approximately $500 million pretax in fiscal 2025 and is expected to generate an NII benefit of approximately $550 million pretax in fiscal 2026. We expect our investment portfolio repositioning, together with our asset reduction program to help us improve return on equity through fiscal 2026 and deliver on our target of 9.5% ROE. We aim to deliver approximately $20 billion of RWA release, which will help support our medium-term target of 13% ROE. With that, let me turn it over to Kelvin now. Kelvin Vi Tran: Thank you, Leo. Please turn to Slide 8. TD delivered a strong quarter. Total bank PTPP was up 25% year-over-year after removing the impact of the U.S. strategic card portfolio, FX and insurance service expenses. We've shared the details on Slide 26. Revenue net of ISE grew 15% year-over-year or 12%, excluding the $388 million net negative impact of severe weather-related events in the prior year, reflecting growth across all our businesses. Expenses increased 10% year-over-year with approximately 1/3 of the growth driven by variable compensation, foreign exchange and the impact of the U.S. strategic card portfolio. We delivered positive operating leverage while taking the opportunity to accelerate investments to drive business growth. Impaired PCLs were relatively stable quarter-over-quarter, reflecting strong credit performance and performing provisions were also stable quarter-over-quarter. Please turn to Slide 9. Through our restructuring program, we are reducing structural costs and creating capacity to invest to build the bank for the future. We expect to conclude the restructuring program next quarter with approximately $125 million pretax in additional charges for a total expected program size of approximately $825 million pretax. We identified additional opportunities to drive productivity, including U.S. store optimizations as part of the distribution transformation described at Investor Day and impacts from organizational reviews. We expect to generate higher savings from our restructuring program with annual run rate savings now estimated at approximately $750 million pretax. Please turn to Slide 10. Canadian Personal and Commercial Banking delivered record revenue, deposit and loan volumes. Average deposits rose 4% year-over-year, reflecting 3% growth in personal deposits and 5% growth in business deposits. Average loan volumes rose 5% year-over-year with 5% growth in personal volumes and 6% growth in business volumes. Strong loan growth across our businesses this quarter capped a record year in RESL proprietary channel originations and in retail auto finance originations. Net interest margin was relatively stable quarter-over-quarter. The impact of balance sheet mix was partly offset by higher RESL origination margins. Tractor on and off rates were offset by rate reduction. As we look forward to Q1, with similar drivers, we again expect NIM to be relatively stable. Expenses increased year-over-year, reflecting higher employee-related expenses and other operating expenses. Please turn to Slide 11. U.S. Retail sustained business momentum and continue to execute against critical deliverables. Deposits, excluding sweeps, were down 1% year-over-year and were up 1% excluding targeted runoff in our government banking business. Core loans grew 2% year-over-year, reflecting continued strength in bank card, home equity and middle market. Net interest margin was 3.25%, up 6 basis points quarter-over-quarter, driven by higher deposit margins, higher loan margins from U.S. balance sheet restructuring and normalization of elevated liquidity. As we look forward to Q1, we again expect NIM to moderately expand. Expenses increased USD 84 million or 5% year-over-year, reflecting higher governance and control investments and higher employee-related expenses, partially offset by costs associated with the extension of the Nordstrom program agreement last year. Overall, we continue to expect U.S. Retail expense growth in the mid-single-digit range this year. We remain focused on productivity initiatives to help fund investments in our core franchise. These include the conversion of Nordstrom strategic card customers onto our servicing platform in the first half of fiscal 2026 and investments in our digital and mobile capabilities and technology modernization. Please turn to Slide 12. In Q4, the Wealth Management business serves almost 2.7 million clients fired on all cylinders. We saw client growth, net asset growth, strong trades per day and market appreciation. We saw strong fundamentals in insurance with double-digit premium growth in general insurance in fiscal 2025 and more than 3.5 million quotes, which drives future client acquisition. For the Wealth Management and Insurance segment overall, revenue net of ISE was up 39%, with approximately 2/3 of the growth driven by the impact of prior year catastrophe claims. Expenses were up year-over-year, reflecting higher variable compensation, technology spend supporting business growth and employee-related expenses. Please turn to Slide 13. Wholesale Banking delivered record revenue and net income, driven by broad-based growth across Global Markets and Corporate and Investment Banking. This quarter, we benefited from a constructive backdrop, especially in capital markets, and our pipeline of future deals remains robust. Reported expenses include acquisition and integration-related charges for TD Cowen. We do not expect these charges to continue going forward. Adjusted expenses increased year-over-year, reflecting higher variable compensation and spend supporting business growth, including technology. These investments are part of the strategy we outlined at Investor Day. We are continuing to mature our platform to support our ambition to become a top 10 North American investment bank. Please turn to Slide 14. Corporate net loss for the quarter was $195 million, largely flat year-over-year. Higher net corporate expenses were offset by higher revenue from treasury and balance sheet management activities. Please turn to Slide 15. The common equity Tier 1 ratio ended the quarter at 14.7%, down 15 basis points sequentially. We delivered strong internal capital generation this quarter, which was partially offset by RWA growth, excluding FX. The bank repurchased 19 million common shares under its share buyback program in Q4, which reduced CET1 by 33 basis points. And we continue to expect to complete our current share buyback by the end of Q1, subject to market conditions. Please turn to Slide 16. At this time last year, we noted that 2025 would be a transition year for the bank. Throughout the year, we took charges as we restructured our U.S. balance sheet. We do not expect balance sheet restructuring charges to continue going forward. Looking back over the year, I'm pleased with -- that we largely delivered what we said we would deliver in 2025. And in many cases, we delivered more. Even with a prudent reserve build for policy and trade uncertainty, fiscal 2025 earnings were up 5% year-over-year. And reflecting our commitment to return value to shareholders, we bought back over $6 billion in shares this year, helping drive EPS up 7% year-over-year. As Ray said, TD is entering fiscal 2026 in a position of strength. We expect to achieve our fiscal 2026 targets with upside potential driven by strong business momentum and execution against the strategy we laid out at Investor Day, supported by tailwinds if positive macroeconomic conditions continue and from PCLs if trade and tariff uncertainty reduces. With that, Ajai, over to you. Ajai Bambawale: Okay. Thank you, Kelvin, and good morning, everyone. Our key message for the quarter is that credit results for the bank are strong. Please turn to Slide 17. Gross impaired loan formations were 23 basis points, a decrease of 3 basis points or $256 million quarter-over-quarter. The decrease was largely recorded across the wholesale banking and U.S. commercial lending portfolios, partially offset by higher formations in Canadian personal and commercial. Please turn to Slide 18. Gross impaired loans were stable quarter-over-quarter at 56 basis points. Please turn to Slide 19. Recall that our presentation reports PCL ratios, both gross and net of the partner share of the U.S. strategic card PCLs. We remind you that U.S. card PCLs recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income. The bank's provision for credit losses was stable quarter-over-quarter at 41 basis points as higher provisions in the Canadian Personal and Commercial segment were offset by lower provisions in the wholesale and U.S. Retail segments. Please turn to Slide 20. Impaired PCLs were $943 million, increasing $39 million quarter-over-quarter, driven by the Canadian and U.S. consumer lending portfolios, including the impact of seasonal trends in the U.S. card and auto portfolios. Performing PCL was $39 million, a decrease of $28 million quarter-over-quarter. The current quarter performing build largely reflects the adoption impact of a model update in our Canadian credit card portfolio, partially offset by improvement in the Canadian and U.S. economic forecasts. Please turn to Slide 21. The allowance for credit losses increased $40 million quarter-over-quarter, reflecting the adoption impact of a model update in our Canadian credit card portfolio and a $47 million impact from foreign exchange, largely offset by lower impaired allowance in the Canadian commercial and wholesale lending portfolios, driven by resolutions and some improvement in the Canadian and U.S. economic forecasts. Now in summary, the bank exhibited strong credit performance in the fourth quarter, reflected in lower gross impaired loan formations and stable gross impaired loans and PCLs. Our fourth quarter credit results capped off a strong fiscal 2025 as elevated performing provisions for policy and trade uncertainty were offset by good underlying credit performance, resulting in a full year PCL rate of 47 basis points, stable year-over-year and within the guidance we offered at the start of the year. Looking forward, while [indiscernible] quarter and are subject to changes to economic conditions, we expect PCLs to be in the 40 to 50 basis points range, an improvement from the 45 to 55 basis points range guided for fiscal 2025. Though economic uncertainty remains elevated, TD is well positioned considering our prudent provisioning, broad diversification across products and geographies, our strong capital position and our through-the-cycle underwriting standards. With that, operator, we are now ready to begin the Q&A session. Operator: [Operator Instructions] The first question comes from John Aiken at Jefferies. John Aiken: Sorry about that technology. Ajai, I know that most of the deterioration on the domestic consumer portfolio came out of residential mortgages and really no risk on that front. What I was hoping that you might be able to explain to me is the dynamic where we've seen degradation on the residential mortgages year-over-year, but we really haven't seen the HELOC portfolio show any -- really any degradation. What are the dynamics behind that? And would incremental impairments on residential mortgages, when will that start to impact the HELOC portfolio? Ajai Bambawale: Yes. No, thanks, John. Let me talk more generally about Canadian housing and our asset quality, and that should give you very good color on what's going on. So you would have seen that our Canadian housing outlook is actually slightly better. And the reason it's slightly better is that there is pent-up demand and the job market is also a little better. Our customer profile continues to be strong. And again, this is across all of RESL, HELOC and residential mortgages. If you look at some of our stats, and I'm very focused on what's the distribution and what's in the tails, we have less than 1% of our uninsured Canadian RESL portfolio which scores less than 650 and LTV greater than 75%, okay? And if you look at some of the other metrics like our uninsured current LTVs, again, they're low, like at 56%. Now let me just turn to quality, okay? And I'm seeing this quality broadly across residential mortgages and HELOCs. And I look at things like delinquencies across both those asset classes and -- or sub-asset classes, they are stable, okay, quarter-over-quarter. And I'm not seeing huge differences between residential mortgages or HELOCs. And if I look at the greater than 90-day delinquencies, it's up 1 bp quarter-over-quarter at 15 bps. And that 15 bps is a pre-COVID number. Again, charge-offs across both these books very, very low. Impaired PCLs, yes, are slightly higher. But if I were to quantify that, that's $6 million, okay, very low. And then I think you talked about gross impaired loans. The gross impaired loans are slightly higher. I think that number has gone up $55 million or $60 million. I don't remember the distribution between residential mortgages and HELOCs, but what's occurring there, that's actually vintages from '22 to '24 that were originated at higher rates. So that's where we're seeing the migration, and that's probably what you're talking about. And that's coming largely from the marginal segment. So again, some uptick in residential mortgages. But again, if you ask me, am I concerned about that portfolio? No, I think that portfolio is a very strong portfolio. So hopefully, I've given you enough color and tried to answer your question as well. Operator: The next question comes from Ebrahim Poonawala at Bank of America. Ebrahim Poonawala: Maybe for Kelvin or Ray, just in terms of capital, when we look at the CET1 at 14.7%, half of retained earnings going into dividends, half going into buybacks, I guess, would be the way to think about it. Do you think you can flex this capital ratio into -- I think you've talked about mid-13s over the next year via RWA growth? Or should we expect the pace of buybacks to materially increase over the next few quarters? Raymond Chun: Ebrahim, maybe I'll start it off and then pass it over to Kelvin. I would say that as per my comments, I do think that there are opportunities and tailwinds as we head into fiscal 2026, both on the EPS side and from an ROE perspective, Ebrahim. But I said I preface that with making sure that the macro conditions prevail and then certainly from the uncertainty that we have around some of the tariff and trade uncertainty. But as you saw in our Q4 results, the momentum of the businesses, I think, will have a strong play with respect to ROE. With respect to capital, as we said in our Investor Day, we are definitely taking a very different -- disciplined approach on capital allocation. First and always, the priority is capital organically to be allocated. And that's looking at, Ebrahim, all of our existing portfolios, the noncore businesses, and you've seen the actions that we've taken. We'll continue to go through that and make sure that any of our existing businesses that are noncore do provide appropriate returns, and we're looking at that. And then making sure that we're deploying the capital even within our organic businesses to the ones that have the most accretive ROE on a long-term basis to give shareholder value. And then we've said very publicly at Investor Day that we will continue to consistently return capital back to shareholders if we don't see -- if we don't have a need on an organic perspective. So on that, I'll pause there and maybe hand it over to you, Kelvin, to talk about RWA. Kelvin Vi Tran: Sure. It's Kelvin. So as Ray said, first, we plan to complete our existing share buyback program by the end of Q1 and then initiate the next buyback program of $6 billion to $7 billion, subject to regulatory approval. And we will strive to grind down our CET1 ratio as much as possible, subject to market conditions. And I think the issue is that we continue to spin off and generate significant capital accretion every year. Again, it all depends on market conditions. But right now, we're seeing that it is still -- we're not getting to 13% yet in '26, but maybe in '27. Ebrahim Poonawala: That's helpful. And if I can have a follow-up for Leo, maybe on Slide 6, Leo. So I just want to make sure I understand this correctly. I understand you need to demonstrate sustainability, nothing needs to break in a material way. But just hypothetically, if we go through all of '26 through the sustainability review, I'm just wondering in a world where there was no big sort of leakage in terms of all the systems that you put in place. Is there anything different that needs to happen in 2027? And I'm asking this in the context of a U.S. regulatory framework that's becoming a little bit more pragmatic and not sort of belaboring banks that have had issues in the past. I'm just wondering, is there a scenario where assuming you check all the boxes in '26 on sustainability, where maybe the asset cap could get reviewed as early as '27? Leo Salom: Yes. No, thank you very much for the question, Ebrahim. I won't comment with regards to the timing of any sort of relief. But I will -- I just want to maybe provide a little bit of color to your question. I think to your point, I think we've made really good progress on the delivery of the management actions. And I've iterated some of the areas where we've made progress, whether that's the transaction monitoring platform, the work that we've done on the customer risk rating tools, the AI tools. So I think we feel very good about the residual risk reduction that we've actually brought forward in terms of the overall AML program. But as I've said before, I think we've got a couple of stages. Everything we do, every management action we do is going to be subject to internal challenge and ultimately to internal audit validation. And that's an important process. Much of that will take place in 2026. And then thereafter, as you know, we're working very closely with the monitor and as well, we're working with the regulator to ensure that we can demonstrate sustainability over the long term. Both of those stages are an important part of the process. So I think being able to demonstrate that not only we've implemented the right actions, we've reduced residual risk, but that we can demonstrate that over time will be critical in terms of earning release from the consent order eventually and then potentially any interim relief. So I think we're making good progress at this point. We'll keep you abreast of the progress over the next few quarters. But at this point, I feel very comfortable with the AML remediation plan. Operator: The next question comes from Gabriel Dechaine at National Bank. Gabriel Dechaine: The margin outlook more stable or relatively stable, whatever. In Canada, I'm just wondering because a few of your peers, I mean, there's a bit of a mixed bag, frankly, but some peers are talking about and exhibiting a wider -- benefit from wider mortgage spreads. And I'm wondering if that's something that could factor into your outlook and surprise on the positive side. Then on expenses, you had guided to 5% to 7% growth this year, came in at 10%, including 10% in Q4. And you talked about some year-end investment undertakings that you took advantage of the strong revenue growth. That's fine. I'm just wondering about 2026. You're guiding to mid-single digits now. You've taken another restructuring charge. Those investments you made perhaps help your efficiency performance. Are you -- you should be more capable to deliver? Are you more committed as well is the question? Sona Mehta: Thanks, Gabe. Sona. Maybe I'll start with your first question on Canadian margins and specifically RESL. And I can share a little bit more on what's underlying our NIM. Kelvin had already alluded to the 3 factors. If I start out in RESL, we had a really good volume growth quarter. And what I'm particularly pleased to see is we're staying true to our strategy where we're anchoring on speed and specialization to drive growth, but with incredible pricing discipline. And so again, that enabled us to drive sequential origination margin expansion. So that's obviously positive to NIM. But then when I step back and look at overall Canadian, CAD P&C NIMs, that strong loan growth outpacing deposits, that naturally has a balance sheet dilutive impact to NIM. And then finally, tractor on-off, Kelvin alluded to, is an important factor. And when we look at that, the magnitude of the NIM benefit that we see is really quite dependent on the maturing tractor rate. And so if I go back -- yes, sorry, go ahead. Gabriel Dechaine: That tractor tailwind is sort of flattening out, I guess. Is that what you're saying? Sona Mehta: Yes, in a sense. And like that really is reflective of the maturing tractor profile. So if I go back several years ago, when rates were the lowest, we locked in less tractors through prudent treasury management. And so as we fast forward to today, our tractor on-off lift was largely offset by the recent Bank of Canada rate cut. So like in some total, many factors, but that's what's driving stability in NIM. Gabriel Dechaine: So I'm not quite clear on the mortgage commentary then some other banks are being quite specific that it's going to be good. They originated a bunch in 2021, 2022 that were -- it was a very competitive environment and the renewals are coming in at higher spreads. That's not something a dynamic that will work in your favor? Sona Mehta: No, absolutely. It is something that we are seeing, Gabe. It's been several quarters. we've had positive expansion. And so as this accumulates, that becomes a broader tailwind. Raymond Chun: The other thing, Gabe, I think you'll see in our mortgage portfolio, and Sona has commented on that on a number of occasions is just the mix of the mortgages, right? And so you're going to see more and more proprietary mortgages that are booked through our proprietary channels, whether it's our branches or our MMS, which are both proprietary and obviously, better margin in those, and you're seeing that margin expansion in our residential book while we continue to take market share and loan and mortgage growth, as you saw on a quarter basis. So I think it's a good story from both a volume perspective, but also from a mix and margin expansion in the RESL book that you're going to continue to see favorability as we play through. Gabriel Dechaine: All right. Then on the expenses... Raymond Chun: Just on the -- just on your expense, the second part of your question, Gabe, on the expense side, let me just sort of walk you through a little bit. On the 5% to 7% guidance that we provided at the beginning of the year, if I sort of take you back, I mean, that was with the guidance that we thought and Kelvin commented in his comments that we thought earnings was going to be relatively flat on a year-on-year basis, and we delivered a 5% earnings growth. So I think some of the expense that you see growth on that side of it is due to the outperformance on our earnings growth. I'd say the second piece is where we've been saying that you're going to start to see moderation of our expenses on a quarter-over-quarter basis, and you saw that from a Q3 to Q4 moderation of our expenses. And so if you factor in the variable costs and the FX that Kelvin said, we're probably down to about a 7% expense growth on Q4 and definitely trending in the right direction to get us to the 3% to 4% expense growth in 2026, and I have high confidence we're going to deliver on that. And where that confidence comes from is the 6 buckets of expense categories that we outlined in the Investor Day, Gabe, where we have -- that was a bottoms-up exercise, and we actually have identified initiatives and tactics in each one of those 6 expense buckets, and we've already started to make progress. And so the $900 million of the $2.5 billion expense takeout that we've committed to over the medium term -- $900 million of that is in 2026, of which $500 million is the restructuring that carries from 2025 to 2026 and the incremental $400 million, we already have clear sight lines into that. And then I'd say, finally, what's really important that we said in our Investor Day is that we continue to deliver positive operating leverage. And you're seeing that for the second consecutive quarter, TD Bank has delivered positive operating leverage, and we expect to have that continue in fiscal 2026. So on your question about conviction and commitment, absolute on what we said in the Investor Day and cost management and the disciplined execution around that is one of our strategic pillars. Operator: The next question comes from Doug Young at Desjardins. Doug Young: Hopefully, this will be relatively quick. But Leo, you set out a target at the Investor Day, and thanks, Ray and everyone for all the other targets and guidance provided in the remarks. But Leo, you set a target of USD 2.9 billion NIAT for fiscal '26 at the Investor Day. Just wondering how you're feeling about that as you sit and look at today and all the different variables, macro rates, balance sheet restructuring expenses. Can you unpack that? Leo Salom: Sure, Doug. Maybe I can just ask you to take a look at the quarter as sort of an indication of the momentum going into 2026. We're really pleased with the quarter revenue growth of 7%, and that was driven by a 7% growth in NII on 6 basis points worth of NIM expansion. But also, we had about an 11% growth in fees, where we saw service fees, our lending fees and wealth management all contributing to a double-digit growth rate. And I do think that's a sustainable momentum as we go into 2026. Expenses, we did very aligned -- to Ray's point, we did see moderation in the expense growth profile in the fourth quarter, expenses were up 5%, but we did manage positive operating leverage of 232 basis points and our commitment and our guidance of mid-single-digit expense growth stands, we feel quite comfortable with that. And then as Ajai outlined, I think from a PCL perspective, PCL came in at $220 million, which was down on a quarter-on-quarter basis and down year-on-year, and it was the lowest level of PCL that we've had since the last quarter of 2023. So if you look at all of the fundamental indicators, I feel quite comfortable with the guidance of both the $2.9 billion NIAT target for the year, but also the return on equity number. Our return on equity for the quarter closed at 9.3%. We've managed to post 180 basis points worth of ROE improvement since the fourth quarter of last year. So Doug, at this point, obviously, we still have a lot of macro uncertainty. We still have to work through potential rate declines, et cetera, that will obviously add some degree of uncertainty for next year. But from an underlying business momentum perspective, I'm quite confident with some of the guidance that we provided on the September Investor Day. Doug Young: Appreciate it. And then just second, I know insurance is a small business, but the earnings were quite weak. And I was a bit surprised given I think it was relatively low CAT this quarter relative to last year, at least in companies that I'm following. So maybe you can -- is there anything unusual like actuarial assumption reviews or anything unusual [indiscernible] going through the insurance results that caused the weaker bottom line results? Raymond Chun: Thanks, Doug. Let me take that. So from an insurance perspective, I do think having run the business, I look at the insurance from a full year perspective. And if you look at it from a full year perspective, gross written premiums continue to be very strong, 10% growth on the General Insurance gross written premiums. As per the Investor Day, our goal is to double the size of our home and auto business by 2029. And so when you look at it from a full year's perspective, I think strong performance. The ROE came in at 24.4% above what we expected -- sorry, 24.2% above what we had expected on a full year basis. But when you double-click into the Q4, your specific question, one nuance that we did in the -- over the course of 2025, but it hit more in 2020 -- in the Q4 is that we did look at making sure that we are growing profitably across all of our geographies across the insurance business. And we've rebalanced in some of the higher severe weather regions. And so you saw that play through. That's actually going to prove to be a positive around resiliency and stability of our earnings as we play through. And so I feel very confident in the Investor Day commitments that we made on the insurance business, but we did actually use it as an opportunity in Q4 to rebalance from a geography perspective and the profitability in the high CAT zones. Doug Young: So you moved out of the high CAT zones or you were in high CAT zones and therefore, that impacted Q4, and therefore, you've moved out of that, and that should benefit you going forward? Is that... Raymond Chun: Yes. Just a little less concentration. And so where we had higher concentration in some of the high severe weather zones, we've moderated the concentration there while accelerating growth in 2026 going forward in the geographies with less CAT exposure. Operator: The next question comes from Paul Holden at CIBC. Paul Holden: I want to ask a couple of questions on deposit growth, maybe starting with Sona because you already gave some flavor on NIM sort of tailwinds and headwinds and you mentioned that deposits is not quite growing at the same pace as loans. So maybe you can talk about why that is and what TD is doing to accelerate particularly low-cost deposit growth. Sona Mehta: Yes, absolutely. Thanks for that question, Paul. I'd start by saying it's been a tremendously strong quarter, closing a really strong year. So we've had #1 growth actually across our 3 major product lines in the Canadian Personal Bank. So that includes deposits, cards as well as RESL. So we're feeling really good about the growth momentum that we're seeing. In terms of the mix in demand deposits and term deposits, similar to what you would see right across the industry, we are seeing a decided shift. So that is a positive trend with a much faster clip of growth in non-term versus term deposits. What I would say, Paul, is we start from a position of real strength here in non-term deposits. I think as we shared at our Investor Day, 86% of our new clients onboard with a checking or savings accounts. And that fuels -- that continues to fuel what is an enviable portfolio mix. So we have 69% of our deposits in non-term deposits versus an industry profile that's more in the mid-50s. So overall, we feel really comfortable with what we're seeing in the industry and certainly what we're seeing amongst our own client base. Paul Holden: Okay. So no reason to suggest any kind of change in trend then in the near term? Sona Mehta: Correct. Paul Holden: You're happy with where you are. Sona Mehta: Yes, we're very pleased with where we are. Paul Holden: Okay. So I also wanted to ask Leo about deposit growth there. It's down a little bit Q-over-Q and year-over-year. I'm not going to make a big deal of it because it's not down a lot, but still down. Like how should we think about that in '26? Should we start to see those personal deposits growing again? Or do they continue to shrink as maybe you continue to rationalize the retail store count? Just help us think through that. Leo Salom: Sure, Doug. Thank you. So if you look at our deposit numbers on a headline basis, they were down slightly. The runoff is really coming from the Schwab sweep deposits running off essentially as planned. We had indicated that under the new agreement, Schwab did have the ability to bring down the overall level of sweep deposits and they're executing that plan as per the agreement. In addition, we've targeted the government banking collateralized portfolios, those that provide us very little liquidity, largely commoditized in terms of pricing. We targeted about $5 billion of that portfolio for runoff, and that was aligned to the overall portfolio balance sheet restructuring activity. In addition, we have taken from about, as you know, earlier this year, we had taken a very defensive posture in terms of pricing to defend our deposit base. As we move through the year, as we've made progress on the balance sheet restructuring on the lending side or on the asset side of the house, we've also looked at our deposit business and implemented much more pricing discipline around some of our higher-priced deposit categories, both in consumer and corporate to make sure that we are managing healthy deposit margins. And in the quarter, we saw a 5 basis point expansion in deposit margins as a result of the actions that we're taking. So given where we are in the U.S., given the restructuring activities, we are being more selective around our pricing, and we have the opportunity to do so, and that is translating into some margin expansion for us. So to your point with regards to the outlook, absolutely, I expect us to go back to a growth posture, but particularly around our core deposits, our core checking account interest and noninterest-bearing checking account balances, we believe that's critical for long-term profitability. And so we did provide guidance as part of Investor Day that we would target mid-single-digit deposit growth rates over the MTO period, and I fully expect us to go back to that profile. Paul Holden: Okay. Is it too early to ask for that in '26 or not? Leo Salom: I think we've already provided enough guidance at this point. So maybe next quarter. Raymond Chun: Maybe I can just ask Paul Clark to jump in. I do think we have a terrific momentum in what we said at Investor Day on referrals from retail to wealth and the momentum that we see there because that, to me, is also another significant deepening of our client relationships and will play into sort of our volume story as we move forward. Paul Clark: Yes. Thanks, Ray. For the full year, we saw over $31 billion in assets as a result of our relationship with retail and commercial. So this is closed referred business. In the quarter, the number was over $7 billion, Paul, which is just a testament to the momentum that we continue to gain. When you think about that in the context of Sona and Barb's business, but predominantly Sona, the way that you have to think about that is for every dollar that Sona sends us, we're consolidating $3 roughly from our competitors. So in the quarter, that results in 2 things. Sona graciously sends us business, which is obviously going to impact our numbers, but we're consolidating from our competitors away. And if you remember at Investor Day, we committed to get that number to $40 billion annually, and we're already up 11% year-over-year. So just great momentum from both Sona and Barbara in the context of this. Operator: The next question comes from Sohrab Movahedi at BMO Capital Markets. Sohrab Movahedi: Ray, I just wanted to focus on Slide 16. You have some targets for 2026, including 6% to 8% adjusted EPS growth. I wonder if you could just tell us which business segments are likely to exceed that and which may be a little bit below that? In other words, how is that -- how are you arriving at that by business segment? Raymond Chun: Listen, why don't I start it? And then I think you've heard from Leo and Sona some of the terrific momentum. Maybe I'll also ask Tim to jump in. But I think what you see, Sohrab, when you look across our Q4 results is actually strength across all of the businesses. And I see momentum in every single one of the businesses. And so I would say, as I said in my comments, we do have positive tailwinds on EPS and ROE as we head into the 2026. And that's on strength of both -- a lot of that is on the strength of our fee income businesses, our markets-driven businesses in TD Securities and in the Wealth Management business. But our fundamentals, as Leo said, in our core banking businesses in Canada and the United States, the fundamentals are better than we had expected even at Investor Day as we ended Q4 and jumped into the fiscal new year. So why don't I let Tim and Paul talk about their businesses because they're the ones that really from a fee income perspective is also providing tailwinds. And then Barb can maybe comment on the strength of the business bank, and then you'll get a full view of all of the businesses since already Sona and Leo have commented. Tim Wiggan: Thanks, Ray. And Sohrab, I would just say, obviously, an exceptionally strong Q4, a record revenue and NIAT number. I would say that the shape of the year continued to play out in favor of investment banking in the second half of the year. And so if I look at Q4, specifically for our investment banking business, we had a record revenue quarter, exceeding Q2, which obviously had Schwab in it. Early days for Q1, although I will say that the momentum is carrying through into the new fiscal year. And finally, something that we talked about at the Investor Day, a tremendous amount of focus on capital discipline and optimization, and that applies both to the market side as well as the loan book and investment banking, which accounts for about 40% of our overall RWA. And so if you look at the ROEs, obviously high in the quarter at 12.4%, up close to 500 basis points. But more importantly, if we look at revenue growth, the RWA growth in Q4 came in at 2.6x and 1.6x for the year as a whole. So I would say, overall, results for the year exceeded our expectations. We had talked about delivering anywhere from $375 million to $425 million in NIAT on average per quarter, and we're at the high end there and exceeded our revenue targets per quarter that we expected, which were $1.8 billion. So I feel very good about the momentum that we showed in Q4 and thus far carrying over nicely into the new fiscal year. Leo Salom: The only thing I'd add on ours, and I know Kelvin took you through the numbers and people tend to focus on the top line revenue line at 16% year-over-year. And each of our businesses have had tremendous market share growth this year, which bodes well for earnings next year. But what I would tell you, I've been most impressed with this year is just the focus on efficiency. Our efficiency ratio through the year improved about 250 basis points, and that really sets us up nicely as we head into next year. ROE for the full year was just over 62%, and we continue to see strong momentum this quarter and heading into 2026. Raymond Chun: Barb, quickly... Barbara Hooper: Thanks, Sohrab. So for the Canadian Business Bank, we are seeing very strong momentum as well. We laid out the strategies at Investor Day that we are looking at to accelerate our growth. And I'm happy to report that we did add about 200 incremental frontline bankers in 2025. Almost half of those were in small business banking, and we add -- we made those additions a little bit earlier in the year. And we did see in our results in Q4, a pickup in our new client originations and our deposit growth. We're looking to add more small business bankers in 2026. And so we expect good momentum to continue. We also added to our commercial banking that was a little bit later in the year. So I don't think we're really seeing a significant amount of benefit in Q4, but we certainly expect to see that in '26. So we're feeling very positive. Raymond Chun: Sohrab, I hope that gives you a sense of the momentum that we're carrying. Sohrab Movahedi: Yes, that's very helpful. And I just wanted to put Kelvin on this but and get him to clarify something. In the context of buybacks, I think a couple of times you mentioned subject to market conditions. So under what conditions would you not do the buyback? Kelvin Vi Tran: Just how fast you can buy given the volatility in the market and how much you can actually -- from a regulatory perspective, you can buy back. So if we would and the market is conducive like earlier this year, we would step in harder on that front. Sohrab Movahedi: So you're price sensitive? Kelvin Vi Tran: Not really, but at the margin, we would be. Operator: There are no more questions in the queue at this time. I would now like to return the call to Mr. Raymond Chun for closing remarks. Raymond Chun: Thank you, operator, and thank you, everyone, for joining us today. We certainly appreciate your questions and comments. TD delivered for its stakeholders in Q4 with robust top line growth, positive operating leverage and strong credit performance. We are well positioned for the year ahead. So let me take a moment to wish you and your families all the best for the holiday season, and we certainly look forward to connecting in the new year. Thank you, everyone. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Greetings, and welcome to the Domo Q3 Fiscal Year 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cory Edwards, Vice President of Corporate Communications. Thank you, Cory. You may begin. Cory Edwards: Good afternoon. On the call today, we are joined by Josh James, our Founder and CEO; and Tod Crane, our Chief Financial Officer. I'll begin with our safe harbor statement. Our press release was issued after the market close and is available on the Investor Relations section of our website. Please note that today's call contains forward-looking statements about our business as defined under federal securities laws. These statements involve risks, uncertainties and assumptions, including, but not limited to, statements and projections about our future financial performance, growth prospects, cash position, sales efforts, technology developments, new business opportunities, transactions and initiatives the potential impact of artificial intelligence and macroeconomic factors on our business. For a detailed discussion of these risks and uncertainties, please refer to our public filings, including today's press release, our most recent annual report on Form 10-K and our quarterly report on Form 10-Q, all available on the SEC website. These documents outline important risk factors that may cause actual results to differ materially from our forward-looking statements. We will also discuss non-GAAP financial measures during the call, which we use as supplemental indicators of Domo's performance. Unless otherwise stated, all results discussed today other than revenue, are on a non-GAAP basis. These measures should be viewed as complements to not substitutes for our GAAP results. A reconciliation of our non-GAAP results to the most directly comparable GAAP measures can be found in today's earnings release and on our Investor Relations website at domoinvestors.com. With that, I'll turn it over to Josh. Josh? Joshua James: Thank you, Cory. Hello, everyone, and thanks for joining us on the call today. It's been an exciting time for us as we continue to execute against our key objectives. In Q3, we generated positive adjusted free cash flow of $2.1 million a $15.8 million improvement over last year. We're on track to finish the year with positive adjusted free cash flow for the first time ever with every quarter being positive along the way. Our operating margin was 6.8%, well above guidance, putting us on pace for our highest full year operating margin ever. We also posted positive EPS for the second consecutive quarter at second time ever. We are pleased with the progress in these financial metrics and are continuing to execute a clear and strategic game plan rooted in 3 key objectives: deepening our partner ecosystem, accelerating consumption and pushing the boundaries of what's possible with AI. I'll speak to the importance of and our performance against each of these objectives. I'll start with deepening partner ties. A foundational component of our ecosystem focus has been rearchitecting our platform so customers can seamlessly integrate Domo with the cloud data warehouses or CDWs they already use. We call this functionality, cloud amplifier because by sitting on top of Snowflake, Databricks, Big Query, Redshift, Oracle or whichever warehouse they prefer, cloud amplifier magnifies the value of our customers' previous data infrastructure investments. This approach gives customers flexibility and gives them control, while fully leveraging Domo's powerful platform capabilities. Today, over 350 accounts are actively using cloud amplifier across 9 different cloud data warehouses, a number that has more than doubled year-over-year. Even more striking, the number of unique users on cloud amplifier has soared 450% year-over-year. This rapid adoption shows that our shift from competing against cloud data warehouses to complementing them is the right move as we are not only enhancing the entire data experience for our joint customers, but also driving meaningful revenue for our partners. In fact, several of these partners are interested in even tighter relationships and considering OEMing our analytics for all of their new customers or considering investments or other strategic relationships. The power of our products together truly delivers exceptional customer value. Our partnerships with the CDW ecosystem continue to grow stronger and more impactful. In Q3, leads from strategic partners increased over 25% compared to Q2 and more than doubled from what we generated in Q1, showing how quickly these relationships are expanding, while working through partners introduces more stakeholders and may create longer sales cycles than our traditional direct motion, it's actually proving to be a major positive for us. These deals typically involve CIO level engagement and more strategic conversations across the business, which can lead to stickier relationships, strong retention and broader adoption across the organization. It reinforces the growing value of our ecosystem and the durable growth engine we're building. Next is the tremendous and almost unprecedented speed at which we've transitioned to a consumption model and the corresponding value it is adding to our business. We see strong evidence of this in our monthly unique user growth and the increasing share of our revenue coming from consumption pricing. Today, 80% of our annual recurring revenue is on consumption contracts, a significant shift that underscores the broad acceptance of this model. A little more than 2 years ago after introducing it, the percentage of our ARR and consumption was in the single digits. And as we've now said for the last several calls, we expect to be over 85% by the end of the year. The move to a consumption model is not just about pricing. It's about unlocking full platform access and demonstrating value to a wider user base by removing traditional licensing limits and enabling broader access we empower more people across our customers' organizations to engage with data and AI in meaningful ways. Monthly active users across our entire customer base have increased over 10% year-over-year, reflecting this growing momentum. The result is naturally accelerating adoption and usage creating a positive feedback loop that drives deeper customer success. Over time, this expanding engagement will generate favorable economic benefits for Domo, while delivering greater impact for our customers. This usage-driven momentum gives us growing confidence in the durability of our long-term model. Complementing the move to consumption, we are also leaning into a more composable approach to how we sell the components of our platform. More composable platform allows us to meet customers, where they are and accelerate how quickly that they can get value from Domo. While we can power the full end-to-end data and AI stack. Some customers don't always need the whole thing on day 1. Sometimes they're looking for a better integration layer or a workflow engine or a place to operationalize AI embracing composability this way means that we insert value immediately where they need us. That flexibility has been a big advantage as modern data architectures become more modular. Operationally, that means our go-to-market motions now include more of a focus on helping customers start with a piece of Domo that most meets their needs and then growing naturally into more components of the platform over time. Finally, innovation with AI continues to accelerate. At a time when industry studies have shown that high levels of generative AI projects failed to reach production, highlighting how hard it is to get value, real value from AI Domo's customers are proving what's possible with the right foundation. The number of unique accounts using our AI features increased over 60% year-over-year, while the number of unique users more than doubled. We view this as evidence that our integrated platform, combining connectors, ETL, workflows, governance and visualization is enabling real AI use cases that deliver ROI at scale. Our customers are moving from experimentation to operationalizing AI to transform decision-making. While some of these benefits are still unfolding, we view these strong adoption in users trends as powerful leading indicators. They validate our strategy and give us confidence that as we continue executing with this pace and focus, favorable financial performance may naturally follow. I'm incredibly proud of the progress we've made over a relatively short period of time. The trajectory is clear. building broad platform engagement today sets the foundation for sustainable profitable growth tomorrow. Now let me share a few customer wins in the quarter that highlight progress against our key objectives. And our partner ecosystem, we closed new logo deals with a large credit union and a fast-growing logistics provider, who each selected Domo and Snowflake together after seeing how our joint solution simplifies their data environment accelerates reporting and provides a strong foundation for their long-term AI strategy. A multibillion-dollar global food and beverage nutrition company is modernizing its approach to marketing intelligence and signed with Domo to optimize its use of Databricks after their previous vendor and SI spent more than a year attempting to deliver results with limited success. In contrast, Domo and its SI partners deliver a compelling proof of concept in just a few weeks. Our ability to blend Databricks data with Domo's AI workflows and app capabilities showed the customer a clear path to standardization and faster insights. This deployment is already sparking interest in expanding Domo across the business. One of the largest insurance companies in the U.S. extended its partnership with Domo, evidence of the strength of Domo's offering for large enterprises and an example of our multiyear contract growth. This insurer expanded to a 4-year 7-figure TCV agreement after a collaborative solution sprint showed how our AI workflows and app development capabilities could streamline their complex RFP process because they were already on consumption, they could leverage the full breadth of the platform without licensing barriers, allowing this solution to be scoped for long-term impact rather than limited access. We also expanded to a 7-figure TCV contract with a large global nonprofit that provides care to nearly 3 million patients. They relied on Domo for years, but recently turned to us to help them build predictive models to better understand and reduce patient churn. Moving to consumption has allowed them to broaden user access, deepen analytic exploration and accelerate their work with AI and application development. They are also a large snowflake customer. And so together, we're partnering to help this customer unlock even more value from their snowflake data using Domo. Given the scale of their operations, we see meaningful room for continued growth. And finally, a fast-growing retail technology company expanded its use of Domo as part of a broader effort to simplify its data architecture and scale efficiently. Moving to consumption removed past licensing constraints, and enabled enterprise-wide access positioning Domo as their long-term platform through 2029 by connecting directly to Databricks using cloud amplifier, they now have a streamlined path for real-time insights across the business. Through a strong C-level relationship, their projected growth and increasing focus on AI-driven workflows and natural language experiences, we see significant future expansion potential. Over the past few months, we've also received strong industry recognition for media and industry analysts for our leadership in AI and data products. Domo was named the leader in Agentic AI by both Dresner Advisory Services and KM World with Dresner ranking us as #1 in its 2025 Agentic AI report? Nucleus Research named Domo leader in its embedded analytics Technology Value Matrix 2025. CRN selected Domo as its 2025 Product of the Year Award for Best Business Intelligence and Data Analytics Technology. ISG named Domo, an overall leader in its data products buyer's guide and Dresner also recognized Domo's broader platform strength, ranking us #2 in its analytical data products report. These recognitions reflect what we're hearing from customers every day that Domo was helping them turn data into actionable insights, modernize workflows and get real value out of their data and AI investments. I'm encouraged by the progress we're making and the momentum we're building with this next quarter expected to be the fastest billings growth we've seen in more than 3 years, while generating positive free cash flow every quarter this year. It's clear that the work of the past few years is paying off, and we're now in a stronger position than ever to drive meaningful, profitable growth in the quarters and years ahead. Finally, I want to thank our employees. It's been a long row to hoe, but the work they've done to strengthen our ecosystem partnerships move a significant majority of our base to consumption pricing and build innovative new AI capabilities has been extraordinary. Their passion and persistence are driving this next chapter for Domo and I'm incredibly proud of what we're achieving together. So speaking of rows to hoe, I know a man who has hoed miles and miles of sugar beets in Southern Idaho. So we should turn it over to our one and only Chief Financial Officer, Tod Crane. Tod Crane: Thanks, Josh, and thanks to everyone for joining us today. In Q3, we generated positive adjusted free cash flow of $2.1 million representing a year-over-year improvement of $15.8 million. Importantly, we expect to generate positive adjusted free cash flow in Q4 and are therefore on track to be positive for the full year for the first time in company history. This also means that we expect to generate positive adjusted free cash flow for each quarter this fiscal year, another first. Our operating margin in Q3 was 6.8% well ahead of our guidance and putting us on track to deliver our highest full year operating margin on record. We also generated positive EPS for the second quarter in a row and the second time ever. These results reflect our ongoing commitment to control the things we can control and operate the company with efficiency and discipline. Billings for Q3 were $73.2 million, below our guidance, primarily due to longer-than-expected sales cycles for certain partner-related deals. We've learned that the sales cycles for customers, who are purchasing a CDW for the first time can be long and complex. However, these deals create stronger, more durable customer relationships, often with CIO level support for Domo being part of their company's global data strategy, making the weight worthwhile. While some partner-sourced opportunities are taking longer than expected to show up in our top line metrics, our ecosystem focus is producing measurable benefits elsewhere in the business as the customer examples we discussed earlier demonstrate. We remain confident this strategy will continue to unlock many opportunities for us that would not have been possible otherwise. Turning to our recurring revenue metrics. Current subscription RPO grew 3% year-over-year to $214.1 million, and our total subscription RPO grew 15% to $405.9 million. This growth underscores the strength of our customer relationships, highlighted by the prevalence of multiyear contracts and the longest average contract duration we've ever seen. Looking ahead, a substantial portion of Q4 billings will come from existing multiyear agreements, providing increased visibility and reducing risk in our financial outlook. Our gross retention in Q3 was 85%. Several years ago, retention was having a negative impact on our business, and we identified it as a major area of focus. Since then, we have made a concerted effort to improve retention primarily through 2 initiatives: first, shoring up our customer relationships, by going into deals jointly with our ecosystem partners and thereby up-leveling our status with CIOs. And second, generating meaningful growth in RPO, which is a reflection of the value our customers are getting from our product resulting in strong relationships and a willingness to make long-term commitments to us. The progress we've made in these areas is finally having a material impact, and we expect gross retention to improve to approximately 87% in Q4 the highest gross retention rate in 6 quarters. This is just the beginning, and we could see ourselves approaching 90% in certain quarters next year. ARR net retention was 95%, up sequentially for the fifth straight quarter and a year-over-year improvement of over 4 percentage points. Another factor contributing to the improvement in our retention metrics is the retention profile of customers on the consumption model, which continues to be well above that of our seat-based customers. ARR net retention for the customer cohort that began on consumption continues to be above 100% and coming in at 106% in Q3. We currently have 80% of our ARR on consumption contracts. We feel confident we will end the year above 85% and as our consumption customers represent a higher and higher percentage of our renewal base, we believe both gross and net retention will continue to improve. Total revenue was near the high end of our guidance range at $79.4 million. Gross margin was 75.4%, down 90 basis points year-over-year, primarily driven by ecosystem-focused improvements to our platform. We expect these improvements to not only enhance our ability to continue executing on our partner strategy, but also drive more consumption revenue, which we expect will increase gross margin over the long term. Our non-GAAP net income was $0.3 million. Non-GAAP diluted net income per share was $0.01 based on 44.8 million diluted weighted average shares outstanding. Looking ahead to Q4, we expect billings of $107.5 million to $109.5 million. The midpoint of this range represents 6% year-over-year growth, which would be our highest billings growth in more than 3 years. We expect GAAP revenue of $78 million to $79 million and non-GAAP net loss per share of $0.01 to $0.05, assuming 42.1 million weighted average shares outstanding, basic and diluted. For full fiscal year guidance, we expect billings of $315 million to $317 million, GAAP revenue of $317.5 million to $318.5 million and non-GAAP net loss per share of $0.07 to $0.11, assuming 41 million weighted average shares outstanding, basic and diluted. In regard to adjusted free cash flow, we expect to be positive in Q4 and to generate approximately $6 million for the year. I would like to highlight that our guidance reflects our expectation that our operating margin will be 5% for the full fiscal year, our highest ever. Earlier in the year, we only expected to exit the year at 5%, but we now expect to achieve that level of profitability for the entirety of the year. We continue to expect that we will exit FY '27 with 10% billings growth and 10% operating margin. With that, we will open the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Derrick Wood with TD Cowen. James Wood: Great. Josh, could you just double-click on the assessment of kind of where the negative billing surprise came from? And what you're doing to address it to get back on track? And maybe give us a little bit more additional color on how we should all be getting comfort on hitting those kind of nice growth rebound targets for Q4 in terms of billings? Joshua James: Yes. Thanks, Derrick. The -- as this ecosystem business has gotten larger and larger for us, we're starting to realize that because it's having a bigger impact, we're starting to realize that it takes a little bit longer for us to close those deals because they're more involved. They have higher close rates, and they're much stickier when we get them. Because we're now in there with the CIO, but involving the CIO and having multiple vendors and from what we've heard from other people, other vendors in the same ecosystem that we're selling into, it looks like the sales cycle is going to be a little bit longer. So we kind of had a onetime shift, if you will. And the pipe in terms of Q4, we feel very confident in -- and we also feel -- we're very excited about finally getting to the billings growth, and that comes from 2 things. We're finally from a retention standpoint, we're finally seeing the improvements of the ecosystem investments that we've made there, as we go to many of our customers and get a chance to talk to them and introduce them to Databricks or Snowflake or Google or Oracle or whoever and the fact that we're in there jointly has really helped us from a retention standpoint, and it's really helping us from a new deal standpoint, just the new deals are taking a little bit longer than we originally realized. And so that's that shift there. But it doesn't change anything about the premise. It's still very positive. We just had that had that shift in billings. James Wood: Anything -- so it sounds like some deal slippage. I mean anything to share in terms of have things closed and in Q4? How is the quarter off now that you've had a month into it? Joshua James: Yes. It started off well. Some deals that slipped already closed -- in Japan, we had deals that closed at the beginning that had slipped also with partners. So it was just -- unfortunately, we didn't lose any of the deals, but it also wasn't "Oh, a couple of deals slipped. We'll get them and then get all at Q4." We're kind of like, okay, we probably should be a little conservative on this and the way we interpret this because, again, we didn't lose the deals. It's just elongated because of getting CIOs in the room, getting multiple vendors in the room. And so as we looked at our pipeline, again, feel really good about it. But in terms of timing for some of those ecosystem deals, we'd probably better be conservative on that. James Wood: Okay. And just the -- your comment on opportunities with some of the CDWs around OEM and other types of investments. Could you give us a little more sense as to what kind of things may be in the hopper? Joshua James: Yes. We've got these partners. And as we work with them and we share 100 customers or 300 customers, they start looking at -- we're starting to realize what we're doing for them. And we're making their customers happy and in most cases, happier than they have been with alternative solutions. And as the partners are looking at that, they're approaching us and saying, hey, maybe we shouldn't be pushing some of these other things and maybe we shouldn't be pushing our own stuff. Are you guys interested in an OEM deal and going to market together, which, to be honest with you, we're kind of surprised about in some cases because a lot of times, you don't see these OEMs pick just one, but that's what's being floated. And they're very meaningful deals that would have a really big impact. The 1 nice thing about being as independent as we are, it hasn't always been benefit, but the nice thing is that we're pretty neutral when it comes to the big players out there. And so we're a safe place for them to help keep their data in their platform. You think about all these different clouds that are out there and all these different clouds that have applications and that have other data flowing through. And the last thing they want to have is that data flowing somewhere else. And so when you look at the other companies that can facilitate data integration, ETL and facilitate that data going from 1 cloud to another, all of a sudden, these big cloud vendors are like, "I don't know, if we really want that happening." We would prefer that it stays here. So maybe we should upgrade our own services, make sure that we have best of breed and really put forth the company that can help us keep our data in our cloud. And that's just presenting a handful of different opportunities that are looking very interesting. So I mean I'm sure this year, we'll have -- in the next 12 months, we'll have a handful of relationships that just continue to improve. I'll add 1 more thing. I don't -- there's not 1 cloud vendor that we're working with, where things look anything but rosy, optimistic exciting on every single 1 of them, things the future looks brighter. And so it is -- we are in a really good position. We needed to represent in our numbers. And we are very excited about the billings growth in Q4. We're very excited about the fact that we've got a $23 million improvement for cash flow this year. So we know we can operate at cash flow positive and profitably. And finally, these investments that we've been making are starting to pay off. We're seeing it in the gross retention. And now we're starting to see it in pipeline and billings growth and I think there's the potential big deals out there that could happen in the next quarter or 2. James Wood: Great. If I could squeeze 1 more in for Tod, just on the -- great to hear the gross retention potential for 90% next year. Any commentary on where kind of the net revenue retention may potentially go to? Tod Crane: Yes. I think there's 2 factors that are going to play into improvement in net retention. 1, as that gross retention number goes up, there's going to be a corresponding improvement in net -- and the other side that I'd point to is as we get better and better at realizing the upside from the consumption model, working more closely with our customers and helping them get into a contract that makes sense based on their usage. We shared several uses metrics during the call. Overall, across the whole platform, unique users up 10% year-over-year. There's a lot of opportunity for us to take advantage of that consumption model and improve our upsell motion. So the combination of improving gross retention, improving upsell, we see plenty of upside on the net retention side as well. Operator: Our next question comes from the line of Brett Huff with Stephens. Brett Huff: Josh and Tod, congrats on making progress on this. I've got 2 questions on kind of a balance. 1 is can you talk a little bit about time to value? I know that's been one of the things that you guys have brought to the table for your partners. But you also mentioned that you're going towards a little bit more composability, which may mean some smaller maybe smaller deals, but maybe even faster time to value. So can you talk about that balance? And maybe the other balance is you're really improving profitability and free cash flow, which is great. But are you finding that you're running up against things where you wish you had a little more freedom to spend in order to drive better growth? Or have you reached that sort of phase yet in wanting a little bit more freedom on Capital? Joshua James: Yes. On the composability, it's -- we do have a full stack. We have a lot of different entry points into relationships. And that's -- it's -- when you're pitching a loan to a new logo, you kind of start with the whole package, and it's 1 of the things that's very appealing. When you're in there with a partner, they've already solved some of their tech set. They have a strategy. They have an architecture. So going there together with the partner and understanding the gaps that they have and being able to easily fill those gaps is a really simple way to improve the partners business, improve the partners installation that they're doing. And it actually hasn't had much of an impact on -- I don't think it's had any impact on our average deal size because this product is so broad and so deep that even when we're selling a composable piece, it's still something that we can charge $50,000 or $200,000 or $0.5 million for just for integration and connecting our connection framework. So we're actually able to still get great contracts. It just is really simplified because we're in there just talk about 1 thing and 1 thing only. And we're making that partner look good because it's so fast. I talked about a couple of examples in the prepared remarks, where we go into deals, it happens all the time. And they've been trying for months or years to make something work. We come in with a partner and 2 weeks later, it's up and running. So just the partner framework really enables us to sell just components of our stack versus having to sell the whole stack. And it's actually a real joy and a really great entry point. As far as the numbers, I'll let Tod speak to it mostly, I will say that, yes, there's definitely we trimmed the fat. We got things down very efficient. We're constantly -- it's been really fun internally, constantly analyzing everything that we do and what's the efficiency of it and what's the alternative to it and are the alternatives more efficient. It's just really fun to fine-tune all those pieces. And as we've done it, finally, we're starting to see some initiatives that are getting good returns and paying off. As we see those returns, for sure, we're running up to things we were like, dang it, wish we had an extra $5 million because we could grow faster, wish we had an extra $10 million over here, we could definitely grow faster. So we're starting to see those things. And as those opportunities become very, very finite in terms of understanding exactly what kind of return we can get off of the dollar that we're making into different investments. As we understand that more and more and get more confidence and do test runs, then it will give us either more common is just as we grow to spend those dollars and continue to invest or give us more confidence to say, you know what, here's something that looks really good. Let's go find something that's not as efficient and swap that out. So we're not to a point where we need to change our stance on our financial architecture that we've put forth. But it is fun to see, gosh, there's some opportunities right there because sometimes, when you run these companies, you don't even see those opportunities, just like, "Oh, can't find the right thing to do right now. We've got to find something that's working, and we're shifting more towards those a lot of things that are working. It would be great if we could do more, but we have these constraints, and we're committed to these numbers. Tod, do you want to add more color? Tod Crane: Yes. Thanks, Josh. If you think about the Rule of 40 framework growth versus profitability, obviously, very, very pleased with the progress we've made over the last 12, 18, 24 months on the profitability side of things. But at the end of the day, the growth is really the price, and that's what we're focused on, and we want to get that growth reaccelerated. The things that we've done so far have not put at risk our ability to grow the business we've been able to find other areas to save money and trim costs that aren't going to impact that ability to grow. But as we've discussed, there are a lot of exciting opportunities right now. The ecosystem play that we've been working on for over 2 years now and the improvements we made to the product, the people that we've got in place, the teams that we've got in place is just opening up a lot of really exciting opportunities, and we'll definitely be doing everything we can to capitalize on those. Brett Huff: Great. I'll do -- if I could do 1 more. Can you talk a little bit -- remind us about how the conversation on AI is going. As you guys know, there's been a big conversation on AI eating SaaS. You guys kind of are more I think, have good defenses against those. But can you just sort of go through how those conversations are going and how offense you're playing offense around AI? Joshua James: Yes. We're definitely playing offense. It's as it evolves is something we pay a lot of attention to. It's 1 of the 3 big initiatives that we focus on day in and day out at our company. Everyone in the company knows that it's a focus. And there's a couple of components to it. #1, it improves our ability to deliver for our customers pretty dramatically because it simplifies a lot of the things that customers do with the stack that we have. So just going through our entire stack and using AI to make it more efficient, faster, has been a huge benefit to our customers. And #2, then what kind of agents can we build for our customers and can our customers build on our platform. And we've got the recognition. We've been cited as the best agent platform -- Agentic platform out there. We have -- we heard about dozens and dozens of new examples every single month, and we need to get that to hundreds and thousands that are happening every month because it's something that customers can do on their own. We have a very big initiative. It's the biggest initiative that we have ongoing right now from an R&D standpoint, developing this next version of next generation of our genetic platform and that will be available here in Q1. But Daren, why don't you take a few minutes, Daren Thayne, our CTO, is also on the call. But Daren, why don't you take a few minutes and share some of your thoughts about our Agentic platform. Daren Thayne: Yes. Thanks, Josh. One of the key things that we see from customers that are leading into AI is definitely they are rightfully concerned about the ability to have the right kind of governance on their data, and they're not willing to just turn over without that governance ability to their company data. And so we've leaned in, in a big way in allowing them to have full governance of their data and unleash their users' ability to leverage AI with the comfort that they still have a fully governed access to that data. Operator: Our next question comes from the line of Patrick Walravens with Citizens. Kincaid LaCorte: Great. I was just curious, how much leverage are you guys getting with your new partners based on your learnings from the Snowflake partnership? Joshua James: How much leverage are we getting from what, Patrick? Kincaid LaCorte: With your new partners -- sorry, this is Kincaid on for Patrick. I don't want to take it from... Joshua James: How much are we getting from our new leverage are we getting with our new partners from what we've learned with Snowflake? Is that the question? Unknown Analyst: That's the question. Joshua James: Yes. Great question. It is a great question because that's definitely how we've been building out all of these partners and we talked a lot about cloud amplifier today. But yes, you have to do it once and the first lift is 10x harder than the second. You still have to go through the entire process. And there's no shortcuts for certain components of it because everybody's got their own unique properties to their stack. So there's big benefits because we learn how to do it from our side and then it's just maybe changing the way we plug into others. That said, there's a lot more than just the technology stack, right? There's the -- how do we go to market? How do we educate their sales executives? What's the play that works? Is it getting with the field? Is it getting with the sales managers? Is it going top down? Is it going bottoms up? What kind of white papers are needed, what kind of marketing materials needed, what kind of spend should we be doing to generate leads, what kind of webinars should we be doing. So the whole go-to-market motion is probably more complex because the technology problem is a problem just needs to be solved, and we've got a great team that figures out to solve it. So the go-to-market part is more complex, but that's also something with huge benefit out of working with 1 or 2 or 3 really well and then all of the learnings benefit everyone else and benefit us. So it's been -- there's definitely been some economies of scale that benefit that we've been getting there. Operator: Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Eric Martinuzzi: The billings shortfall for Q3, was this just 2 or 3 large transactions. I understand the explanation that you've got more players involved and you're dealing at the CIO level. But this 2 or 3 sort of whale-size deals? Or was this 6 to 10 midsized deals? Tod Crane: Yes. So it was a combination of I don't think there's any 1 or 2 big deals that constituted that. I think it was a number of kind of, let's say, medium-sized deals that slipped. And as we mentioned earlier, a lot of that is stemming from the fact that these partnered sales cycles are a little more involved and take a little bit longer than we originally expected, but we ultimately come out on the other side a lot stronger because we are -- there's a lot of stakeholders involved. There's a lot of people that get eyes on our product and want to understand how we're going to perform on top of the cloud data warehouse that they're evaluating and when we come out the other side, we've got the full blessing of the CIO. We've got backing from the IT department. We've got people from all over the company that understand that Domo is going to be deployed with that cloud warehouse. So if you think about it from a modeling perspective, yes, some $2 million to $3 million of deals that slipped into Q4, but as we updated our model and said, okay, we've got a longer sales cycle here that we're dealing with. There's also some billings that we originally had in Q4 that pushed out in the future period. So kind of net-net, no net impact to Q4. But we feel really confident in the number that we guided to there. One thing we talked about on the call was because of all the work we did on multiyear deals 1.5 years ago, starting 1.5 years ago, we've got more of our -- a higher percentage of our Q4 billings coming from existing multiyear contracts than we've ever had before. So that gives us a lot of comfort and a lot of visibility into that Q4 billings number. And we're -- as we said on the call, really starting to recognize a lot of benefit from the work we've put in on getting longer-term deals, growing RPO and going into deals jointly with our partners to build stronger customer relationships. Eric Martinuzzi: Okay. And then you guys did a terrific job here in FY '26, keeping a tight lid on the expenses, and we've obviously seen that in the free cash flow -- just curious, I'm not looking for a 2027 OpEx guide, but just curious to know if FY '27, are you -- are there planned areas of investment that would be at a run rate higher than we were in FY '26, either on the R&D or on the sales? Tod Crane: There very well could be, but I think we're -- as we go along, we're finding areas of the business where we're able to get more efficiency than we've ever had before as well. I mean we're obviously like most companies out there were looking for ways to deploy AI effectively within our company and how do we get more leverage out of our existing resources by empowering them with technology, empowering them with AI. We use our own product internally a ton. We use it every single day. All -- everybody in the companies is in the product and utilizing the power of Agentic-AI in a secure government environment and finding ways to automate and be more efficient. So while there will be areas, where we want to invest, there are going to be areas where we're going to be able to be more efficient as well. Joshua James: And I think the guidepost there that we said we were going to -- we were committed to 5% and 5% exiting this year, 5% and 5%. And and we're still planning on doing that. And exiting next year with 10% growth and 10% margin. And that's the guidepost. And within those constraints, if we're getting more growth, and that gives us opportunity to invest more than we will. But we've set those guideposts out there for a purpose so that every investor can get great comfort with how we're going to grow this business. Operator: Our next question comes from the line of Lucky Schreiner with D.A. Davidson. Lucky Schreiner: Great. It was nice to see that ARR net retention for the customers, who began on consumption. That remains strong, but it did tick down a bit -- and I was just wondering what was the main driver behind that in light of the usage momentum and user growth you had referenced in your prepared remarks. Tod Crane: Yes, there's going to be a little bit of movement in that cohort in the near term. It's a meaningful sample size. It's a meaningful dollar amount, but it's not -- if you think about it, with that NRR metric being a trailing 12-month metric, it's really reflective of where we were a year ago on our journey of converting customers to consumption. So a year ago, we were probably in the 50% to 60% range, somewhere in there. So -- it is a -- like I said, it's a meaningful dollar amount, but it's also -- it's not the entire customer base. So there's going to be a little bit of choppiness there, as we continue to get to a point, where it is very, very close to 90-plus percent of that denominator. Lucky Schreiner: Got you. That's helpful. And then the gross retention improvement to 90% potentially next year was great to hear. Is the uncertainty of timing there, though, primarily a function of the longer sales cycles with CDW and when those start to benefit the renewal process? Or is that around like cohorts were coming up with the longer contracts to renew? Tod Crane: Yes. It's a combination of a couple of things. So certainly, the progress we made with getting a higher and higher percentage of our customer base under multiyear contracts is going to drive a lot of that improvement in gross retention. It's also -- there's a number of other initiatives we've got in place. We're working on our onboarding. We're working on a number of things, getting more and more technical resources into the company that can interface with our customers on a regular basis and really drive that deep adoption in their organizations and make sure they're getting a lot of value out of our product. There's, again, a number of factors that are all playing into that, but those are all reasons why we feel confident that this step-up from -- we've been at 85% for the last 5 or 6 quarters, stepping up to 87% in Q4, and we see kind of that step-up continuing and progressing as we go forward into next year. Those are all the things we're seeing that give us -- give us confidence in that. Operator: [Operator Instructions] There are no further questions at this time. I'd like to turn the call back over to Josh James for closing remarks. Joshua James: Thank you. I'm thrilled that we are expecting the best billings growth in over 3 years and expecting to be adjusted cash flow positive every quarter this year. And now that we've completed the earnings call, I will take a moment to share a personal message. Over the past several months, I've taken a hard and honest look at my relationship with alcohol. I periodically used it as a crutch during moments of stress and once I started drinking, I sometimes struggle to know when to stop. This pattern doesn't align with the person I want to be for myself and my family and my faith of the people I lead. So a few weeks ago, I check myself into a residential substance abuse treatment center for alcohol. I have another 2 weeks to go of residential treatment and then we'll spend several weeks of continued daily treatment, followed by a year of weeklong -- of weekly counseling. I am making this public because I believe transparent accountability is an important step for my recovery. I never thought it could be on my bingo card that I might become a well-known, very flawed Morman or a member of the Church of Jesus Christ Latter-Day Saints. I always wanted to be a great example of Christ of my church of my wife, my children, my parents, friends and coworkers. But I failed in many of regards on that front, and I'm committed to getting help. I've decided to take some medical time to really focus on recovery. I know that I will recover and improve myself. And going forward, I only hope I can live the rest of my life more humbly, more purely and hope to become a story of redemption of getting back up after falling down and of living a life with character of which I can be proud. I want to express my deepest gratitude to my wife and my family, who've been pillars of strength throughout this journey. Their love patients and unwavering support have grounded me through some of my hardest moments, and I'm profoundly grateful. While I'm focusing on myself, I will still be able to perform my duties as CEO at Domo. And as always, continue to take them very seriously. However, for a temporary period, I'll be spending a majority of my time prioritizing my health. I look forward to keeping the Domo train on the rails and executing at the highest levels. As I also temporarily rely on my team more than ever. I will continue driving the strategic conversations and relationships and we'll also have weekly or daily sync with my team as needed. I appreciate your listening and pray for your understanding and support. I will try to make myself as available as I can for any follow-up questions at another time. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Addex Therapeutics Third Quarter 2025 Financial Results and Corporate Update Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Tim Dyer, CEO. Please go ahead. Timothy Dyer: Thank you. Hello, everyone. I'd like to thank you all for attending our third quarter 2025 financial results conference call. I'm here with Misha Kalinichev, our Head of Translational Science, who will be providing an update on our R&D programs. I draw your attention to the press release and the financial statements issued earlier today, which are available on our website. I also draw your attention to our disclaimers. We will be making certain forward-looking statements that are based on the knowledge we have today. I will start this conference call by giving a quick overview of our recent activities and achievements before reviewing our pipeline. I will then hand over to Misha, who will review in more detail our dipraglurant post-stroke recovery program and GABAB PAM preclinical program for cough. I will then review our Q3 2025 financial results. Following that, we will open the call for Q&A. The third quarter of 2025 has seen several important achievements across our pipeline. We've made excellent progress in our GABAB PAM program. We continue to complete preclinical characterization of our selected compound. We've also selected a backup compound for this important program. As a reminder, our partner, Indivior, successfully completed IND-enabling studies with their selected drug candidate for substance use disorders. Under the terms of the agreement, Addex is eligible for payments of up to USD 330 million on successful achievement of prespecified regulatory clinical and commercial milestones as well as tiered royalties on the level of net sales from high single digits up to low double digits. Also under the terms of the agreement, we have the right to select compounds for development in a predefined list of reserved indications. As mentioned, we have selected a compound and are advancing its development for chronic cough. We have repositioned dipraglurant, our mGlu5 negative allosteric modulator for brain injury recovery and have made good progress in preparing the program for clinical studies. As a reminder, earlier this year, we entered into an option agreement, giving us access to an exclusive license to intellectual property covering the use of mGlu5 inhibitors in this interesting therapeutic indication. Included in this agreement is a research collaboration in which we are working with Sinntaxis and the University of Lund to complete preclinical profiling of dipraglurant and prepare the clinical studies. Our spin-out company, Neurosterix is making excellent progress in advancing its portfolio of preclinical programs, including a potentially best-in-class M4 PAM schizophrenia. In June, we invested in Stalicla, a private clinical stage neurodevelopmental disorders focused company. Stalicla has developed a proprietary precision medicine patient stratification technology platform, which allows the company to select patients based on the biological dysregulation rather than behavioral phenotype. Proof-of-concept platform has been demonstrated by applying the technologies to identify and develop drugs in subpopulations of patients suffering from autism spectrum disorders. Stalicla has made excellent progress in advancing its patient stratification study in autism as well as advancing discussions with pharma to apply its technology more broadly in neuropsychiatric disorders. We completed the third quarter with CHF 2.2 million of cash, which provides us with a cash runway through mid-2026. I'd like to highlight that the cash burn has been significantly reduced following the Neurosterix spinout transaction; however, current cash does not fund progression of our unpartnered programs into the clinic. Now for a quick review of our pipeline. We continue to believe in dipraglurant and are executing our plans to reposition the development of brain injury recovery. As mentioned, our partner, Indivior has selected the GABAB PAM drug candidate for development in substance use disorders and we successfully completed IND-enabling studies. We are advancing an independent GABAB PAM program for chronic cough and are ready to start IND-enabling studies subject to securing financing. Neurosterix made excellent progress advancing its pipeline, including completing IND-enabling studies for their M4 PAM program. Program is on track to dose patients this year, and we expect to be able to announce further progress in the coming months. Now I will hand over to Misha, who will give you some more details about our exciting portfolio. Mikhail Kalinichev: Thanks, Tim. Hello, everyone. I will start by speaking about dipraglurant and our plans for development in brain injury recovery. Dipraglurant is an orally available, highly selective mGlu5 negative allosteric modulator, which we believe could improve the outcome of rehabilitation for patients suffering from traumatic brain injury or stroke. The mechanism of action of dipraglurant targets neuroplasticity early in rehabilitation to promote rebuilding of neuronal connections and sensory motor recovery. There is large unmet medical need in post-stroke recovery and rehabilitation. Stroke is among leading causes of chronic often lifelong disability as it leads to motor, sensory, cognitive impairment and multiple comorbidities. There are over 100 million stroke survivors worldwide, and the number is growing at the annual rate of 12 million. A variety of rehabilitation therapies are used with post-stroke patients, but the recovery is slow and often inadequate. There is an urgent need for pharmacological agents that can promote the recovery stimulated by rehabilitation therapy. mGlu5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in the brain, involved in neuroplasticity and modulates excitatory-inhibitory equilibrium. In fact, activation of mGlu5 has been observed in a range of neurological disorders, including stroke, where it plays a role in maladaptive rewiring of the brain following stroke. Inhibition of mGlu5, on the other hand, can facilitate adaptive rewiring of the brain, promoting neuroplasticity and creating of new functional pathways moving the neural network towards the pre-lesion state. Exciting new evidence recently published in the Journal Brain suggests that the negative allosteric modulator of mGlu5, MPEP administered daily in rats following stroke results in a sustained and growing improvement in sensory motor function in comparison to vehicle treatment. Similar improvement in sensory motor function was observed in animals treated with our mGlu5 NAM dipraglurant. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of MTEP also stimulates intra and interhemispheric connectivity in the brain disrupted by stroke. It is important to note that improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across species. Dipraglurant is ideally suited to be used in tandem with rehabilitation therapies in post-stroke patients as it has a fast onset of action and short half-life. It has shown good tolerability in healthy subjects and in Parkinsonian patients showing only mild to moderate CNS-related adverse events. We have a drug product ready and a strong patent position and believe dipraglurant can become a first-in-class drug to facilitate post-stroke recovery. We can also speculate that dipraglurant-mediated adaptive rewiring and facilitation of recovery following brain damage would also be seen in traumatic brain injury patients. Let me now turn to GABAB program and the exciting opportunity that it offers to the chronic cough patients. There is a strong rationale for developing GABAB PAM for chronic cough. Chronic cough is a persistent cough that lasts for more than 8 weeks and can be caused by a variety of factors, including respiratory infections, asthma, allergies and acid reflux, but also by cough hypersensitivity syndrome. There is a large unmet medical need in novel antitussive drugs as current standards of care are ineffective in 30% of patients and only moderately effective in up to 60% of patients. In addition, the current treatments carry risks of serious side effects. Support for using GABAB positive allosteric modulators in treatment of chronic cough comes from the clinical evidence that baclofen GABAB agonist is used off-label in cough patients and from the anatomical evidence that GABAB receptors are strongly expressed in airways and in the neuronal pathway regulating cough. Therefore, we believe that GABAB PAMs could offer superior efficacy in cough patients. The pre-IND activities, including in vivo proof-of-concept studies, non-GLP tox and CMC have been completed. Our clinical candidate has shown favorable efficacy, tolerability and developability profiles. The compound has demonstrated a consistent minimum effective dose of 1 mg per kg and ED50 of 6 mg per kg in models of cough in vivo. No signs of tolerance were seen after subchronic dosing and more than 60-fold safety margin was demonstrated based on respiratory depression, a sedation biomarker. The IND-enabling studies are planned and ready to start subject to securing financing. In the model of citric acid-induced cough guinea pig, acutely administered compound A delivered a robust antitussive efficacy, reducing the cough number dose dependently and achieving 70% reductions at the maximal doses. The antitussive profile of compound A was similar to that of nalbuphine, Orvepitant, Baclofen, and Codeine. Compound A increased the latency to first cough dose dependently, thus delaying the onset of cough. The antitussive profile of compound A in delaying cough onset was similar or better than that of reference drugs. In the same experiment, compound A appeared well tolerated as there were no marked changes in respiratory rate at up to 60 mg per kg. In contrast, Nalbuphine, Orvepitant, Baclofen, and Codeine resulted in robust reductions in respiratory rate at their highest doses, indicative of sedative-like effects. When evaluation of the antitussive efficacy across compounds was done at the respective high doses free from respiratory effects, compound A was shown to be superior to Nalbuphine, Orvepitant, Baclofen, and Codeine in both cough number and cough latency measures. In the model of ATP potentiated citric acid cough in guinea pig in a head-to-head comparison experiment, acutely administered compound A exhibited a trend of better efficacy and potency in comparison to that of P2X3 inhibitor while showing signs of similar tolerability. In summary, we have selected a clinical candidate for chronic cough with a robust reproducible antitussive efficacy of 1 mg per kg and good PK/PD. The compound has the potential to have the best-in-class efficacy and tolerability profile and broad application in cough patients. The compound showed a favorable developability profile in non-GLP tox studies performed in rats, dogs and nonhuman primates. Subject to raising financing, we are ready to start the IND-enabling studies. This concludes our prepared remarks on the progress of our R&D. Now I'll hand it back to Tim. Timothy Dyer: Thanks, Misha. Now for a review of the Q3 2025 financials. Starting with the income statement. Income in Q3 2025 remains similar to our income in Q3 of 2024 and amounted to CHF 0.1 million, which is mainly related to the maintenance of patents licensed to Indivior, which they are funding and to the fair value of services received from Neurosterix Group at 0 cost. R&D expenses of CHF 0.2 million in Q3 2025 are primarily related to our GABAB PAM program remain similar to Q3 2024. G&A expenses of CHF 0.5 million in Q3 2025 remained stable compared to Q3 2024. As a reminder, we are accounting for our investment in Neurosterix using the equity method of accounting and therefore, recognized our share of the net loss of CHF 0.9 million for Q3 2025, which is similar to the amount for Q3 2024. Now to the balance sheet. Our assets are primarily held in cash, and we completed Q3 2025 with CHF 2.2 million of cash held in Swiss francs and U.S. dollars. Other current assets amounted to CHF 0.2 million, primarily related to prepaid R&D and G&A costs. Our noncurrent assets of CHF 5 million as of September 30, 2025, primarily related to our 20% equity interest in Neurosterix Group recorded on the balance sheet under the equity method of accounting for associates and also, to a lesser extent, our investment in Stalicla. Current liabilities of CHF 1.2 million at the end of September increased by CHF 0.4 million compared to December 31, 2024. This is primarily due to increased payables related to professional services. Noncurrent liabilities of CHF 0.2 million at the end of Q3 are consistent with amounts at the end of December of 2024 and primarily attributable to retirement benefit obligations. Now to summarize, we've made excellent progress in advancing our GABAB PAM program for cough and our dipraglurant post-stroke recovery program. Our spin-out company, Neurosterix continues to advance its portfolio with the M4 PAM program set to start Phase I this year. We are very pleased to be -- by the progress Stalicla is making advancing its business strategy and pipeline. We're looking forward to completing our evaluation of potential indications for our mGlu2 PAM program, which we received back from J&J and continuing to advance our portfolio towards clinical studies. This concludes the presentation, and we will now open the call for questions. Operator: [Operator Instructions] And now we take our first question -- and it comes from the line of Ram Selvaraju from H.C. Wainwright. Raghuram Selvaraju: Four quick ones. Firstly, I was wondering if you could comment on the commercial outlook for a potential therapeutic intervention in chronic refractory cough, particularly in the context of the fact that gefapixant doesn't appear to now be a factor in the United States market. Secondly, I wanted to ask about ultimately, what you expect the next funding catalyst for Stalicla to be and what the outlook might be for Stalicla to pursue a path to a public listing, if that's something you can comment on at this time. Thirdly, I wanted to see if you could give us some context around competitive clinical development in the post-stroke recovery space, particularly as this pertains to CCR5 receptor modulators and especially the ongoing clinical programs with maraviroc, which was originally approved as an anti-HIV medication. And if you could perhaps give us a sense of how those trials, particularly the CAMAROS trial might provide important learnings for future development of a candidate in post-stroke recovery like dipraglurant. And lastly, maybe you can give us a sense of what Indivior is looking for next in your ongoing collaboration and what catalysts you expect over the course of 2026? Timothy Dyer: Okay. Yes. So the first question regarding the commercial outlook in cough. You're absolutely right. Gefapixant seems not to be doing particularly well. I think -- I mean, there are a number -- well, first of all, it's not registered in the U.S. I mean one of the reasons that Camlipixant was acquired by GSK when GSK acquired BELLUS for CHF 2 billion is because it seems to not have the same taste disturbance issues that Gefapixant had. And we understand that data from the Phase III with Camlipixant is coming out in the coming months. We have done some commercial assessments on cough. We haven't actually disclosed our position on how we see the commercial opportunity. However, we still see it as a significant unmet medical need. We know from our discussions with KOLs that baclofen is efficacious in cough patients. And the only reason it's not being used more widely. It's a drug that has to be dosed about 5 times a day. And the efficacious dose is sedative. So patients can't drive their cars. And therefore, it's really a last resort. What we've also heard from KOLs that we're working with is that up to 50% of cough patients who take P2X3 inhibitors or gefapixant are discontinuing treatment or nonresponding. We haven't got any breakout of the nonresponders versus the ones that discontinue due to the disturbance. So that's question one. Misha, would you like to add anything to that? Mikhail Kalinichev: Yes. I just wanted to mention that recent evaluation of responders to gefapixant shows that there are up to 50% of patients that have no benefit from this mechanism, which is higher than was initially predicted, which was around 30%. It's not surprising considering that P2X3 inhibitor really captures only single mechanism, peripheral mechanism that is responsible for chronic cough. There are multiple other peripheral mechanisms leading to chronic cough. And importantly, there are central mechanisms that remain to be addressed. And the advantage of the approach that we are taking is that centrally acting GABAB PAM will be able to address needs of all these patients. Timothy Dyer: So on to the question too about Stalicla. Yes. So we're very happy with the progress that Stalicla is making. I mean they are -- they're continuing to execute on their warehousing study. So they are recruiting nonpharmacological intervention study, but they're recruiting patients in order to stratify them into the different phenotypes that they've identified. And these patients are sort of been warehoused ready for the pharmacological intervention studies. And -- regarding the fundraising, they are currently working on a private company. I think it's well understood that they are working on a Series C financing. This financing is to fund 2 clinical program, Phase II clinical studies for 2 subpopulations within autism spectrum disorders. They are also in parallel working on out-licensing an asset that they in-licensed from Novartis. This is mavoglurant, an mGlu5 -- most advanced mGlu5 negative allosteric modulator, which has shown excellent data in a Phase II study for cocaine use disorder. I know that they are getting some traction from various pharma parties around the out-licensing of that. So I think one of these activities or both, we're hoping will occur. Now the question regarding IPO. I mean, private companies are always staying close to the idea of IPOs, especially if there's a strong need for capital, given the current warming up of the market, I'm aware that Stalicla is certainly looking at this as a potential funding mechanism. So that's number two. Number three, regarding stroke, thank you very much for raising the topic of the CAMAROS trial with [indiscernible]. Two weeks ago, we were actually in Sweden discussing with our partner, Sinntaxis, Lund University, and we had the pleasure of meeting the lead investigator, Sean Dukelow, who is leading that study, and we are certainly planning to collaborate with him and others that are involved in that study and there's a lot of learnings from that study that we can certainly benefit from when planning the study of dipraglurant. And Misha, would you like to add? Mikhail Kalinichev: Yes, happy to follow up this topic. Of course, we follow this story since it was first shared by the Science magazine a few years back and then a series of very elegant experiments published in the [ cell ] journal and now a clinical trial. We follow this with interest and excitement. We believe that it shows that there is a potential for improvement in post-stroke recovery via adding a pharmacological agent exactly as we proposed with mGlu5. We are not surprised as there are multiple overlapping and redundant mechanisms in the brain and identifying yet another mechanism that follows very similar path kind of supports our hypothesis. Very much like mGlu5, CCR5 is upregulated after stroke. Its inhibition in the animal either genetically or pharmacologically facilitates recovery exactly like what happens with mGlu5. Both receptors are GPCRs. And both receptors are upregulated after stroke. So there are multiple parallels, and we are very excited. For sure, there will be many learnings for us at the end of this CAMAROS clinical trial, in particular, to understand how one can address sensory versus motor recovery readouts and the CAMAROS study is heavily leaning towards more motor. And in our discussion with clinical experts, we will put as much emphasis on sensory readouts as the motor ones. So for sure, there's a lot to learn, but we are very much in tune with this approach and looking forward to the outcome of this clinical trial. Timothy Dyer: Thanks. So on to the fourth question regarding Indivior. I mean Indivior, as I said, they've successfully completed the IND-enabling studies, and they are currently preparing to move the program forward. Unfortunately, I cannot give any more information on that at this stage. But again, we are still happy with the progress they are making to move the study forward. Are there any other questions? Operator: [Operator Instructions] Thank you, ladies and gentlemen. This brings the main part of our conference to a close. And I would now like to hand the conference back to Tim Dyer for closing remarks. Timothy Dyer: So I'd like to thank you all for attending, and we look forward to speaking to you again soon. I wish you all a great day. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect.
Desiree: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stitch Fix first quarter 2026 earnings call. 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 ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. I would now like to turn the conference over to Cherryl Valenzuela, Head of Investor Relations. You may begin. Cherryl Valenzuela: Good afternoon, and thank you for joining us today for the Stitch Fix First Quarter Fiscal 2026 Earnings Call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete first quarter 2026 financial results in a press release on the quarterly results section of our website investors.stitchfix.com. We would like to remind everyone that we will be making forward-looking statements on this call which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of the factors that could cause the results to differ. In particular, our press release, issued and filed today as well as our annual report on Form 10-Ks for fiscal 2025 and subsequent periodic reports filed with the SEC. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Please note fiscal 2024 was a fifty-three-week year due to an extra week in the fourth quarter. As such, references to our year-over-year revenue growth rates and consecutive quarters of revenue growth in our women's and men's businesses on this call are based on an adjusted fifty-two-week basis removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our Investor Relations website and a replay of this call will be available on the website shortly. And now let me turn the call over to Matt. Matt Baer: Thank you, Cherryl, and good afternoon, everyone. Q1 was a strong start to the year. Revenue exceeded our outlook, and accelerated 7.3% year over year to $342.1 million. Adjusted EBITDA also exceeded our outlook and was nearly 4% of revenue at $13.4 million. We are increasingly becoming the retailer of choice for more of our clients' apparel and accessories needs. We are doing this by leveraging the latest in generative AI technology, the expertise of our human stylists, and our assortment of leading brands. In service of our aim to deliver the most client-centric and personalized shopping experience. Given our Q1 performance, combined with the robust demand we've seen so far this quarter, we are guiding to a third quarter of accelerating growth in Q2, and raising our full-year guidance. The outperformance is the direct result of the compounding benefits we're seeing from the disciplined execution of our transformation strategy. We've strengthened the foundation of our business by embedding retail best practices and building significantly more leverage into our operating model. We have fundamentally reimagined our client experience. We zeroed in on four areas to deliver a more modern and dynamic Stitch Fix. First, delivering enhanced client engagement features, Second, cultivating deeper client-stylist relationships. Third, offering a best-in-class assortment, And fourth, increasing the flexibility of our business model. For example, our increased flexibility now includes dynamic larger fixes, the ability to turn a freestyle shopping journey into a styled fix, curated theme fixes for specific occasions and use cases, and family accounts, which unlock the Stitch Fix experience for the extended family. This comprehensive and customer-driven approach is clearly resonating with clients. The ninth consecutive quarter Our fixed AOV was up nearly 10% in Q1, AOV has increased year over year. As our larger fixed offerings, and our improved assortment continue to resonate with our clients and better meet their outfitting needs. We are strengthening our competitive position and gaining market share in our core apparel business. Our strategic expansion into non-apparel categories is further accelerating this growth. By helping clients complete their outfits and dress them from head to toe, we are capturing a greater share of their wallet from other retailers. Our 7.3% year-over-year revenue growth in Q1 meaningfully outpaced Surcomas' estimated 1% growth for the broader U.S. Apparel, accessories, and footwear market. Our growth is broad-based, with both our women's and men's businesses continuing to accelerate. In women's, we saw a strong start to fall sales across key seasonal categories such as sweaters, coats, jackets, and vests which combined grew 19% year over year. Sneakers, which were up 63% year over year driven by New Balance, Gola, and Adidas, and wide-leg denim, was up 217% driven by outsized performance in days denim, pistola, and Madewell. We've also seen great client responses to new brands especially within activewear and footwear, such as Varley, Birkenstock, and Roan. And we're excited to continue to add new brands to our assortment in the coming months. Our men's business, delivered a second consecutive quarter of double-digit revenue growth by leaning more into the elevated everyday and athleisure styles our clients are looking for. Seasonal categories such as fleece, sweaters, and outerwear grew 57% combined, while denim grew 30% and sneakers grew 24% year over year. Brands like TravisMathew and Viore delivered outsized growth and remain trusted client favorites for style, versatility, and quality. While new brands such as Ketan, Industry, and n n o seven have introduced more style and trend into our assortment. We believe that our expanded relevance in activewear, athleisure footwear, and accessories in particular could unlock a significant wallet share opportunity, and that our fair share with our existing client base in these categories is approximately $1 billion of incremental revenue. We are confident in our ability to capture increased market share in the future. Just as importantly, we're focused on achieving profitable active client growth We ended the quarter with 2.3 million active clients, at the high end of our expectations Q1 marked the sixth consecutive quarter of in active client year-over-year growth rates and a return to sequential active client growth in our men's business. We continue to expect a sequential increase in net ads in Q3 of our current fiscal year. Our methodical approach to rebuilding our client base around long-term fit with our service and higher lifetime value paired with a continuously improving client experience is working. With respect to new clients, three-month LTVs have grown year over year for nine consecutive quarters and remain at three-year highs. We also have had more new clients on recurring fixed shipments at the '1 than in any of the prior six quarters. Q1 also benefited from higher reengagement. With a significantly higher percentage of reengaged clients enrolling in recurring shipments compared to last year. We believe these positive trends confirm the improved quality of our new and returning client cohorts and will lead to greater client retention higher revenue predictability, and improved profitability over the long term. To build on this momentum, and ensure we sustain this improved client quality, we are also focused on delivering growth by leveraging our competitive differentiation in data science and AI. AI is not new to Stitch Fix. When we launched nearly fifteen years ago, we disrupted retail with a proprietary data-driven approach. Over time, we've amassed billions of insights on our client's fit style, and budget preferences that, combined with the human judgment of our stylist, enable us to uniquely deliver ultra-personalization at scale. We're capitalizing on this competitive advantage through a suite of AI-powered innovations that aim to drive greater client engagement and retention. For example, vision, our generative AI-powered style visualization experience, provides our clients with an entirely new and inspiring approach to style discovery. Offering personalized, shoppable images of each client based on the unique style profile, and the latest trends. Another great example is our AI style assistant, which leverages GenAI to engage in a dialogue with clients and is helping our clients better articulate their individual request to their stylist. The style assistant draws on each client's style file, and the extensive data we already know about them. And the more it's used, the smarter it gets. Helping ensure each fix delivers on the client's individual needs. The scope of our Gen AI strategy, goes beyond client-facing features. We are taking an enterprise-wide approach, incorporating these capabilities across every area of the business to drive further efficiencies and deepen our competitive advantage as a leading innovator in retail. For example, our merchandising team is using GenAI to fundamentally transform private brand product development and inventory management. Our GenAI-assisted design process, leverages our proprietary data to develop complete fashion lines. Which will enable us to respond to trends more quickly and bring products to market faster. Beyond design, AI provides predictive intelligence for trend forecasting, optimizing inventory, and setting intelligent pricing. Ensuring every piece of merchandise we sell is calibrated for both profitability and client satisfaction. The innovations we've introduced across our business will enable us to better serve clients this holiday season. We entered this critical period with our most seasonally relevant assortment and competitive pricing and promotions, enhanced by new and inspiring shopping experiences including vision, theme fixes, and fixes built around a freestyle item. We also launched Stylus Connect, a platform for near real-time client stylist collaboration, and introduce family accounts to better support gifting during the season. Holiday performance has been strong, with record freestyle sales for the Black Friday to Cyber Monday period. In closing, we have strong momentum in our business, remain focused on exceeding our clients' expectations, and we'll continue to play offense in order to deliver increased market share gains. Now I'll turn the call over to David to share more details of our financial results and future outlook. David Aufderhaar: Thanks, Matt. Good afternoon, everyone. We delivered a strong first quarter that underscores the success of our strategy and the momentum Matt outlined. We're accelerating growth and gaining market share, while maintaining financial discipline to ensure that growth is profitable and sustainable. FY '26 is about leaning into innovation and the client experience strengthen our competitive advantage. While continuing to identify savings that fuel reinvestment. Now let's turn to the numbers. Revenue was $342.1 million, up 7.3% year over year, exceeding our outlook. Average order value rose 9.6%, driven by more items per fix, and higher AUR. Reflecting strong demand for larger fixes and our improved assortment. We ended Q1 with 2.3 million active clients, at the high end of our expectations. Revenue per active client reached $559. Up 5.3% year over year, marking the seventh consecutive quarter of year-over-year growth. The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients. Gross margin was 43.6%, in line with our FY 2026 range of 43% to 44%. With contribution margins remaining strong above 30% for the seventh straight quarter. Advertising was 9.9% of revenue in Q1, up 50 basis points year over year. Q1 adjusted EBITDA came in at $13.4 million or 3.9% margin, outperforming expectations on strong revenue. We ended Q1 with $2.442 billion in cash and short-term investments and no debt. Giving us flexibility to invest in growth. Inventory, was a $141.5 million, up 18.8% year over year reflecting investments in our larger fixed offer offerings. Turning to our outlook for Q2 and FY 2026. We are increasing our full-year guide to take into account the positive trends we are seeing in the business. For full-year FY '26, we expect total revenue to be between $1.32 billion and $1.35 billion. We expect total adjusted EBITDA for the year to be between $38 and $48 million and we expect to be free cash flow positive for the full year. And for Q2, we expect total revenue to be between $335 million and $340 million. We expect Q2 adjusted EBITDA to be between $10 million and $13 million. With respect to revenue, we are really encouraged with the trends we have seen in our business so far this year. The resilience in client demand that we saw in Q1 and through the first part of Q2 gives us confidence to guide to another quarter of growth acceleration in Q2 and to raise our guidance for the full year in FY 2026. Given the current trends in consumer confidence and the impact of inflation on discretionary spending, we think it's prudent to assume some headwinds in the back half of this year. As a reminder, we will also face tougher AOV comps as we begin to lap the double-digit growth we saw in the 2025. Both of these considerations have been included within our outlook. For active clients, we believe our methodical approach to rebuilding our active client base is working. We expect active client year-over-year growth rates to continue to improve in Q2. Additionally, we remain on track to deliver a sequential increase in net adds in Q3 FY 2026. We continue to expect full-year gross to be approximately 43% to 44% and full-year advertising costs to be between 9-10% of revenue. We're investing thoughtfully in AI and innovation, which we expect to drive stronger client engagement and retention over time. These investments are already included in our outlook, and we'll scale them judiciously. Our strong first quarter demonstrates the health of our commitment to client engagement and operational discipline drove revenue and market share gains. Looking ahead, we remain confident in our strategy. Which prioritizes sustainable, profitable growth. With that, operator, we can open the line for Q and A. Desiree: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and you may requeue for any additional questions. Thank you. Dylan Carden: Our first question comes from the line of Dylan Carden with William Blair. Desiree: Your line is open. Dylan Carden: Hi. You guys got me? Matt Baer: Yeah. We do. Dylan Carden: Awesome. This is Mark Spalanger on for Dylan Carden. Thank you for taking my question. I was just curious, could you provide a little bit more color on new customer behavior and just your general view on their you know, stickiness. What what metrics are you tracking that inform this view outside of the you know, the thirty-day LTV that you mentioned? Matt Baer: Yeah. Hey, Marcus. Appreciate the question. I'll share some insights. And, David, feel free to add anything additional. When we look at the client behavior that we're seeing across the board, we're extremely enthusiastic in terms of what we've been seeing. We shared in the prepared remarks that we've seen nine consecutive quarters of improving LTV for new client acquisition. New clients have also been were also up last quarter, for both year over year and quarter over quarter, which gives us a lot of confidence that we're gonna continue to see a more health in our overall client base moving forward. Also seeing strength within our reengagement of with our reengaged clients or or formerly dormant clients They continue as they rejoin the service to stay longer and spend more, which again is really encouraging to continue to the overall health of our client base. And then finally, when we're looking at our clients that know, might otherwise go dormant, we just completed a quarter in which we had the lowest number of dormant clients in five years. Some additional signals that show the strength overall in our client base is we shared in our prepared remarks is that our men's business has returned to sequential increases in our overall active clients. And that is one of many things that give us further confidence that we will return to overall sequential active client growth in Q3. So those clients, that we have they're staying longer. They're spending more. The new features that we've launched are driving incremental engagement, and we're also seeing, and and then those new clients that have joined, we're also seeing them stay longer and spend more. So we're really proud of the overall widespread and holistic impact with everything that we've done. Desiree: Awesome. Thank you. Our next question comes from the line of Aneesha Sherman with Bernstein. Your line is open. Aneesha Sherman: Thank you so much, and congratulations on the quarter. Matt, you talked about gaining share and you said it's some pretty strong numbers about share gains versus total apparel accessories and footwear sector. Can you talk about where do you think that market share is coming from? I mean, is it from other multi-brand retailers? Is it from trade down? I mean, what are you hearing from the brands that you talked to about where those share gains are coming from? And then on gifting, now I was surprised to hear you say that gifting was so strong. It's typically not a very strong use case for you. Do you think that's changing? And especially as you move more into freestyle is gifting becoming gifting or maybe even holiday use becoming more of an occasion for you? And if I could throw in one more quick follow-up for David, around advertising, Nine to 10%, you know, it sounds like the sales numbers are working. The client numbers are working. How do you think about maybe leaning in on that more to drive more of the top line if needed? Thank you. Matt Baer: Yeah. I hey. Hey, Aneesha. It's Matt. I'll I'll answer the first two on on market share and holiday performance. As you noted, David can can chime in on on the advertising and any additional commentary. First, appreciation for the recognition. The team deserves it. They're doing a phenomenal job in order deliver, these incredibly impressive results and market share gains. Speaking of those market share gains, it's a great question. And, the work that the team has done to improve the client experience is clearly resonating. The work that we've done to continue to improve the trends overall in our active client growth rates, continue to demonstrate that as well. And with regards to who we're taking market share from, what we are what we're doing is we're focused on delivering the most client-centric and personalized shopping experience. And in doing so, we're picking up share from where other retailers aren't delivering. And we're taking that share from a wide range retailers who don't and cannot offer the personalization consumers want and expect, which is so core to our business. And as you noted, we're hearing loud and clear from the brands that we work with that we are delivering outsized growth relative to others that they might be working with. In terms of our holiday performance, as I noted in the prepared remarks, we really entered this holiday season with the most seasonally relevant assortment, competitive pricing, really compelling promotions. And a lot of new ways for our consumers to engage with us and to shop For example, themed fixes or fixes built around a freestyle item. Also, a significant improvement in terms of some of the engagement experiences, like Citrix Vision and Stylus Connect. Specifically in terms of gifting, the more recent launch of Family Accounts has delivered results that have exceeded our expectations. With family accounts, we heard loud and clear from our clients that they were looking to bring the Citrix experience to their entire family. They loved the service that we provided, and they wanted to make sure that they were able to use it for spouse, partners, children, and any other loved ones as well. In fact, 92% of our women's clients shop on behalf of a spouse or partner, when we created the ability to launch family accounts, we saw phenomenal engagement right out of the gate. And that was really the entryway for us in order to start to deliver a gifting business over the holiday season. Addition to the gifting, though, as you well know, a lot of the purchases that happen over this time period aren't gifts for others. They're gifts for self. And that's where we have really led the way, and that's what helped us deliver record-breaking sales over the Black Friday to Cyber Monday time period. David Aufderhaar: And then, Aneesha, on the on the advertising, you know, this quarter, we did lean in a little bit on on advertising. We ended up at the high end of that nine to 10% range, at 9.9%. I think it goes back to what we've talked about in the past about that methodical approach to to advertising and really holding ourselves accountable to those CAC to LTV ratios. And because of that, we we tend to see some seasonality in our marketing spend. And so we leaned in in Q1 Q1 and Q3 tend to be our stronger quarters. So you'll probably see us spending more at the lower end of that range in Q2. And all of that is just to make sure that we are really focused on not just adding clients to add clients, but but really making sure to Matt's point that we're bringing in really clients and sort of what he highlighted earlier that that new client LTV is something that we really an eye on. And this last quarter, it was up, you know, almost 17% year over year. And that's really just a a very clear indication that you know, that the marketing efforts are working and we're bringing in clients that truly engage with the service and see value in the service. And and we'll continue with that methodical approach. And where we do find opportunity, like, we're very comfortable leaning in. Desiree: Thank you. Really helpful. Next question comes from the line of David Bellinger with Mizuho. Your line is open. David Bellinger: Hey, everyone. Thanks for the question. I wanna ask about the consumer-facing AI and and visualization tools. Any read on the early adoption there? Any any numbers you could share with us or you know, when you in what ways are consumers using and and engaging in these tools early on? Matt Baer: Yeah. Great question. And we're really excited about this this truly innovative, feature that that we've created, Citrix Vision. Where clients can upload a couple of pictures on themselves and see a generative AI image vision visualization, of themselves, of their likeness, dressed head to toe in Stitch Fix apparel. That experience is completely shoppable. And fully shareable across all social media platforms. And we're seeing engagement from our clients at far exceeded our expectations when we rolled out the beta, just a couple of months ago. And we're seeing clients use it in many different ways. We're seeing clients that are using their Vision images and sharing it back with their stylist to help inform what they're looking for in their next fix. We're seeing clients, purchase directly from the Stitch Fix vision, image at David Bellinger: itself. Matt Baer: And we're also seeing a lot of what we call Stitch Fix vision in the wild, where clients are actually sharing it across their social platforms. They're sharing it with friends and family, and it's creating a bit of a virality and and organic growth for us from a client acquisition standpoint as well. So we're really encouraged by the early adoption that we're seeing across the board. And, we're even more excited about how we're leaning into it into the future, with additional applications. David Bellinger: K. Thanks for that. If if I can just get one other one in. Sure. Question on the gross margin performance for for David. I know it's down a 180 basis points versus last year, still within your full-year range or so. But could you just help us bridge that decline and anything we should expect for the Q2 period? David Aufderhaar: Yeah, David. I can I can give you more color on that? I think we might have highlighted a little bit on the on the last earnings call. But the decline from a year-over-year perspective is three factors. First is transportation expenses. Our transportation teams have done a great job over the last three or four years of really driving leverage in our transportation costs. Through carrier diversification, negotiations, even last mile carriers, And in FY 2025, it was probably the lowest percent of revenue we've seen in a very, very long time. And this year, it's more around those general rate increases that you're seeing. You know, USPS is is a big part of that, and seeing those general rate increases. And so that's part of the gross margin decline. And then the second part is really investing in in different categories from merchandising perspective, which we really consider it, you know, a great investment and a great ROI, really leaning into some of those categories we feel like, you know, we have market share opportunity, like footwear is a great example where they just have lower margins. But, you know, we're able to outfit a client entirely and I think that will really drive, you know, a higher LTV from a full client perspective. And so we're we're really happy with that investment as well. Then the third and honestly, the smallest of the three is tariffs. There was a small impact to tariffs, but again, our teams have done a very good job negotiating and and really minimizing that impact from tariffs. So I'd say that was probably the smallest of the three. And and the other thing I'd highlight is it's another reason why we've been calling out contribution margins. Over the past few quarters is we've done a lot of work in making sure that we're driving efficiency within our warehouse and stylist teams And because of that, you know, having contribution margins that are still well over 30%, they were 32 and a half percent, this last quarter. We feel really confident that we can continue to drive leverage in the business. And for Q2, I would expect margins to be in similar place than they were this quarter. You know, we pretty much right in the middle of of where our guidance, our full-year guidance range is. David Bellinger: Very good. Thank you both. Desiree: Thanks, Dave. Next question comes from the line of Jay Sole with UBS. Line is open. Jay Sole: Great. Thank you so much. I have a couple of questions. Matt, can you just first of break down just for us the the opportunity with different brands? Because you mentioned you're bringing in some great brands. You're having success. Is it what is it that's attracting brands, or is it really you just going out reaching for more brands now that, you know, you can sell them? Just explain to us how the the quality of the the third-party brand profile is improving. You know, could you talk about how the the private label's improving? And then just on net revenue per active client, I think it was up 5% year over year. Think that's the seventh quarter in a row you had growth Can you just kind of break down the drivers of it? And then just on active clients, you did touch on this. I think it was down 5%, but it it continues to improve. I guess, what are the drivers there? And just give us any any color on of the demographics and some of the newer customers that you bring in, you know, what the demographics of those newer customers are? Thank you. Matt Baer: Yeah. Absolutely. Happy to answer that. I'll start with the brands question. David, if you want to start with RPAC and then active clients and I'll add some additional insight probably after that as well. The Stitch Fix service is an incredibly attractive value proposition for third-party brands to work with. We create a phenomenal experience for our clients, and in turn, that creates a really positive experience for the brands themselves. As a closed ecosystem, brands that work with us, they don't have to worry about seeing their product on deep discounts fully visible to the entire market and all consumers. They don't have to worry about the adjacency of of seeing their product hanging on racks or on digital shelves next to products of inferior quality. Everything that we do is personalized to the individual. When their product shows up either on our site or delivered to their home and it fixed, it's with other brands that they'd be proud to see from an adjacency standpoint. And we treat the brands with respect throughout the process. We also do a phenomenal job in terms of based on everything that we know about our clients to ensure that we're getting price, style, and budget right. When we deliver product to a client, you know, it's product that they're gonna have a high level of resonance with. It's product that they're gonna be excited to get and that they're gonna keep at a really high rate. And that experience that we provide for brands becomes really attractive and is part of the reason why they're so eager, to work with us. And then when they do, why they have such an exceptional experience, as a partner of ours. It's also why so many coveted brands, we are the largest or one of the largest, retail partners that they have and also watch some of the brands. We are their exclusive retail partner other than their direct-to-consumer platform. As we continue to expand that brand portfolio, our clients are are absolutely recognizing it, and it's part of the reason that they continue to engage more. And it's part of what's continued to drive up our average order values as well as our overall client LTVs. So it's just a a really great experience we provide and a really good partnership that we offer each of them. David Aufderhaar: And then, Jay, on the on the RPAC side, you know, really definitely encouraged with what we're seeing there. It was up 5% year over year this last quarter and I think we highlighted that it was the seventh your seventh quarter in a row that we we improved a year-over-year perspective. A big part of that is what we're calling out those new client LTVs. That when you see that it's it's really a big part of of what you're seeing because as those new clients become a larger share of of the base, that's really starting to impact our pack. And I think the other thing that highlights that really well is average order value. Is average order value was up, you know, almost 10% year over year and it was the the ninth consecutive quarter that it's been up. So so definitely something that, you know, is is driving a lot of strength. And within average order value, there are probably two things I'd call out Excuse me. One of those is just, you know, a higher average number of items sent in in 3% year over year, and that was that was really more about that mix shift into some of these newer categories that we've been leaning And so definitely seeing it encourage signs signs across all of those metrics that are coming through in that revenue per active clients. On the active client side, we were really encouraged with what we saw this last quarter. We ended at the high end of our expectations. Really just slightly down for the quarter. And and what we're seeing, I think Matt highlighted a little bit of this earlier, but really across all three of the views of active clients where, you know, new client acquisition was was up year over year, and we continue to see strength there. Reengaged clients is is an area where we've we've really seen some great strength. Reengage clients were up 8% year over year this last quarter. And so definitely an area that we're leaning into and really bringing some of those clients back into a a really new experience and experience with, you know, a very different level of assortment. And so seeing strength there. And then dormancy, know, our client retention continues to get better. And so just playing forward those three lines is really how we have the confidence in being able to continue to say that in in Q3, expect a quarter over quarter inflection. There is definitely seasonality to our active clients. There's also seasonality to our our marketing spend as well. And so know, in in Q2, it's it's tends to be you know, a seasonally slower quarter for us from a client acquisition perspective. And so probably expect active clients to be slightly down from a quarter over quarter perspective. But then still very confident that in Q3, we expect a quarter over quarter increase. Matt Baer: A couple of other points that I think are relevant I'll call out here that impact both are relevant for both RPAC and active clients overall. First, we're just incredibly encouraged that we are seeing strength across all income segments from our client base. And that gives us a lot of additional confidence in terms of that increased guide within both Q2 and our full year. As, you know, the service that we offer is one that serves well clients no matter what the macroeconomic environment is. Because of the deep and enduring relationship that clients have with their stylists. And the ability for us to tailor each of those experiences to their budget at any given time. Then the second, is that the growth that we have that's being driven by both increased client engagement as well as increased unit sales. It's not being driven by inflation. So the growth that we're delivering is that healthy growth that's gonna lead sustainable and profitable overall enterprise growth. Jay Sole: Got it. Okay. Thank you. Very helpful. Desiree: And, again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to our CEO, Matt Baer. Matt Baer: Thanks. To close, I'd like to recognize the entire Stitch Fix team for their exceptional execution this quarter. I'm proud of how we're increasingly establishing Stitch Fix as our client's retailer of choice. For more of their apparel and accessories needs, and that's evidenced by the revenue growth in the quarter and the considerable market share gains we captured, which we discussed. Our results this quarter, they're a testament to the superior retail experience we provide. We believe we offer a higher level of convenience personalization, service, inspiration, and innovation anyone else in the market. I appreciate your interest in our business. And we believe the continued execution of our strategy will further fuel the momentum we have in our business and drive long-term sustainable profitable growth, and I look forward to sharing our continued progress. Desiree: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Good day, everyone, and welcome to ServiceTitan, Inc.'s Third Quarter 2026 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. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note that this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Jason Rechel. Please go ahead. Jason Rechel: Thank you, Operator. And welcome everyone to ServiceTitan, Inc.'s fiscal third quarter 2026 earnings conference call. With me are ServiceTitan, Inc.'s Co-Founder and CEO, Ara Mahdessian, Co-Founder and President, Vahe Kuzoyan, and CFO, Dave Sherry. During today's call, we will review our fiscal third quarter 2026 results. We'll also discuss our guidance for the fourth fiscal quarter and full fiscal year 2026. Before we get started, we want to draw your attention to the Safe Harbor statement in today's press release and emphasize that information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties, and assumptions. All statements other than statements of historical fact could be deemed to be forward-looking. Forward-looking statements reflect our views only as of today, and except as required by law, we undertake no obligation to update or revise these forward-looking statements. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ. We also want to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures along with reconciliations to our GAAP financial measures, are included in our earnings release, which we've furnished with the SEC, and is available on our website at investors.servicetitan.com. Unless otherwise stated, all references on this call to platform gross margin, total gross margin, operating income, operating margin, free cash flow, and related growth rates are on a non-GAAP basis. Finally, we've posted an updated investor presentation that can be found on the Investor Relations website at investors.servicetitan.com along with a replay of this call. And with that, let me turn the call over to Ara. Ara? Ara Mahdessian: Thank you, Jason. And thank you for joining us. Next week will mark the one-year anniversary of our IPO and the second annual Day of the Trades. As I reflect on this milestone and our progress over the past year, I am deeply humbled by how well Titan's shown up to deliver exceptional value to our customers. While we've come a long way together, I have also never been more confident that our opportunity to build the operating system for the trades is only just beginning. Our growth formula today remains the same as ever. We deliver real ROI to our customers, helping them reach even greater financial outcomes, and this allows them to grow their businesses. Which drives more technicians and GTV on our platform and leads to higher subscription and usage revenue for us. As they realize the value of our software, they buy more Pro products, which further drives our growth. This growth formula is now compounded by our opportunity to democratize AI for the trades. During the third quarter, year over year, we delivered 26% subscription revenue growth and 25% total revenue growth with record free cash flow. Our overall financial performance was greater than we expected due to steady execution with both new and existing customers and strengthen usage revenue. The breadth of performance against each of our main priorities this year exciting momentum coming out of our annual user conference, and then expanding scope for ServiceTitan, Inc. to bring automation to trades. All continue to underscore our opportunity to transform the lives of every hardworking contractor. I wanna talk this quarter about the Wrench Group. One of the largest operators in the trades with more than 7,000 employees serving over two and a half million end customers annually across multiple trades, in 14 states. The Wrench Group backed by high-profile leaders in private equity, is one of our longest-tenured customers and has embedded in our software as a standard operating system at the core of its operations. But the world is evolving, and Wrench Group's new chief information officer David Finger, responsible for technology across the org, now says they are thinking about the ServiceTitan, Inc. platform differently than in the past. As Wrench looks at acquisitions, for example, companies already on the ServiceTitan, Inc. platform ease the inherent complexity of integrating targets? And that's in concert with changing principles as the business seeks to unlock silos and incorporate enterprise thinking. David Finger told me, we want to unlock best practices at an enterprise level, allowing us to tap into the strength of reporting and consistency across the org without infringing on the economy and entrepreneurial spirit of our location. And ServiceTitan, Inc. is at the core of what we want to do and provides us with a platform to execute. This size and enterprise scale are believed to be accelerating differentiators in the world of AI. David Finger told me that it believes leveraging an integrated ecosystem of technology allows organizations to thrive by creating comparative advantages and differentiated customer outcomes. And he believes that ServiceTitan, Inc. has formed the industry's best ecosystem critical to lasting organizational growth. As part of its enterprise-level strategy, Wrench Group recently rolled off of a horizontal marketing platform to leverage the purpose-built capabilities of Marketing Pro. Quotes, the usability, scalability, simplicity, and consistency across locations are exactly what a trades business like ours requires. End quote. Said David Finger. Quote, and we also now have 99% of our locations using SchedulingPro, which feels like table space, as we make it easy for customers to do business with us. And both. And as you'd expect to hear from a world-class executive, Wrench is playing offense with AI, putting the customer experience at the forefront by leveraging AI voice agents in the contact center, a normal language interface to enhance the experience, and most importantly, by leveraging predictive analytics. Wrapped up by telling me that, quote, solutions like Dispatch Pro are able to run thousands of scenarios with complex variables and considerations to ensure the right person or the right action is taken at the right time. Which humans simply cannot do. And this only enhances the customer experience. Because if you have great data, great processes, great tools, and the right culture, AI will be an accelerant for your business, end quote. As I shared at Pantheon last month, we are operating at a turning point for the trades. Leveraging the foundation of workflow that happens in ServiceTitan, Inc. with the compelling benefits of AI we are now giving our customers the opportunity to rethink how they operate. ServiceTitan, Inc. has an entrenched and expanding ecosystem compounding proprietary data set, and industry-specific bench that allow us to deliver differentiated automated, outcomes. Our customers are phenomenal operators. With an opportunity to thrive in their industry compared to those that aren't leveraging automation to the fullest extent possible. We hold ourselves accountable to delivering focused execution measured over a series of quarters years, and decades. I am proud of where we are today. And as always, I believe we're only just beginning. I'll now pass it to Vahe, who will share more details on our progress. Vahe Kuzoyan: Thanks, Ara. Titan has delivered for our customers this quarter, and the excitement coming out of Pantheon has been notable. It has never been a more exciting time for contractors in the trades. Let's start again with enterprise. We had a strong quarter of new large customer wins, and we continue to see successful go-live activity across large commercial and residential customers. A busy quarter of product execution was headlined by a range of new functionality from centralized feature configurations to benchmark plus to adaptive capacity tailored to the needs of sophisticated operators. We're excited to go live with Galaxy Service Partners, a newly formed alliance of commercial door, gate, and access control companies. Galaxy is led by the team behind Guild Garage, underscoring the standardization of ServiceTitan, Inc. across the expanding private equity ecosystem and the trades. Our pro products continue to be our largest driver of subscription revenue growth. This quarter, we introduced FieldPro. The next evolution of SalesPro that extends AI to technicians in the field. And we release virtual agents across the entirety of our Pro portfolio. Our pro product strategy has evolved from delivering functional business automations to delivering a comprehensive platform for agents to automate work across the trades. At the center of these agentic workflows is Atlas, which forges the raw power of modern large models directly into the foundational intelligence of ServiceTitan, Inc. Atlas is a giant tech command center capable of delivering something to trades businesses that only ServiceTitan, Inc. can deliver. Deep comprehension of data and workflow coupled with the system to automatically action out outcomes. This agentic workflow and interface is at the center of our new MAX program. We believe Max is indicative of the potential evolution of ServiceTitan, Inc. that will make increasingly accessible, powerful, and valuable for our customers to automate their businesses at scale. In commercial, our multiyear investments are delivering increasingly strong results with our focus now on becoming market standard. This quarter, we introduced our commercial CRM and construction management capabilities. Which are the final components to fully form ServiceTitan, Inc.'s end-to-end commercial platform. Focused on empowering commercial contractors to drive revenue growth, increase productivity, optimize cash flow, and deliver improved margins across the entire scope of subcontractor workflow. We had the opportunity to partner this quarter with James River Air Conditioning. One of Virginia's most trusted HVAC plumbing, electrical contractors for over fifty years. James River is a hybrid residential and commercial business. I've been personally working to meet their business needs for nearly a decade. Our commercial service agreements, equipment management, and project management capabilities could not meet the James River standards. Until now. I am personally committed to delivering clear ROI to James River over the next decade. Including with roofing, where we continue to make good progress defining our go-to-market motion maturing our implementation playbook, and building on our key insurance and estimating features. We announced the partnership with Verisk to allow contractors to load their ServiceTitan, Inc. data into Verisk Xactimate claims management system to review, validate, and complete the claims estimating process. We were excited to go live this quarter with Time Proof and Master Roofing. A residential and commercial roofing consolidator. Execute on plans to scale to 50 branches across 30 states within the next year. Time Proof and Master Roofing selected ServiceTitan, Inc. because they see us as the operating platform that allows for a centralized operating model to grow so quickly. And the only software platform capable of delivering the workflows integrations, data visibility, and reporting that are required for the roofing industry. The resilient execution by our existing customers and the conversion of new customers in existing and new trades are a testament to both our current strengths and future opportunity. As Ara said upfront, intend to deliver on our mission with focused execution. With that said, I'll turn it over to Dave to run through the financials. Dave Sherry: Thanks, Vahe. I'm proud of our execution on each of our main priorities this quarter. Today, I'll run you through Q3 financial results in detail provide guidance for Q4 and for the full fiscal year 2026. For more detailed financial results, please refer to our press release issued earlier today. Q3 gross transaction volume or GTV was $21.7 billion, representing 22% year-over-year growth. Our customers are performing well, again, demonstrating the durability and diversity of the markets we serve coupled with the ROI that ServiceTitan, Inc. delivers. Our GTV continues to be distributed across a diverse set of trades and end markets. Within residential, it is primarily driven by break-fix and essential services for existing homes, rather than new home construction. Since our GTV is tied directly to end consumer sales, it is generally insulated from supplier inventory cycles. In the quarter, GTV growth was led by commercial, And within residential, we saw relatively consistent growth in both HVAC and other trades as compared to Q3 of the prior year. Now on to our financials. Q3 total revenue of $249.2 million grew 25% year over year. Subscription revenue, of $182.8 million grew 26% year over year, led by strong growth in pro, commercial, and new trades. Usage revenue grew 24% year over year to $56.8 million outpacing our expectations due to higher than expected fintech utilization. Total platform revenue for Q3 the sum of subscription and usage revenue, grew 25% year over year to $239.6 million, Q3 professional services revenue was $9.6 million. Net dollar retention was greater than 110% for the Q3 platform gross margin was 80.2%. An improvement of 310 basis points year over year. As a reminder, roughly 200 bps of this improvement resulted from the allocation of certain customer success expenses to sales and marketing. Total gross margin for Q3 was 74.3%. Up 390 basis points year over year. Q3 operating income of $21.5 million resulted in operating margin of 8.6%. An improvement of 780 basis points year over year. While we continue to pace ahead of our incremental margin goals, we're making steady progress on our R&D priorities and hiring plans. Q3 free cash flow was a record $38 million. Up from $11 million for the prior year third quarter. Year to date free cash flow was $50 million up from $5 million in the prior year period. As seen in our cash flow statement, we paid approximately $20 million in cash for the acquisition of Conduit. Which closed in October. Conduit has a cross-sell opportunity within our residential HVAC customer base and we see opportunity in other trades over time. A few quick model notes before formal guidance. As we shared with you last year, '25 was an unusually strong quarter. Driven by faster than normal customer expansion, and some one-time subscription items. Additionally, Q4 of this year will have one fewer business day as compared to the year-ago period. Which is expected to compress Q4 FY twenty-six GTV and usage revenue growth by approximately 150 basis points. We will then see the benefit of one additional business day in '27. Now shifting to formal guidance. For the fourth quarter, expect total revenue in the range of $244 million to $246 million We expect to generate operating income in the range of $16 million to $17 million For the full year fiscal 2026, we expect total revenue in the range of $951 to $953 million. We expect to generate operating income in the range of $83 to $84 million. We deliver sustainably high ROI to our customers who operate in resilient trades that keep our economy running. Our goal remains to durably compound growth over many years while increasing margins at the same time. We see healthy performance this quarter as further evidence that our strategy to become the operating system for the trades is working. With that, will turn the call back to the operator for Q&A. Operator? Ara Mahdessian: Actually, I'd love to invite Kash Rangan from Goldman Sachs. To ask our first question. Today is Kash's final ServiceTitan, Inc. conference call. Prior to his January retirement after a very esteemed career. Kash, you've been an incredible partner over the years. We admire your brilliant mind. We admire the content of your character. And we are deeply grateful for everything you've done in partnership with us. And all of us at ServiceTitan, Inc. wishing you all the best Kash. Operator: Thank you so much. One moment for Pat. Chick. Jason. Your line is open right now. Go ahead. Kash Rangan: Can you hear me okay? Thank you. So it's very lovely of you, Ara, Vahe, Dave, Jason, team. You guys will always be special. I really don't have a question, but I have an observation. Maybe I can parlay that into a question. You've come a long way. You've been the, titans of the trade or, call it the mavericks that, that defied conventional wisdom that you could actually create a billion-dollar run rate business, although not hinder Q3. But I'm sure if you look at the month of November, you probably hit a billion-dollar revenue run rate. So coming us as far as you have, and when you look at the road ahead, as you start to imprint the go-to-market motion in years '26 and beyond, our own team, what are you gonna be doing differently as you as you iterate and try to get to that scale of being truly a multibillion-dollar revenue company in the years ahead. What what are the latest observations going into calendar '26 to how you gear maybe the go-to-market, maybe a little bit differently to achieve the the ambitious goals that that are ahead of you. And my very, very best to you guys. Ara Mahdessian: Thank you, Kash. Our goal has always been to build the operating system for the trades and one that impacts as many contractors as possible. And for each one, to the greatest extent as possible. And we believe that the combination of those two things translates into the direct revenue opportunity for us. And the the biggest opportunity that we see relates to AI in the trades. It's a very exciting and critical opportunity for us It is why it is our number one priority. And why Vahe and I are directly leading the effort to make sure that we and our customers win Ultimately, customers want one platform that's fully automates all of their key workflows and ultimately optimizes for revenue and profit for them. And this is the essence of the MAX program. That we announced at Pantheon with a pilot with 50 customers. With hundreds more in the backlog. Because for us, customers have told us that they don't want to set up and manage lots of different AI point solutions. They don't wanna deal with different point solutions interfering with one another. They they they don't wanna optimize locally for things like leads or call booking rates. These are all imperfect proxies. For what they really care about, which is revenue and profit. And in a world where trades businesses have finite capacity, They wanna optimize for generating the leads that are most likely to result in the highest revenue or optimize for, like, booking the calls that represent the highest revenue potential? And so the the future of work in the trades it's us, it's not a set of AI point solutions. It's about connecting calls to appointments, to sales, to inventory, to payroll, and in a way that maximize revenue and profit. And this is the the foundation of the MAX program and the next evolution of ServiceTitan, Inc. And we have distinct both product and go-to-market advantages to be the winning solution. We we have the largest proprietary dataset. We're the system of action. We're the primary UI where customers manage their entire business. We have the distribution and so on. But it will require intense execution. And so that is why Vahe and I and our teams are working like dogs and we're maniacally focused on this to guarantee success. For our customers and ultimately for us. Kash Rangan: Absolutely fantastic. And I'm gonna be watching from the sidelines. This evolution of this vision ahead. Congratulations. Thank you so much. Thank you so much. Operator: Our next question comes from Josh Baer with Morgan Stanley. Please proceed. Josh Baer: Great. Thank you for the question. Actually, I just wanted to follow-up on the MAX program. Wondering how the pilot is progressing early on. And wondering what's the current time to deploy and implement MAX and and anything that you can do to either speed that up and just wondering when we could expect the program to open up more broadly to that backlog of customers and your overall customer base? Ara Mahdessian: Sure. So we're still early days on the MAX program. And we are intentionally slow rolling it to make sure we get it right. Our focus is primarily on making sure that every participant in the MAX program is wildly successful. And so the progress is strong. We're pretty happy with the results so far. But we are still in the phase of validating everything within the cohort, and we'll be opening it up hopefully soon. Josh Baer: Okay. Got it. And if I could just follow-up, wondering if you could shed some light on what you're seeing from private equity where we are as far as contribution to current customer wins, growth contribution from private equity kinda as a channel, what and if you'd expect that to change? Looking ahead? Dave Sherry: Sure. Josh, I'll take this one. As we shared at Pantheon, our private equity customers are our best utilizers of the product. They adopt pro products to a greater degree, and they grow on average 500 bps faster than non-sponsored back customers. So they remain an important growth factor for us, and we don't have any reason to believe that that's slowing down. Josh Baer: Okay. Awesome. Thanks. Operator: Thank you. Our next question comes from DJ Hynes with Canaccord. Please proceed. DJ Hynes: Hey, guys. I'm gonna I need a a a few more decades make as much money as Kash or to have the impact that he did, so I'm gonna keep working. Alright. When you look across the customer base, where would you say the average ratio of technicians to back office staff is today? And and and where do you think it could go over time? And maybe as part of that, it it'd be great to get your thoughts on what that efficiency unlock might mean for ServiceTitan, Inc. Ara Mahdessian: Great question. It will vary across trades. It will also vary across size. So you will have contractors that'll have two technicians the one back office, You'll have really efficient ones that get above two technicians per back office. But then you also have trades businesses that have something closer to one to one. But I think they it's incredible to see the alignment in vision with our customer base where they they believe in this vision that you have you know, the the ownership, and then you have the technicians in the field. Doing the work. And you try and bring as much efficiency and automation to everything in between. Because they see that as you automate, you not only increase profitability, but you've increase revenue. Because a lot of these AI automations help increase close rates, average figures, lead generation, and the like. And having higher profit margins helps you be able to spend more on customer acquisition and and grow the business. DJ Hynes: Yeah. Yeah. Makes sense. And then, Dave, one for you on the guidance. So at this time last year, you guided Q4 to be sequentially flat to modestly up. This year, you're actually guiding Q4 to be down a bit sequentially. Talked about some of the dynamics with the one fewer day. And, obviously, the Q4 guidance was above consensus. I know you're trying to keep targets conservative. But is there anything you're seeing in the business that would lead you to be a bit more cautious this year versus last year? Dave Sherry: Hey, DJ. First, our strong Q3 put us in the in the fortunate position here to raise our forecast rest of year. As you noted, typically, GTV and usage will sequentially moderate from Q3 heading into into Q4, I don't think we expect this year to be any different. And as always, our assumptions continue to be driven by a prudent GTV forecast So nothing out of the ordinary here, DJ. DJ Hynes: Yeah. Okay. That's what I wanted to hear. Thank you. Operator: Thank you. One moment for our next question. That comes from the line of Dylan Becker with William Blair. Please proceed. Dylan Becker: Hey, gentlemen. Really appreciate it. Maybe for Vahe. I know Ara talked about kind of the value of the ecosystem. You also called out with the initiative around roofing, the partnership with Verisk. Wondering how you're kinda thinking about diversifying and broadening out the broader partner ecosystem, but maybe what that in particular unlocks around the insurance side, working with kind the exterior trades as you're thinking about continued expansion into that domain or that realm? Thanks. Vahe Kuzoyan: Yeah. So, as part of our efforts around roofing, the current areas where we're focusing our efforts are primarily around insurance-based, roofing workflows. And the partnership with Verisk is obviously an important part of that. As we look ahead, we think that the insurance integrations will likely have, applicability to other trades, like, water damage restoration and so on. But that's more of an upside for the future. It's not currently something that we're working on today. And the progress that we're seeing across roofing in general has been really strong. We're seeing a ton of traction both in terms of the, sales side of things, but also our ability get customers live. And so we remain as bullish as ever on the roofing side. Dylan Becker: Great. Thank you. And then maybe one, Dave, if I can as well too. Really appreciate kind of the color. Or commentary around the diversification of GTV. But maybe if you could kind of double click on that as we think about, kind of the health of the consumer, where you're seeing, momentum kind of on that side and maybe a way to think about the dynamics you called out around kind the break versus fix or break fix versus replace exposure or anything, for us to be aware of on that front? Thank you. Dave Sherry: Sure, Dylan. We look at a lot of internal data points. There are two main ones that we look at. The first is job growth. And the second is average ticket. And what we've seen in the last quarter, has been pretty consistent on both. And so that for us gives us an indication that the economic market is fine, and that's what we're assuming in our guide, going to next quarter. Dylan Becker: Perfect. Thank you. Operator: Our next question comes from the line of Scott Berg with Needham and Company. Please proceed. Scott Berg: I have one really nice quarter here, and thanks for taking my questions. I want to stick on the commercial side for both of them. First question probably Ara is on how you plan to maybe invest in commercial opportunity as you start thinking about fiscal twenty-seven. You you seem pretty confident that you have all the functionality you need to really press into that area today. But do you do anything differently as start thinking about, how you tackle that opportunity next year? Ara Mahdessian: It's not so much different. I think the thesis still remains the same. That we need to nail construction. Which is our current focus on the commercial side for the subcontractors. And that will not change as we go into next year. Where I suspect a lot of the, value creation will shift to is less of these table stakes features and more AI-driven value creation, particularly on the CRM side. And so that's where I suspect a lot of the R&D efforts will be going into as we think about, going into becoming the market standard within the commercial space. But the traction that we're seeing overall with the commercial market has been very strong. And, the thesis around having a holistic solution that can cater to both the service side and the side of the subcontractors. Is proving out like how we hope to would. Scott Berg: Excellent. Helpful. And then, as a follow-up, Dave, your comments on GTV started by saying, I'll outperformance in the commercial side, which I find maybe not unusual, but a little bit surprising because the know, usage of those solutions on the commercial side is certainly less than on the residential side. But was there anything you need to call out for the strength there on the commercial side in the quarter? Or was it just kind of just general usage, I guess? Dave Sherry: So I'd say that what we saw in GTV was continued progression, in commercial as a growth driver for us. But you hit on, I think, an important point there. On what's driving our usage take rate. And that, again, happens to be the higher adoption of our fintech products. We've seen more volume come on platform, which, of course, we monetize more. That's more than offsetting the growth in commercial which does, to your point, have a lower GTV, usage take rate. Scott Berg: Excellent. Next quarter. Operator: Our next question comes from the line of Parker Lane with Stifel. Please proceed. Parker Lane: Yes. Hi. Good afternoon. Thanks for taking the question. As you guys make a bigger push into the commercial space with the construction workflows, CRM. Just wondering if you could comment on some of the learnings you're you're finding in that area. What level of satisfaction or people having with the workflows or solutions they have in place there today? Is there more of a desire to consolidate on one platform that's that's driving that opportunity for you? And lastly, when you look at the opportunity is it fair to say that that your existing, residential customers are the ripest opportunity, or do you think there's a a handful of organizations you don't have relationships with today already on residential that could be attractive to targets for commercial? Vahe Kuzoyan: Sure. So on the commercial side, some of the early observations that we're seeing is that there is a similar force around consolidation within the space. And the degree to which private equity is, increasing its presence there. Is playing out in a very similar way. What we're seeing as as being a primary difference is that the consolidators on the commercial and construction side are generally less we will call it, mature in terms of the centralization of certain functions and standardization across across their acquisitions. And so they tend to be operated more as independent shops versus operating as a single company. Which has been kind of more of this the the style of consolidation that we've seen on the residential side. Our assumption is that that's not because there's a lack of desire to do those things. It's just that the lack of capabilities from a systems perspective has been the primary driver there, not necessarily desire. And so we're really leaning in on capabilities that allow commercial and construction contractors to have, the benefit of synergies in a way that's more similar to the residential side. And we think that's gonna be a tailwind for us as we progress into this market. When we look at on the, residential side, you know, if you look at our recent partnership with Roto Rooter, which was, something we announced, recently, A big part of what allowed us to win in that scenario was the fact that we had both the residential and commercial sides. Of the story that we can solve for them. And so we expect that there's gonna be other large players similar to this where having both sides of the house be something that we can handle. Is is something that's gonna be compelling. The James River example that we mentioned earlier today is another great example of that. Parker Lane: Appreciate the feedback. And, Dave, one quick one for you. You talked about the diversity of different trades in GTV. As you get into, some of these newer trades that are maybe less weather dependent, is there any potential to see more of a smoothing of use-based revenue quarter over quarter in the future? Dave Sherry: Yeah. Great question. I think for now, we haven't seen a real shift in seasonality. But to your point, not all trades have the same profile seasonality. And as those expand, we may see a shift. I wouldn't say we've seen it yet, but it is a good observation that not all trades are the same seasonal trends. Than the ones we are large in today. Parker Lane: Thank you. Thank you. Operator: Our next question is from Terry Tillman with Truist Securities. Please proceed. Terry Tillman: Yeah. Hi, Ara, Vahe, and Jason. Congrats on the the quarter. And I don't know if it's fortunate or unfortunately, but I'll be doing lots of these earnings calls over the years. Still. The first question is, you know, I I always like the testimonials from new customers or expanding customers, and I heard e ecosystem multiple times and, like, unrivaled ecosystem. So whether it's the PE consolidators or your fintech partners or the OEMs, are you seeing some sort of kinda multiplier effect or benefits from the ecosystem helping influence new business for you all or just expand faster in trades? Then I had a follow-up for Dave. Ara Mahdessian: Yes. Indeed. And welcome aboard. Looking forward to the the partnership. In the road ahead. We certainly do see the evangelism not just from the customer base, but also through the ecosystem and the partners, As you know, we are now very meaningful partners to manufacturers distributors, other key vendors that serve contracting businesses. And in many cases, their solution also works better if a contractor has our solution. And so the value props benefit us, the contractor, and the third party. And so we do get a lot of referrals and references as a result of that, which helps with our go-to-market motion. Terry Tillman: That's great to hear. And I guess just a follow-up for Dave. It sounds like one less day in the quarter for 4Q. It's not typically your strongest free cash flow quarter by any means, but it's also not your lowest. Anything to think about seasonality wise for free cash flow in 4Q? Thank you. Dave Sherry: Hey, Terry. Nothing big here. I'd say that typically, over the year, our free cash flow and operating income are about the same. The big seasonal quarter on free cash flow ends up being Q1 where we pay out bonuses. There's nothing in particular around Q4 that's unique. I would just assume in and you think about your models, full year free cash flow and full year operating income tend to converge pretty closely. Terry Tillman: Alright. Thanks. Operator: Thank you. Our next question is from the line of Andrew Sherman with TD Please proceed. Andrew Sherman: Oh, great. Thanks. Congrats, guys. Dave, on the Resi HVAC, great to hear. It was consistent year over year. Could you talk about why your GTV there is generally insulated the volume declines that the OEMs have seen worsen? The past couple of quarters? And as their cycles start to improve, maybe next year, could that turn into a tailwind for you? Dave Sherry: Sure. I think it's it's important to remember, as I mentioned in my prepared remarks, that RGTV and residential is driven by break-fix in existing homes. And RGTV includes components beyond system sales like labor, parts, and membership. There there are other data points out there, like you said, the OEMs and, other indices that may be by certain variables that don't generally drive RGTV? Like new home construction and and supplier inventory cycles. So as those go up and down, you may not see us fluctuate exactly with them. And lastly, I think it's really important, to remember that we have a diverse customer base across many trades and end markets. It's it's this diversity combined with the world-class operators that are that are our customers. Combined with our software, which adds a lot of value to them, plus new customer additions that it's the foundation of the steady GTV growth you've seen in time. This quarter really wasn't any different there, and, sort of the foundation from which we grow over time. Andrew Sherman: That's great. Thanks. And then on the pro products across your whole customer base, maybe if you could just rank order the the ones seeing the highest demand. So I would say, our most mature products are generally the ones that are, the most penetrated. So MarketingPro, for example, has been the one that has been in the market the longest and is the most mature. In terms of demand, what we're seeing is, as Ara mentioned, AI is a huge focal focus area for our customers. It's pretty strange actually to see how aggressive our customers are demanding solutions within the AI world. And so everything that touches whether it's virtual agents that are answering the calls or it's AI on the demand generation side, or on the automations around dispatch and back office, that's probably the area that's got the hottest demand right now. Andrew Sherman: Perfect. Thanks, guys. Operator: Thank you. Our next question comes from Joseph Vruwink with Baird. Please proceed. Joseph Vruwink: Great. Thanks for taking my questions. If I look at the subscription growth rate and how that's been running fast than GTV growth, I know it's not gonna be perfect, but I do think about it as maybe highlighting the contribution of the pro products to subscription. Do you think that spread could maybe start to pick up in FY twenty-seven just given some of the things that came up at Pantheon. You know, there's a lot of new sales approaches that Pro, not just Mathemax program, but also the new product bundles or as you just mentioned, the willingness of customers to bring multiple products together if that can actually be automated and enhanced with an agent framework. Dave Sherry: Yeah. I think look. Our platform earn rate is is driven by a couple of factors, and you what you're thinking on is usage and subscription. I think Pro continues in a major growth driver for us. We've also seen substantial growth in our customers' which is driving usage, and the usage recently has been, augmented by the adoption of fintech products. So I'm not sure I'm ready to call for a change in the gap between the two growth rates. When we talk about next year, we'll we'll be really pro providing our perspective on FY '27 in March. So I I guess it's probably too early for me to call a few the change in the growth rates relative to one another. Joseph Vruwink: Okay. That's great. And then I I know this ResiHTech topic has, you know, been asked quite a bit, but it's just a a different, I guess, question from me. Dave, you mentioned that you looked internally at a lot of indicators, and you highlighted the ones that matter most. I mean, in your collective experience, which dates back a a while now, it's and that covers several of these kind of HVAC destocking cycles, Has there been times when you could have proactively flagged that maybe there was an issue with the consumer and you were braced for maybe compression in average ticket sizes, it it sounds like those aren't even popping up, but I wonder if maybe you've had a a track record historically to to call that out proactively. Dave Sherry: I I think during the COVID times, we saw average ticket grow quite quickly. And we realized that that that was, an influence of the consumer. And so I think that's the time we saw those two data points really diverge. The average ticket grew a lot shortly after COVID, as the replacement cycle went, kind of on steroids for a period of time. Joseph Vruwink: Okay. Thank you. Operator: Thank you. Our next question comes from the line of Daniel with BMO Capital Markets. Please proceed. Daniel: Yes. Good afternoon, everybody. Thank you for taking my question. Maybe just one for me. I wanted to go back to the prepared remarks and the the comment about the the marketing takeaway from a a horizontal application. And maybe just kinda expand about sort of how and why you are such a better solution than a horizontal application in that use case. And do you think more generally as your customers automate the back office, there's lots of other sort of potential horizontal applications to go after. So if you think about prioritization of your R&D workflow, like, how interesting is an opportunity is that versus some of the other things that you're working on? Thank you so much. Vahe Kuzoyan: Great question. Lot of great solutions out there, but where I think Marketing Pro delivers very unique value props above anything else. Is it is very hard to manage all of your leads and CRM data. In one platform. And then export it into another platform and set up automated marketing campaigns audiences and segments and then try and synchronize when leads fall in and out of those audience and constantly have to do that almost daily, make sure the right audience is targeted. If that's why Marketing Pro is designed to be specifically, like, for the trades And we have built automated campaigns into Marketing Pro so that you can detect when is the best time to launch certain types of campaigns and automatically do that on behalf of the contractor so that it doesn't necessarily have to be done manually. Daniel: Great. Thank you. Thank you so much. Operator: Our next question comes from the line of Yun Kim with Lumpur Capital. Please go ahead. Yun Kim: Vahe, more of a strategic question, but obviously we're hearing a lot more about AgenTek commerce and general adoption of AI chatbots like ChatGPT in the consumer market. How does that change your current product strategy, especially around marketing and sales products? And does this potential rise of agentic commerce, does that represent an opportunity to increase your GTV take rate? Thanks. Vahe Kuzoyan: So it's still early days on that transition. And we're obviously keeping a very close eye on how the consumer behavior is changing and how that would flow into us. We obviously have several products that would be affected by that, in terms of things like reputation and our online booking integration with Google and so on. But we also think that it would present a meaningful opportunity for new products and new services to emerge. We've all kind of seen, the OpenAI marketplace and and how exciting that is for players to, engage. And so we expect that consumer behavior will change, that the way in which they find contractors will evolve from what it is today. And we're certainly very keen to capitalize on opportunities that will emerge. As a function of that, but it's still hard to say exactly how it's gonna shake out. Just gonna make sure that wherever it shakes out, we have the best product in the market for our customers. Yun Kim: Okay. Great. And then, Dave, real quick. Anything to note around contract length and billing cycle as you continue to increase your commercial mix also larger customer mix increases? Dave Sherry: You know, we bill generally monthly. Nearly all cases, even for large customers in commercial and residential. I don't see that changing. So, no, I don't think that that changes as we shift our focus towards more commercial or even larger customers. Yun Kim: Okay. Great. Thank you so much. Operator: Thank you. Our next question comes from Tyler Radke with Citi. Please proceed. Tyler Radke: Yes. Thanks for taking the question. I wanted to follow-up on the construction opportunity. Obviously, know, big market. You have a a pretty good vision on you know, full platform, doing everything from the workflows, payroll, etcetera. Like, where do you start? What where are you finding kinda the you know, the biggest low hanging fruit and just give us a just a a sense on you know, how often you're sort of replacing third party solutions versus, you know, greenfield? Thank you. Vahe Kuzoyan: So we rarely see greenfield. The vast majority of customers that, we take on, across the board, but especially in construction, are generally coming from something. The areas where we found the most success is contractors that are primarily focused on the service side of their business. And looking to expand that part. That's generally where we're able to provide the most value to the subcontractors that approach their business from that perspective. As the construction module becomes more we are starting to take on more and more supply subcontractors that focus more and more on the construction side. And today, I'll say we're at a point where we could take on pretty much any subcontractor in the mechanicals that's got, up to a per project size of about 10 to $15 million on a per project basis. The work we're doing over the course of the next two quarters should push that up meaningfully into the $20 to $30 million per project range. But as you imagine, for most subcontractors in the trades, that's well north of the largest projects that they take on. And we've seen that the vast majority of, prospects that we talk to, fit within kind of that size range. And so for us, the work on the construction side now is going more towards the true value creation aspect of helping them grow, helping them improve increase their margins, helping them improve their on-time performance. Versus handling kind of the table stakes features which is what most of the market does today. Tyler Radke: Thank you. That that's helpful. And Dave, on the profitability side, certainly been tracking well ahead of plan. This year. You've seen nice expansion on both operating and and cash flow margins. I I think you had some comments just around some of the hiring trends and everything, but any early look on how to think about margin expansion next year, anything else on FY '27 would be great. Thank you. Dave Sherry: Sure. I think, continue to be really intentional with you guys about guidance. We know we wanna establish a tracker with you all, and our plan is to provide a view of annual, numbers in March. What I'll say is that you should expect from us to have the same framework we have this year. Which is constraining our growth excuse me. Maximize target growth constrained by two variables. Twenty-four month tax payback, 25% incremental margins. Now this year, were a bit behind on hiring, and that has led us to being a little over our internal margin targets when combine that with the strength we've seen. In usage. I would expect next year for us to again target the 25% incrementals but expect less upside than we've seen this year as we catch up on hiring towards the end of this fiscal. Tyler Radke: Very clear. Thank you. Operator: Thank you. Our next question is from the line of Jason Celino with KeyBanc Capital Markets. Please proceed. Jason Celino: Hey. Great. Thanks for fitting me in. I wanted to ask about usage. You know, we've seen two quarters in a row. Of acceleration, and I think, Dave, you mentioned it it been partly driven by better fintech utilization. Can you just explain that a little bit? Sure. Dave Sherry: You know, we have financing and payment products for our customers. They're not adopted by a 100% of our customers. And what we've seen in last couple of quarters is that we have an increasing adoption of those solutions as our customers realize the benefits of the fully integrated solution. Our team with, has, internally has gone and spoken to customers that are not integrated, and gotten them to see use the solution, and that's driven up the usage taker I overall. Jason Celino: Okay. Excellent. And then on the subscription side, any any updates on kind of the momentum you're seeing with pro product attached you know, especially after know, launching FieldPro at Pantheon? Thanks. Dave Sherry: No. We we continue to see strength in our pro product attach. I think that is one of the main and most important growth drivers for us. I think that what you're seeing, if you look at our overall platform run rate, is a tale of of of sort of three things. The first is when GTV grows the way it did in the quarter, platform excuse me. Subscription revenue doesn't grow directly with it, which is a headwind. To earn rate. The second is we're seeing a lot of growth in markets where we're not the market standard. As you can imagine, our earn rate is lower in markets where we're not the market standard. Those two headwinds are being more than compensated by the growth we're seeing in pro products. And that sort of because pro products remain a growth driver for us, which is why you see our overall earn rate expand year over year, on the same comparable period. Operator: Thank you so much. One moment for our next that comes from the line of Hannah Rudolph with Piper Sandler. Please proceed. Hannah Rudolph: Hi, guys. Thanks for taking my question. Great to hear about the early progress on the MAX program you've seen and the strong pro product adoption this quarter. Given where you sit now, do you feel like pricing and packaging of pro product is in a good place, or do you feel like you still have a lot of room to optimize the pricing and packaging of pro? Dave Sherry: You know? I we've talked pretty openly that we've not optimized our our our our pricing. I think max is the beginning of the future. We think we have a a better solution there. It's still in the pilot phase, and we're still trying to figure it out. We're focused primarily today making sure that our customers as buyers that are wildly successful. And as part of that, we will evolve and ensure packaging pricing works perfectly for now. In a pilot, and we're excited about what it means for us going forward. Hannah Rudolph: Makes sense. And then with the end-to-end platform for commercial now, fully available with commercial CRM and construction management, How are you thinking about timeline to get to market standard and what it's going to take to do that? Vahe Kuzoyan: Yeah. Great question. It's hard to say exactly I would say that from for becoming market standard, there's both a product component and having the ability to perform certain capabilities. And then there's a market aspect in terms of branding, recognition, and just the overall let's say, credibility. That we have. And I would say, we're pretty close from a product perspective. There's a few more things that maybe over the next couple of quarters will need to come online to really firmly make that case. But I would say we have work to do on the branding side. And making sure that from a reputational standpoint, it's as strong in commercial as it is on residential. And so I would expect that you know, it'll be at least another year before we've got the market side of the thing, market side of the equation kicking in the same way that we do on the residential side. Hannah Rudolph: Great. Thank you so much. Operator: Thank you so much. And our last question comes from the line of Michael Turrin with Wells Fargo Securities. Please proceed. Michael Turrin: Hey. Great. Thanks. Appreciate you fitting me on, and I'll ask a question that maybe helps summarize just some of the questions throughout. So you can probably tell we've all been fielding macro questions around just some of the end market commentary. It doesn't seem like there's great signal there given, the results you just put up. So maybe just across the team from your perspective, what are the signals investors should be watching, whether it's customer segments you're expanding into some of the product add-ons or or some of the financial metrics that could maybe provide better signal, just give you a chance to you know, focus some of the the the conversation around where should be looking as they learn more of the ServiceTitan, Inc. story from here. Thanks very much. Dave Sherry: Hey, Michael. I'll I'll take this one. I'm excited to to see you next week. I I think for us, a couple things worth noting here. First, as you know, we're trying to run this as a marathon, not a sprint. We're really excited for the opportunity to durably compound here. And the way we do that is a pretty simple growth formula We ensure we deliver enormous value to our customers, and as they grow, we grow. Way we look at that is two things. One is expansion in GTV, which I've talked a fair bit about today. Is a result of a diverse set of trades, particularly led right now by commercial, And the second is is our ability to earn a portion of that GTV. As revenue for us. And that is is principally right now, driven by the pro products you've heard us talk a lot about. And so I think watching our evolution in GTV and earn rate against it probably the best way to watch our performance here. Thanks very much. Operator: Thank you. And this will conclude the Q&A session for today. I will pass the call back to Ara Mahdessian for his final remarks. Ara Mahdessian: I just wanna thank everyone for joining us today. We know you have the opportunity to spend time with great companies, and so we greatly appreciate you choosing to spend your time with us. And we cannot wait to to celebrate the second annual Day of the Trades on December 12. With many of you in New York Thank you, and wishing you all the best. Operator: And with that, we conclude our conference. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the fourth Quarter 2025 Cooper Companies Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. I would now like to turn the conference over to Kim Duncan, VP of Investor Relations and Risk Management. You may begin. Kim Duncan: Good afternoon, and welcome to Cooper Companies fourth quarter and full year 2025 Earnings Conference Call. During today's call, we will discuss the results and guidance included in the earnings release and then use the remaining time for questions. Our presenters on today's call are Al White, President and Chief Executive Officer and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements including statements relating to revenues, EPS, cash flows, interest, FX and tax rates, tariffs and other financial guidance and expectations. Strategic and operational initiatives, market conditions and trends, and product launches and demand. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the company to differ materially from those described in forward-looking statements are set forth under the caption Forward Looking Statements in today's earnings release and are described in our SEC filings including Cooper's Form 10-Ks and Form 10-Q filings, all of which are available on our website at coopercos.com. Also, a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release which is available on the Investor Relations section of our website under Quarterly Materials. Should you have any additional questions following the call, please email IR@CooperCo.com. And now I'll turn the call over to Al for his opening remarks. Al White: Thank you, Kim, and welcome, everyone, to today's earnings call. I'll start by highlighting three key strategic priorities and then move into our quarterly results and guidance. Our first priority is to deliver consistent market share gains for CooperVision. We've accelerated the global rollout of our MyDay premium daily silicone hydrogel lens portfolio and we're seeing momentum build. We're executing on numerous global private label contracts and winning new ones. And we're strengthening branded sales, especially among independent optometrists. We're also looking forward to several upcoming product launches to further strengthen our positioning and ensure CooperVision delivers steady revenue growth throughout fiscal 2026 with the strongest performance expected in Q3 and Q4, as MyDay achieves full traction. Second is our continuing commitment to earnings and free cash flow. This quarter marked our eighth consecutive quarter of beating consensus earnings expectations our fiscal 2026 earnings guidance exceeds current consensus expectations driven by significant cost savings from our recent reorganization. Additionally, for the past two years, we've reported double-digit earnings growth and we're targeting making it three years in a row. And importantly, these earnings are turning into cash, with $150 million of free cash flow delivered in Q4 beating expectations. I'm also pleased to announce this momentum is continuing. And we're raising our fiscal 2026 to 2028 free cash flow target to more than $2.2 billion. Our entire organization is aligned behind these efforts as free cash flow became a bonus metric in 2024. Alongside revenue and earnings. Third is our attention to returning capital to shareholders. We repurchased nearly $200 million of stock in fiscal Q4, bringing our total fiscal year repurchases to almost $300 million or roughly two-thirds of our 2025 free cash flow. For fiscal 2026, we expect to allocate a similar percentage to share repurchases with the remaining portion targeted to debt pay down. To support this effort and to reinforce our commitment share repurchases being a core component of our long-term capital allocation strategy the board authorized an increase in our share repurchase plan to $2 billion in September. Before moving into the quarterly details, I want to emphasize that our board and management team remain highly focused on driving long-term shareholder value. We've accelerated share repurchases, Insiders have bought stock. We've completed significant reorg and integration activity to increase profitability and cash flow. And we've been winning new contracts and solidifying long-term customer partnerships CooperVision and CooperSurgical. Additionally, we initiated an evaluation of strategic alternatives earlier this year and presented our initial findings to our board in October. Alongside ongoing governance discussions around the timing of our chair's transition to retirement. Today, we have taken the next step by issuing a press release announcing formal strategic review to ensure that we explore every opportunity to unlock long-term shareholder value. We also announced the transition of our chair role from Bob Weiss to independent board member Colleen Jay. And finally, we're adding total shareholder return to our executive performance share plans to further align leadership incentives to our stock's performance. With that, let's move to the Q4 results. Consolidated revenues were up 4.6% year over year or up 3.4% organically to a quarterly record $1.065 billion. Operating margins improved meaningfully, and non-GAAP earnings grew 11% to $1.15. For CooperVision, we reported revenue of $710 million up 4.9% or up 3.2% organically. These results were consistent with our guidance, driven by improved global availability of MyDay, partially offset by market softness in China and certain areas in EMEA. Overall, the global contact lens market continues to trend toward premium offerings, which is a positive for our MyDay portfolio, including our premium private label MyDay business, but it does create headwinds for Clarity, in our older hydrogel lenses. On an organic basis, by category, torics and multifocals grew 5% and spheres grew 2%. Bimodality, daily silicone hydro hydrogel lenses grew 5%, with double-digit growth in MyDay and declines in Clarity. Our silicone hydrogel FRP lenses by OFINITY and Avera grew 2% and MiSight delivered strong growth of 37%. Regionally, The Americas grew 5% led by strength in daily silicone hydrogel lenses. AMEA grew 3% strengthening our number one market position led by MyDay and Biofinity. This was slightly below expectations due to market weakness in a few countries, but this doesn't appear to be tied to consumer activity, and we've already seen a pickup this quarter. Asia Pac was flat as growth in MyDay was offset primarily by a 28% decline in China, driven by continued weakness in low margin e-commerce channels where we're not chasing aggressive pricing activity. Moving to products. MyDay delivered a strong quarter led by Torix and Energous. We're continuing to execute on the private label deals we won in Q3, and I'm pleased to report that we won quite a few more contracts in Q4, several of which are in The U.S. And Europe. So you'll see those in the coming months. Momentum is robust, we're seeing increasing bidding activity with especially strong interest in our premium comfort MyDay Energous lens featuring our innovative digital boost technology, which we expect to launch in Europe in Q2 of this year. From our MyDay multifocal, which continues to roll out in the APAC region and from our MyDay toric parameter expansion, is expanding around the world. We'll also be launching MyDay MySite and MyDay Toric multifocal in 2026 and we expect those offerings to be received incredibly well. For clarity, we're progressing with repositioning the product family in Asia Pac, and we're seeing early positive signs with products such as Clarity's new three ad multifocal launch, what the which delivered double-digit growth in The Americas. Regarding FRPs, Biofinity delivered solid performance in The Americas, and EMEA led by multifocals, Energous, and our innovative made to order lenses. But remains soft in Asia Pac, especially outside of Japan. This was similar to last quarter with continued weakness in markets such as China. Turning to myopia control. MiSight delivered strong growth of 37% driven by robust performance in The Americas and another record-setting quarter in EMEA. Our back-to-school campaigns boosted fitting activity, while customer engagement initiatives and new pricing models supported higher purchase volumes. We expect this momentum to continue into fiscal 2026, with the upcoming launches of MySite in Japan and MyDay MySite across Europe. Both scheduled for fiscal Q2. Private label programs in Europe and other select markets are also proving highly successful and we expect more details to deals to be signed this year. With MiSight growing 30% in fiscal 2025, reaching a $104 million in sales, we expect growth of at least 20% to 25% for fiscal 2026 with further strength in 2027 as product launches gain traction. To conclude on Vision, let me share details of our performance relative to the market. This is calendar quarter data, so it's apples to apples with our competitors. In calendar Q3, we grew 5%. In line with the market. And on a year-to-date basis, for the three calendar quarters of 2025, we've grown 4%. Also in line with the market. CooperVision has gained share for seventeen straight years and we remain focused on achieving that goal for an eighteenth consecutive year in calendar 2025. Turning to CooperSurgical. We delivered quarterly revenue of $356 million, up 4% or up 3.9% organically. This was at the high end of our guidance range driven by solid execution. Within fertility, revenues were a $141 million, up 1% in line with expectations given last year's 13% comp. Growth was driven by market share gains in EMEA and strong global genomics performance. Partially offset by softness in The US. As we enter fiscal 2026, we're optimistic this that this will be a stronger year. We're seeing encouraging traction with new RFP wins, from some major fertility clinics We're receiving significant interest in WITNESS, our automated lab tracking system, and our genomics portfolio is seeing an uptick in momentum following the recent launch of several new tests. For the overall fertility market, consumer spending remains tight, especially in Asia Pac, and clinics are continuing to manage spending carefully but we are seeing some early positive signs, including improving cycle activity in The US and growing global clinic interest in new technology. We remain highly optimistic about the long-term outlook for fertility given the underlying fundamentals supported by the estimate that one in six people globally are expected to experience infertility at some point in their lives. Underscoring the long-term significance and resilience of this market. Moving to Office and Surgical. Sales were $215 million up 6% and up 6% organically. PARAGARD grew 16% following a softer Q3, driven by strong demand for our single hand inserter upgrade that was launched earlier this year. Medical devices grew 3% led by double-digit growth in our labor and delivery portfolio. And a 35% increase in our OBP surgical line of innovative single-use lighted cordless surgical retractors. These gains were partially offset by softness in legacy products. Moving to fiscal revenue guidance. For CooperVision, we're guiding fiscal Q1 to 3.5% to 4.5% organic growth as we continue stair stepping higher with execution around ongoing contract wins. For the full year, we're guiding to 4.5% to 5.5%, assuming the market grows 4% to 5%. Our expectation is that current momentum will result in strong share gains in Q3 and Q4 but we're maintaining conservatism to avoid having guidance be too back end loaded. For CooperSurgical, we're guiding Q1 to 2% to 3% growth and full year to 4% to 5% growth. Within this, we're forecasting only a modest improvement in fertility, which we're optimistic will prove conservative given some of the recent market trends along with much easier comps. Before turning the call over to Brian, wanna thank the entire Cooper team for their outstanding execution this quarter. Delivering strong results during a period of significant organizational change reflects our team's commitment to building a more streamlined and efficient company and it speaks volumes to the company's dedication to excellence. And with that, I'll turn the call over to Brian. Brian Andrews: Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis. So please refer to the earnings release for a reconciliation of GAAP to non-GAAP results. For the fourth fiscal quarter, consolidated revenues were $1.065 billion up 4.6% and up 3.4% organically. Gross margin declined marginally as expected, to 66.2% driven by tariffs and product mix, partially offset by positive foreign exchange. Operating expenses were flat, reflecting disciplined cost management and operating income increased a healthy 9% to a 27% margin. Interest expense was $23.7 million and the effective tax rate was 14.2%. Non-GAAP EPS grew 11% to $1.15 with 198 million average shares outstanding. Free cash flow was strong at $150 million with CapEx of $98 million and net debt was $2.4 billion improving our bank defined leverage ratio to 1.76 times. Lastly, we repurchased 2.9 million shares for $197.3 million. Leaving approximately $1 billion of availability under our $2 billion repurchase plan. Before moving to guidance, let me recap the reorganization and integration work we completed in Q4. We began executing this effort in early Q3, and moved quickly with a clear focus on improving operational efficiency and reducing back office costs. By leveraging prior IT investments, supported by AI capabilities, We integrated key support functions and are unlocking meaningful productivity gains. At the same time, we completed significant acquisition related integration work. From a financial perspective, we recorded approximately $89 million in charges associated with all of this activity. And expect annual pretax savings to be roughly $50 million or 19¢ starting in fiscal 2026. Beyond operating margin expansion and free cash flow benefits, these savings strengthen our ability to invest in high return opportunities repurchase stock and pay down debt. Fully aligned with our commitment to long-term value creation. Moving to guidance, and starting with Q1, we're guiding to consolidated revenues of $1.019 billion to $1.03 billion representing roughly 3% to 4% consolidated organic growth. CooperVision's revenue is expected to be in the range of $693 to $700 million. Up 3.5% to 4.5% organically. And CooperSurgical's revenue is projected to be $327 to $330 million. Dollars up to 2% to 3% organically. For earnings, we're guiding to non-GAAP EPS of $1.2 to $1.4 with improving operating margins from strong operational leverage, offset by lower gross margins due to tariffs and mix. Interest expense is expected to be around $24 million and the effective tax rate to be in the range of 15% to 16%. For the full year, fiscal 2026, we're guiding to consolidated revenues of roughly $4.3 billion to $4.34 billion reflecting 4.5% to 5.5% organic growth. CooperVision is expected to be in the range of $2.9 to $2.925 billion. Up 4.5% to 5.5% organically. And CooperSurgical is expected to be in a range of $1.4 to $1.413 billion. Up 4% to 5% organically. For earnings, we're guiding to non-GAAP EPS of $4.45 to $4.6 This assumes another year of strong operating margin improvement driven by operating expense leverage, offset by lower gross margins due to tariffs and mix. Interest expense is expected to be around $85 million assuming no share repurchases or changes in Fed policy. Note that if the Fed does lower rates next week by a quarter point, interest expense would be reduced by roughly $2 million in fiscal 2026. The effective tax rate is expected to be in the range of 15% to 16%. Free cash flow for fiscal 2026 is expected to improve to $575 million to $625 million driven by stronger operating cash flow from higher profits, working capital improvements, and lower one-time costs. CapEx will also decline on an absolute basis as CooperVision's investment cycle winds down. These positives will temporarily be somewhat offset by roughly $70 million tied to our reorg and final payments on building activity including our new CooperVision R&D facility. From fiscal 2026 through 2028, we expect to generate over $2.2 billion in free cash flow. Al White: This outlook reflects two key drivers. Brian Andrews: First, consistent improvements in operating cash flow from higher profits. Lower one-time items, and tighter working capital management supported by a streamlined and AI-enabled operating structure. Al White: And second, Brian Andrews: CapEx normalizing in fiscal 2027 to roughly 5% of revenues. Covering both maintenance and growth investments. Lastly, on cash flow, at the divisional level, Cooper Surgical generates more free cash flow per revenue dollar than CooperVision. But we expect that gap to narrow materially in 2027. As CooperVision's CapEx declines and free cash flow accelerates. From a capital deployment standpoint, we remain committed to investing in growth and innovation, repurchasing stock, and reducing debt. Lastly, as you'll see in our 10-K tomorrow, we have successfully remediated the material weakness related to certain IT general control failures from fiscal 2024. And with that, I will turn it back to the operator for questions. Operator: Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, press star or one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're called upon to ask a question and are listening via speakerphone on your device, please pick up your headset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit yourself to one question and one follow-up question. Our first question comes from Jeff Johnson from Baird. Please go ahead. Thank you, guys. Good evening, and congratulations on the progress in the quarter. Al, I wanted to talk, I guess, first on clarity. Obviously, a good MyDay number in the period. Did you give a Kim Duncan: for how much Clarity was down? And I think that's been about a $400 million annualized line for you guys. What is maybe the floor on that? And is that Operator: continues to come down and MyDay grows, do you see those MyDay gross margins eventually within the next year or two getting to Clarity gross margin levels? Thanks. Al White: Yeah. I'll let Brian comment on the gross margins because we've made a lot of progress there. Yeah. Clarity was down a couple percent this quarter, and it's it's approached it approached $400 million this year. So it's still pretty sizable product line for us. We're doing a lot of work on it right now. We've got some new products that we're launching. We're excited about the three ad multifocal in The US is being received really well. But on the flip side of that, we're doing some repositioning in places like Asia Pac to to put that that lens family more in the entry level space that we want it to be in. So we're gonna continue to have some push and pulls here, I think, over the next couple of quarters, but I do still think that there's a place for that lens and it has the opportunity to be very successful. If there's ever a situation where the market moves a little bit more towards mass market or is a little bit more price conscious, I think you'll see that lens take off. But in the meantime, to hit on the the start of your question, Jeff, yeah, good quarter for my day. We are making a lot of progress there. We have a lot of really exciting stuff going on. You wanna comment on margins? Yeah. Sure. Thanks for the question, Jeff. I will comment on individual product line gross margins, but I will say that the gross margins for the family of products of daily silicone hydrogel lenses is below CooperVision's gross margins. I talked about mix being part of the reason for for the gross margin decline in Q4. It'll be part of the reason for the gross margin decline year over year next year. And as we sell more daily silicone hydrogels, I would expect that we'll still have pressure on the gross margin line. Now that being said, we do get more revenue per patient when we sell daily SiHy's We get more gross profit dollars, and we get more operating income dollars. And so as we leverage our prior investment activity, and a more streamlined organization, I would expect we'll be able to drive operating margin expansion and earnings growth despite some of the headwinds we'll be seeing from the gross margin line. Operator: All right. Thank you, Brian. And maybe just one quick follow-up. Just whenever you guys give calendar versus fiscal numbers, it always opens it up to a question like this. But if you did 5% growth in calendar 3Q, Al, and you did 3.2% in fiscal Q4, it would seem to imply a pretty weak October, I believe, if I'm thinking about that correctly. But just tell me why I'm wrong there or at least kind of help reconcile those two, the 3.2 and the 5% numbers? Thanks. Al White: Yes. It was the flip side, Jeff. It was actually the beginning of the quarter, the overlap in the beginning of the quarter. Not the end of the quarter. October was a good month. Operator: Our next question comes from Laurence Biegelsen from Wells Fargo. Please go ahead. Hey. Good afternoon. Thanks for taking the question. Larry Biegelsen: Al, could you please talk about the strategic review How long will it take What's your reaction to those who have advocated for splitting up CVI and CSI and you know, and adding new board members. Al White: Sure. The we announced a strategic review. For those who haven't seen it, we issued press release concurrently with the earnings release. We're going to take a look at options out there because we do wanna drive shareholder value. Right? And we look at that. And we were doing that work proactively with our board over the summer. We actually presented strategic analysis and a strategic review to them in the month of October and and we obviously put that out publicly. We'll provide an update on any activity on our next earnings call, which is the March. That's our Q1 earning call unless something material happens beforehand in if it does, obviously, we'll we'll issue a press release or, make a statement on that. So outside of that, I'm not gonna comment too much on it, but, yeah, it's underway. Larry Biegelsen: So so no comment on know, I mean, just maybe your latest thoughts. Obviously, there's are others out there now advocating for splitting up CVI and CSI. Has your position changed out know, just love to hear your latest. Thoughts on that, and and I'll I'll leave it at that. Thanks for taking the question. Al White: Yeah. My position has not changed on that. We discussed that, actually, Larry, at your conference, in September. You raised it, and I gave my opinion on that. And my opinion has not changed, which is our job is to drive long-term shareholder value. If if taking certain actions are beneficial for our long-term shareholders, then we need to evaluate those. As I talked about in the September meeting that we did, I I believe if we drive value in this business, that we'll maximize long-term shareholder value. And that's what we're doing. That's what we did with the reorg. That's what we're doing with stock buyback. That's what we're doing driving cash flow. That's what we're doing in a whole slew of different ways. But we're gonna look at the value of this business and do what's best for our long-term shareholder long-term shareholders. That's our job as as executives of of public company. Operator: Our next question comes from John Block from Stifel. Please go ahead. Jonathan Block: Great. Thanks, guys. How I think your contact lens market growth expectations for 2026 I think you said for the market 4% to 5% Year to date, the market's 4%. And I don't know. It just seems like industry pricing power is fading a bit. So, you know, just talk if you don't mind about sort of the market growth assumption or construct Like, what's behind that assumption If we do finish this year four, even a tad below, what's responsible for market growth acceleration if pricing power is decelerating? And then I'll ask a follow-up. Al White: Sure. Yeah. John, I I might go the other direction a little bit on that one. We grew as a market, grew 4% in Q1 calendar Q1 and four percent Calendar Q2. The market grew 5% in calendar Q3. It actually increased this last quarter. I do think that the that we're gonna be in a four to 5% market growth for this year. I'd be really surprised if we're not. From a pricing perspective, I think global pricing next year will end up being somewhere around that 1% on a true global net basis. So probably pretty similar, frankly, to what it what it was this year, which leads me to believe we'll probably be somewhere in that four to 5% range next year. I do think this quarter, which was five, was probably a little bit better representation of where the market is. So I say four to five, but honestly, I think it'll be closer to five next year. Jonathan Block: Okay. Fair enough. And then just to shift gears, like, you know, I think like a different approach in terms of going to CDI numbers for for you guys. Rather than from, like, a product standpoint to a geography standpoint. I mean, APAC, falling around 0% for fiscal twenty five. It was up gosh, 7% in '24. And then at some point, this thing was growing 13, 14% in prior years. So for fiscal twenty six, is it you know, sort of like a more of the same argument in America's and EMEA for the most part, but we just see that APAC claw back a little bit closer to mid single digits. You know, function of my day, but also a function of getting some of these quasi one timers be behind you. Just looking for any direction from a geographic perspective. Al White: Yeah. I think you're right, John. At the end of the day, you know, we had some struggles in Asia Pac this year. It was heavily focused on the pure play ecommerce channel. That's where we lost, share. I mentioned that, China was down 28% in Q4. As you remember, it was down kind of mid-20s in Q1 and Q3. So our China business is quite a bit smaller this year than it was the year before. And, again, heavily focused on low margin That's the reason that you've seen our revenues come down and be a little bit softer, but you haven't seen the impact on our profit. Now we clear do clearly do not chase revenues at all cost. We would never do that, and that's a great example of where we don't do it. We don't we're not chasing the market where we're seeing some participants with super aggressive pricing out there. We're maintaining fiscal responsibility and and sensibility around how we operate. What I will say is as we move into fiscal twenty six, is these markets like China and the pure play ecommerce and some other markets have become a much smaller percent of our overall business. So we're not gonna see the same detriment in '26 that we saw in '25. Operator: Our next question comes from Robbie Marcus from JPMorgan. Please go ahead. Lily: Hi. This is Lily on for Robbie. Thanks so much for taking the question. The guide is a bit more back end loaded from a revenue growth perspective. So what gives the confidence in growth stepping up over the course of the year? And what are some of the variables across vision and surgical that we should think about as improving over 2026? Al White: Sure. Thanks, Lily. It's a little bit back end loaded, but it's not that much back end loaded. I mean, we intentionally did not get overly aggressive on Q3 and Q4 so that we wouldn't have a situation where it was heavily back end loaded. Even though, frankly, I'm pretty optimistic we're gonna have a strong Q3 and Q4 given where '4. As I mentioned, a number of those are in The US and in and in Europe. So, a number of people on the phone will start seeing some of those as we get into 2026. So I'm excited about what going on with MyDay and the progress that we're making, and that's gonna be one of your biggest drivers. It's gonna push forward the CooperVision business. When it comes to CooperSurgical, we're forecasting a relatively similar year next year to this year. And that includes kind of being conservative on fertility. I mean, I'm optimistic fertility picks up. And we certainly have easier comps that we're gonna against that's gonna help us a little bit. But we wanna stay a little conservative on fertility also and consumer spending. When I think about CooperSurgical, remember that we launched the single hand inserter for PARAGARD. At the beginning of last year, so we had a really strong Q1. That's the reason that we're guiding a little bit softer here. For Q1. Having said that, Paragard just had a really strong Q4 and finish to the year, so we'll see how that plays out because frankly, guidance for CooperSurgical assumes flat to low single digit growth in PARAGARD, and we did quite a bit better than that this year. Lily: Great. That's helpful. And then just as a follow-up, I was hoping you could talk a bit more about the improved free cash flow outlook What's driving that increase relative to the prior guide? Is any of that step up coming from decreased investment in SG and A or R and D? Thanks so much. Al White: Sure. Yes. The way to think about free cash flow is it is not back end loaded. It's just consistent performance, consistent execution. And we'll step up nicely this year by continuing to do exactly what we've been doing. I mean, we just posted the $150 million in Q4, which was strong, and we're gonna continue to post strong quarters here by delivering earnings growth, by doing some of the working capital management that Brian mentioned, And then as we move into next year, you're gonna see CooperVision's CapEx come down. Our our maintenance and growth CapEx is about 5% of revenues. It's somewhere in that range. Right? And we've been running up for single digits. So you're gonna see that come down as we make final payments on our MyDaylines this year. And then we're also completing a some relatively significant business activity. And the last thing we really have this year is our new CooperVision R&D facility going up. So as those roll off and you continue to see profits grow, 2027 is gonna be a a nice free cash flow year. And then I think it's just more consistency the next year. So we're saying over $2.2 billion now. Frankly, we feel pretty good about that number, the over on the $2.2 billion side of it. Operator: Our next question comes from Jason Bednar from Piper Sandler. Please go ahead. Jason Bednar: Hey. Good afternoon, guys. Wanted to start first with I think I heard you right, there aren't any repurchases assumed in earnings guidance for fiscal twenty six. But I thought you referenced in the supplementary PR today that you're allocating free cash entirely to to repurchase this. So just how to reconcile that? Is that just conservatism, or did do I have something incorrect there? Al White: Yeah. So we we spent about two-thirds of our cash flow this past year on share repurchases. And we're targeting spending about two-thirds of our free cash flow on share repurchases in twenty six. That will be EPS accretive. We did not include that in the guidance. Range. Jason Bednar: Okay. Alright. Got it. And then as as a follow-up, you know, Al, good to see the TSR addition to the comp plans. I think a lot of us will be happy to see that. I I did wanna ask just if you could discuss how you landed on Colleen as the next chairman for the business. I know it's maybe a bit of a hot button issue right now just given of the items out there in the public domain. But if you could just discuss, you know, why would that was the right move for the board in the context of other options, whether currently on the board or not on the board? Thank you. Al White: Sure. We've been having conversations over the last year with Bob. You know, and and and driven by Bob. I mean, Bob's a great guy. Right? He has a ton of value. But he's gotten to the point where he's saying, hey. I wanna go into full retirement. And if it's that time for me. So we were talking about it in the context of transitioning the chair leadership over and how that should happen and when that should happen, and this was the right time to do that. Colleen has been with us for a number of years. She's fantastic. She's super smart. She was a top executive over at Proctor and Gamble. She's got global experience. She's got branding experience. She brings a lot to the table, and she just does a really nice job. She's And and she as I said, she adds a lot of value. Across the board, which is great. She was the one who probably six months ago brought up the TSR and said, hey. We need to roll the TSR into here and look at shareholder returns make sure we're aligning executive comp even closer to the stocks performance. And she brought that together with our consultants and so forth and put a plan together. And and, yeah, as I mentioned, we're gonna be rolling that in. So I think she's the perfect perfect person to step in as the chair. And Bob's got Bob's plan is continue to work with her and transition transition the role over to her to ensure it's just it's a really smooth process. Operator: Our next question comes from Travis Steed from Bank of America. Please go ahead. Travis Steed: Hey, everybody. I just curious on with the strategic review, your willingness to take short term dilution to create longer term value and how you kind of balance this short term for the long term? And and and also how you think about consolidation in the contact lens space. So there's essential synergies there and antitrust risk with with actions like that. Al White: Well, I think that I mean, you're always gonna have some of those questions around short term investments and short term activity and the impact on the long term. Be it across the board, right, product launches or product development or or any number of of moves that you can potentially make. So I think the important thing is what we set, which is, hey, we've done it. We've done some work on a strategic strategic review here, and people have asked the question about what does that mean. And what actions can you take and so forth. And what I what I wanted be clear about and that we issued the press release is is we've done a bunch of work on that. We're rolling up our sleeves to do more work on that, and we're and we're taking a serious look at all the different alternatives that are out there. Be it, a number of things, frankly, that we in that press release. So I'm not gonna go into all the details behind that other than to say, are rolling up our sleeves. We're working with our advisers. We're looking at the alternatives that are out there, and we wanna ensure that we're driving long term shareholder value. Nice, that's our heavy, heavy focus. Travis Steed: Alright. That's fair. And then gross margin's down in 26. Just trying to understand exactly how you're getting operating margin leverage. Is SG and A not growing on 26? And how much are you going to be cutting in the business? Al White: Well, sure. I mean, I think when you look at it, you can just plug the numbers in and you can see that OpEx itself or SG and A, if you will, is not going to grow very much. Because that's where we're set right now. So this is not additional cuts. This isn't like we need to go do things. We had this reorg activity planned out a while ago, and we completed it aggressively. And I think the team here did a fantastic job doing it aggressively and getting it done. And you can see that in the SG and A or in the OpEx, if you will, in our Q4 as reported results. And you should assume to continue to see that level of excellence in terms of of spending supporting the top line and driving leverage on a go forward basis. Operator: Question comes from Matt Miksic from Barclays. Please go ahead. Matt Miksic: Hey. Thanks so much for taking the questions. So one follow-up on on an earlier question. Around your your sort of intention expectation of gaining share here in the fourth calendar quarter? Maybe just talk about you know, where you see the the the various business lines inflect, anus, and vision, obviously. You know, just just some color as to which catalyst do you think are kinda lifting off a little bit in the last you know, month or so of of the year? And then I have one follow-up. Al White: Sure, Matt. That's a really good question. You'll remember last year in Q4, we did not have a particularly good quarter. We had some competitors launching product and and they had a lot of activity going on and it was it was one of the weaker quarters that we've had with respect to the market in in a long time. So we are comping against that, and we are in a significantly better position in this calendar Q4 than we were in last calendar Q4. So what it comes down to is just weakness last year and strength this year, and a lot of that ties right to the topics we've been discussing starting with my day. So I do think we have an excellent opportunity to hear closest calendar year strong. And when you compare that to last year's weakness, it should be a pretty good number. I'm well, I said it in the call. Like, we're seventeen straight years of market share gains, and we have not given up on making that eighteen. So we'll see how things close out. That's great. And then the follow-up question Matt Miksic: earlier on this as well, the sort of separation. You've talked about it. You've answered how you feel about it and creating shareholder value. You know, given that it's been sort of feels like it you know, these reporting lines and operating wise, feels like it has been know, running separately or independently in many ways. And you know, some might say ready. To to separate for some time. You know? What if if that's the case, if you looked at this before, you know, what is changing now you know, given given sort of the new board involvement and new investor involvement? That you think could could could make could make this possible now from a to the tax Al White: basis? Is it a get the restructuring done, and it's a a tuned up you know, upgraded, you know, portfolio that that we think will get more interest What what would you say? Thanks. Well, I think that I mean, if you talk about a separation, it is a it is a negative in that it'll create dis synergies. It is a negative from a tax perspective. Having said that, you've seen a number number of companies, whether it's in the med device space or med tech more broadly or or even just more broadly just saying companies who have looked at their portfolios who have different different businesses within the within their under their umbrella, so to speak. And they've looked at different ways to say, hey. I wanna try to unlock value. I'm I'm gonna spin off my diabetes business, or I'm gonna spin this off. I'm gonna spin that off. Or I'm gonna look at different strategic alternatives. I think that's good hygiene. I think that's important to do, and and now is an appropriate time for us to do that. We made a ton of progress at CooperVision to position ourselves here to really get growing again and taking market share, and we made a ton of progress in CooperSurgical with our fertility business and and we're gonna do great in fertility. So I think when you look at the businesses right now, it's just fair to ask the question, which is, are there are there strategic moves that we can make that unlock shareholder value? And that's one of them. And I think it's important for us to roll up our sleeves and evaluate that, and that's we're committed to do. Operator: Our next question comes from David Saxon from Needham and Company. Please go ahead. David Saxon: Yes. Great. Thanks for taking my questions, and good afternoon. Maybe I'll start with CSI just on PARAGARD. Al, I think you said flat to up low single digits for fiscal 'twenty six. It looks like the competitive IUD is going to launch in the '26. Is there anything embedded in that ParaGuard expat expectation as it relates to that launch? And then you know, when you first acquired it, you talked about the margin profile really strong. Has there been any meaningful change to that margin profile? Then I'll have one follow-up. Sure, David. A couple of things. Al White: Yeah. There is the competitor product that was approved. I have no idea if it's gonna launch or when it's gonna launch or anything else about it. We did factor in some conservatism, if you will, into that into the my guidance of kinda flat to up a couple percent, assuming that there is a competitive launch. Now I'm forgetting off the top of my head, Brian. Probably know. I think Paragard grew 7% this year. So I'm optimistic we'll have another good year. But, yes, we did factor in a little conservatism around the potential for a competitor launch. I will say the margins have come down a little bit because of the single handed sorter launch, that activity. Nothing that I would classify as material. But, yeah, the gross margins are a little bit lower on that product. David Saxon: Okay. Great. Thanks for that. And then just on CVI, so the Asia Pac ecommerce dynamics, I mean, sounds like we'll lap that in the fiscal first quarter. But any residual impact from like the distributor channel inventory dynamic you talked about a couple of quarters ago or the private label conversion from Clarity to MyDay. Just how we should think about those moving pieces, as it relates to fiscal twenty six. Thanks so much. Al White: Yeah. As we think about that from from an Asia Pac perspective, I think you're still gonna have a little bit of that noise frankly in Q1. And we factored that into the guidance. Right? We did 3.2 globally and we factored in three and a to four and a half as a company. And we factored in continuing weakness in Asia Pac in Q1. So whether we see that or not or how much that changes, like, we'll see, and we'll play that out. But you could see some of that, I think, as you continue to transition. Operator: Our next question comes from Young Lee from Jefferies. Please go ahead. All right, great. Thanks for taking the question. Young Lee: I guess to start, maybe a question about the the pipeline. You know, I did hear that you're launching some new products that can contribute to growth. But, you know, some of your competitors have been talking more and more about next generation contact lenses and materials. I was wondering if you can comment sort of where you are with your program. Al White: Sure. We have some great stuff going on in R&D. Couple of things that I'm not gonna get into, but that I'm super excited about. We have some launches going on right now that I talked about. You know, we have some stuff like MyDay, MySite. I mean, that that is it that is, like, market leading innovation. First of all, we're the only contact lens company with an FDA approved product for myopia control in my site. And now we're launching MiSight on a silicone hydrogel platform with one of the leading brands out there in my day. I mean, you can't get much more exciting innovative than that, and that's coming here in Q2. And we've got some other really cool innovation and stuff, including some material work and so forth that we're doing internally. So I'm not gonna start touting that right now. It's not the time to do that. But suffice it to say, we have some have some good exciting stuff going on ourselves, and we have some some product launch activity that's pretty exciting right in front of us. Young Lee: Okay. Great. Thanks for that. So I guess the follow-up question is just on the fertility business. Can you maybe go a little bit more into detail on the assumptions for growth year, you know, talking about the geographic variances between U. S. And the impact from consumer Al White: Sure. Yeah. I mean, at the end of the day, it's going to be interesting to see what happens with fertility. I happen to believe that fertility by the end of the year will end up growing mid single digits. I think we'll grow a little bit faster than that. I think some of that's gonna come because of the easier comps. Some of that's gonna become because consumers just levels off in Asia Pac where it's been weaker. Some of that's gonna come because you have some some pretty cool technology upgrades that are working their way through the system right now, including by us. And you're gonna see some fertility clinics upgrading. Having said that, that is not what we factored into our guidance for this year. We factored in a more conservative expectation around fertility because I just don't wanna get ahead of ourselves there. So, when we look at it from a guidance perspective, kinda market more in the low single digits and us growing more in the mid single digits. Operator: Our next question comes from Nathan Cai from BNP Paribas. Please go ahead. Nathan Cai: Hi, thanks for taking my questions. On the MyDay can you discuss the revenue contribution of the MyDay product label contract? In APAC throughout 2026 and 2027. And then on fertility could you provide more details on the recently improving cycles you have called out and any changes in competitive landscape between you, VitroLife, and NexBring? And I don't if you can give some details on the new technologies. The clinics are interested in. Thank you. Al White: Sure. A number of things there. I'll answer your last one first because some of the new technology you may have just seen or if anyone follows it at ASRM, is the big Fertility Conference Here In The US. We just launched three new genomics tests, that are being received incredibly well. And we have some other technology advancements that we're going to be launching this year. Within our genomic space and also within our capital space. And then we've got some super exciting stuff that we're working on in in our R&D side, that I'm excited to get out in the coming years. I I'm gonna step back to the my day momentum. You know, I talked about that last quarter and that we were winning contracts, and we've been executing on those contracts. A lot of that was tied to Asia Pac. As I mentioned, we're now seeing contract wins in EMEA and in the in The US. And you're gonna see that momentum build as we move into Q3 and Q4. So that's a process that's gonna happen. That's why I talk about the stair step improvements. Because we have to manufacture the product, have to label it and package it. We have to get it over into the hands of of the retailer, the key account, whomever it is, selling that product, and we have to get it launched. So it it does take a little bit of time. We clearly took a step forward here in Q4, and we're going to take a step forward again. And then we're gonna take another step forward as we execute on those contracts. This is not the first time we've done it. I've seen this many times over the years here. At CooperVision, and it's gonna happen again this time. So I won't give you specific numbers on that, but I will just say that as you win those contracts and as you execute on those contracts, just over the quarters, you start picking up energy on that. You and we see that momentum right now. Picking up from a fitting activity, and that's that's the key. The first step is get product in people's hands, get the fitting activity increasing and so forth, then it transitions It transfers over to the sales, and and you see that momentum building. And that's what we're seeing, and that's what I'm referencing. So I won't give you specific numbers on that, but, hopefully, that gives you enough color to kinda to get comfortable with it. Nathan Cai: Thank you. That's helpful. Operator: Our next question comes from Joanne Wuensch from Citi. Please go ahead. Anthony Petrone: This is Anthony on for Joanne. Thanks for taking the question. Could you talk about your expectations for '26? Thank you. Al White: For my side for fiscal twenty six, sure. We closed the year out well. Right? We had a good solid quarter. I think we're gonna have a good year next year. As I mentioned, you know, I think we'll do at least 25% in fiscal twenty six. There's a lot of reasons to believe that we're gonna be stronger than that, but we also have the Stellef launch that's happening here in The US. So we're we're building a little conservatism in because of that. I mean, right now, it's actually looking like it's a positive because you're just seeing so many people in the optical community talk about myopia control for children and how important it is and how it needs to be standard of care. So in my mind, there's no question that long term it's a significant positive, and it's a significant positive for my side. If I look at just fiscal twenty six, could that impact our revenues here in The US market a little bit? It could. Right? And if it does, we factored that in. That was our assumption, which is if we get negatively impacted, because it's the less in the very short term, the growth on MiSight might come down towards the the 20% range. But there's a lot of reasons to be more optimistic. I mean, MiSight's launching in Japan. That should be a great market. Not till Q2, but that's coming. MyDayMysight, as I mentioned, is that it's arguably, I'm gonna argue, the most innovative thing going on in the contact lens market, probably the most innovative thing by a wide margin. Going on in the contact lens market right now. That product launched it in Europe, we're gonna hit a few other countries in Asia as we move through the year. So there's a lot of reasons to be excited about MiSight right now. We'll see how the year plays out. Operator: Next question comes from Brett Fishman from KeyBanc Capital Markets. Please go ahead. Brett Fishman: Hey guys, thanks very much for taking the questions. Just had a couple of follow ups on some of the CVI assumptions for FY 2026. You were just talking about MiSight but maybe just drilling into the Japan launch. I think you mentioned today is planned for two q. I was hoping you can maybe just touch on how you're thinking about the longer term opportunity in that region. And then just, you know, coming back specifically to what's expected in the FY '26 guide. As a result of that launch. Al White: Sure. Well, let me just be clear because the launch is for MiSight in Japan. We have we obviously have MyDay there now, although to be fair, it's pretty new, and a lot of the contracts are pretty new. So let me just bifurcate that quickly. Right? Because I think that my site itself going in Japan for the very first time should be very successful. That's an ophthalmologist market. A product like that that relies on clinical data And that's the key when it comes to MiSight. I Mean, There's Other Things You Could Do, But MiSight Is The Only Lens With This Really Strong Clinical Data. That'll Go Over Really Well In A Country Like Japan. So although it's a Q2 launch, it'll gain traction as we move through the year, and I would envision that's gonna be a really successful product towards the '26 and into '27. If I think about Japan on a broader basis, we just didn't have the amount of MyDay capacity that we wanted there. We weren't able to do a number of the private label contracts and so forth that we wanted to because, we didn't have product. As you as you remember, Brett, right, we we stopped being capacity constrained over the summer. Were able to aggressively go into all of Asia Pac, including Japan, and start winning the private label contracts. We've won a number of those. We're executing on those now. So the assumption is not anything Herculean. It's just that we execute under the contracts that we have. And, continue to get the product into the marketplace. So relatively straightforward stuff. And that's one of the reasons that we put guidance three and a half to four and a half in Q1. We did a three two this past quarter. Not saying that we're gonna get a hockey stick immediate ramp up. We're just saying we're gonna continue to get consistent solid improving performance. Brett Fishman: Alright. Thank you for that color, and apologies if I misspoke. I meant to say my side. And then just circling back one other question. You know, you've talked about some of the distributor channel inventory dynamics in The Americas. And was hoping you could just update whether that had any impact on 4Q either negative or if there was some positive reversion. And then if you're still assuming a relatively neutral impact there for FY '26, Thank you. Al White: Sure. Yeah. There was really nothing there. At the end of the day, from an inventory perspective, there's I didn't raise it because there was nothing to talk about. Operator: Our next question comes from David Roman from Goldman Sachs. Please go ahead. David Roman: Thank you. I'll I'll just ask two questions here quickly. Upfront. One is, can you give us just a little bit more detail on the nature of some of the reorganization efforts that you've undertaken here? And then what are some of the actions you're taking to ensure retention? You know, sometimes with these restructurings, they're unintended consequences of losing the right people you need to execute. The business on a go forward basis. What are you putting in place to ensure you have the right people to achieve the forward strategic objectives? Al White: Yeah, David. Good question. On the reorg, it was pretty much across the board. With a heavy focus on kind of back office support. So we did look at all of our areas. CooperSurgical, a little bit more so because we had some integration related work and some Salesforce consolidation there. But there was a lot of leverage opportunity in our support function areas because of all the IT upgrades that we've done. And, frankly, you hear people talk about AI all the time. Well, it is real. And, you know, when we looked at at the AI that that we've deployed and our opportunities to leverage it, there were some good opportunities there. When I look at retention details, I mean, we have fantastic people here. We have great teams of people who are here. And the one thing that we're pushing on our organization right now is that we want everyone to embrace AI. Continue to embrace it. Continue to learn it. Make AI your friend, so to speak. I mean, because we made the moves that we needed to make in Q4, and our teams know that. And right now, it's about staying focused on executing, leveraging our growth, making all the appropriate moves. But one of the things that we wanna make sure we do here, we always try to do, is first and foremost, we promote from within. And that's just the key point. I mean, if I gave you the stats, you would be amazed. At how many promotions we have from within, and we're gonna continue to do that. We train our people, and we want our people promoted from within. We want everybody here being successful, making more money, and get ahead because we're a growing organization. We just need to do it intelligently so that we can really truly leverage this revenue growth on a go forward basis. And the company right now is so much more efficient than it was and less bureaucratic that, we're in a great spot right now to just do our jobs and execute. Operator: Our next question comes from Anthony Petrone from Mizuho Group. Please go ahead. Anthony Petrone: Thanks. And maybe one on CV, I want to strategic review. So on CVI, maybe a little bit on the private label business. How that trended in the fiscal year? Were there bigger opportunities out there that yeah, the gains or loss, how is that gonna set up for '26 as well just thinking in the private label trend? And then on on strategic, maybe just a recap on historically, what are the synergies of having CSI and CVI under one umbrella And then over the years, have you have you noticed any dis synergies? In other words, you know, has has capital allocation between those two businesses, is that you know, been an issue that could be resolved if if they were two separate entities? Thanks again. Al White: Sure. On the private label trends, I would say I would probably point to the new private label contracts that we've won in The US and in Europe. There's some exciting stuff there. I'm not gonna go too far into it, but you'll see some of it because it'll be hitting and and making itself public in that in maybe even January, but February, March time frame. So I think that's gonna set us up well for, again, for Q3 and Q4 this year. To be good quarters for us. So I I I like the I like the momentum that we have in Asia Pac in some different areas. I'm probably equally excited about some of the newer contracts that we've won and that we'll be rolling out. On the strategic synergies, I would say from a capital perspective, we have always invested in CooperVision first and foremost. That's our main driver. We put our dollars there. You've seen that over the years in terms of new manufacturing lines and distribution center upgrades and IT upgrades and so forth. We've also done a number of deals, as you know, at CooperSurgical as we built that out. But the last one we we did was over a year ago. We did a little tuck in, in August the last year. So it's been a little while there. We've got a great business there. Right? Holly has pulled everything together and has a really much more efficient business today than it was a year or so ago. And and we've been because of that, we've been able to do that work and reallocate our capital, if you will, to share repurchases, and we're gonna continue to focus in that area. So I would say that that there's been no negative at all from a capital allocation perspective. The synergies that we have are back off synergies largely. And I talked about that and how we're just doing all that stuff more intelligently, but it's still back office type synergies. Those businesses still, to a great degree, run separately. Operator: That concludes the question and answer session. We'd now like to turn the call back over to Al White closing remarks. Al White: Great. Thank you, operator, and thank you, everyone. As you could tell, we had an incredible amount of work that was completed in this last quarter. And I'm excited that we were able to get on the phone with everyone today and go through those details and present it. And look forward to speaking with everyone over the the coming weeks. Thank you. Thank you for your time. Operator: This concludes today's conference call. May now disconnect.
Operator: Greetings, and welcome to Torrid Holdings Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Chinwe Abaelu, Chief Accounting Officer and Senior Vice President. Thank you. You may begin. Chinwe Abaelu: Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the third quarter of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com. With me on the call today are Lisa Harper, Chief Executive Officer of Torrid; and Paula Dempsey, the Chief Financial Officer. Ashlee Wheeler, our Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, December 3, 2025. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. With that, I'll turn it over to Lisa. Lisa Harper: Thank you, Chinwe. Hello, everyone, and thank you for joining us today. I'll review our third quarter performance and provide an update on our strategic initiatives, including the enhancement of our product assortment, our commitment to the growth of our sub-brands, the expansion of opening price point strategy and execution on our store optimization plan. Then I'll turn the call over to Paula to discuss the financials. We are clearly disappointed with our overall performance this quarter. Despite some areas of strength, it was more than offset by missteps in our overall assortment mix that we are addressing head on with decisive corrective actions, and I'll discuss that shortly. For the quarter, while sales came in at the low end of our guidance, profitability was dampened by deeper promotional activity than we had planned, impacting our adjusted EBITDA. We delivered third quarter sales of $235 million and adjusted EBITDA of $9.8 million. I want to be clear, these results largely reflected execution issues that are within our control. Let me walk you through the factors that influenced our results. This quarter delivered strong performance in several key categories with denim, non-denim, dresses and intimates meeting our expectations, all generating positive comparable growth. However, this improvement was more than offset by missteps in our tops and jackets category. Tops represented approximately half of the year-over-year sales miss this quarter. Specifically, we shifted too heavily towards fashion-forward designs at the expense of our core assortments and established franchises. While innovation is important, the shift moved us too far from the functional replenishable items. Our customer feedback has been invaluable in guiding our course correction. We are successfully attracting and reactivating consumers who embrace our elevated fashion and lifestyle offerings across our sub-brands. However, our loyal long-standing customers continue to rely on us for their core ward drove essentials and their solution-oriented products and trusted fabrics with evolutionary rather than revolutionary style updates. Our denim category exemplifies the balanced approach we're implementing going forward. In Q3, we successfully integrated fashion elements while preserving our core franchise DNA, delivering mid-single-digit growth on top of last year's double-digit performance. This demonstrates our ability to innovate within our customers' expectations, and we're applying those learnings across all categories moving forward. We are taking decisive action to address these challenges with clear time lines and measurable outcomes. First, we've strengthened our merchandising foundation by implementing enhanced guardrails in our merchandising process and building a more robust assortment planning function. I'm personally overseeing both initiatives to ensure rapid execution and accountability. Secondly, we're actively addressing near-term assortment gaps. We've initiated chase orders for our key franchises, focusing on the core fabrications and silhouettes our customers expect in both knits and woven tops. These products will begin arriving in January, positioning us to see sequential improvement in knit and woven performance by the end of Q4 with accelerating momentum into Q1 2026. Looking ahead, we've completed a comprehensive review of our spring/summer 2026 buying strategy. We're rebalancing our investments to deliver the right mix across categories, fits, fabrics and end users, ensuring we meet our customers where they are while maintaining our innovative edge. These actions reflect our commitment to operational excellence and customer centricity. We have clear visibility into the path forward and confidence in our ability to return these categories to growth. Shifting to footwear. Our strategic decision to pause the footwall category in response to tariff-driven cost pressures was sound, but we underestimated the attachment rate impact. The loss of this anchor category resulted in lower overall basket sizes and transaction frequency, leading to what we estimate as an approximate $12.5 million in lost sales this quarter, of which $10 million was contemplated. The timing amplified the impact as October represents our peak boot selling season, which historically drives some of our highest attachment rates of the year. We've taken decisive action to quickly course correct. We reintroduced a carefully curated footwear assortment in mid-November and early performance has been encouraging. We've restructured our sourcing and SKU mix to mitigate tariff exposure while maintaining the category's ability to drive attachment. Based on what we're seeing, we expect to scale footwear back to historical sale levels of approximately $40 million in 2026, but importantly, an improved profitability given our more disciplined approach to the category. This positions us to recapture both the direct footwear revenue and the attachment-driven sales we lost during the temporary pause. Now turning to our strategic initiatives. We are focused on enhancing our product offering by expanding sub-brands and strategically introducing an opening price point strategy designed to increase market share through customer acquisition and increase frequency among our loyal customers. Our sub-brand strategy is working and is on track to deliver approximately $80 million in sales this year, attracting new, reactivating lapsed and increasing spend among our high-value customers. These lifestyle concepts offer unique collections that provide newness and excitement while broadening our customer base. Importantly, sub-brands create a halo effect, driving attachment rates to core categories and supporting customer reactivation through targeted community and influencer marketing. Looking ahead to 2026, we're implementing a more strategically balanced assortment architecture. Approximately 30% of our assortment offering will be opening price points, developed in close partnership with our merchandising design and product development teams to ensure we maintain our quality standards while delivering accessible value to customers. We are excited about momentum in our intimates business with 3 new bra launches planned for 2026, our first substantive bra introduction since 2019, representing significant innovation in this important category. Bras as a category drives strong customer acquisition and loyalty and engagement, and we believe there is significant runway in this business. On the marketing front, we are committed to a balanced approach with emphasis on both mid- and upper funnel awareness and acquisition as well as lower funnel conversion and retention. This includes increased digital media investment, a robust influencer strategy and several in-person activation. In 2026, you will see even greater expansion of these community and brand-building engagement efforts. Our popular model search campaign ran from September to November this year and was done through our digital channels, supporting a broader reach. We had an incredible response again this year, so much so that we selected 5 top models, one from each age demographic ranging from 18 to 50-plus, showcasing the range and relevance of our brand and community. Additionally, we have improved the value proposition of our loyalty program and our private label credit card, which drives significant expansion in customer lifetime value. We remain committed to our store optimization strategy, and I'm pleased to report we're executing exceptionally well against our plan. As consumer preferences continue to shift toward digital channels, we're proactively rightsizing our physical footprint to deploy capital more efficiently and enhance shareholder returns. Our execution remains on track. We closed 15 stores in Q3, bringing our year-to-date total to 74 stores, and we continue to expect approximately 180 closures for the full year. Importantly, we're seeing strong retention metrics aligned with our expectations that validate our approach. Customer retention from this year's closures is running in line with our expectations, demonstrating the strength of our omnichannel ecosystem, the success of our enhanced retention strategies, including multi-touch communication plans and our ability to successfully migrate customers to nearby locations and digital channels. With 95% of customers engaged in our loyalty program, we remain well positioned to effectively migrate customers to nearby stores and digital channels. The financial benefits are substantial and will accelerate as we move through this optimization. These closures are expected to contribute significant adjusted EBITDA margin benefit in 2026, while also generating significant free cash flow improvement that will provide increased flexibility for future strategic investments. Now I'll turn the call over to Paula to discuss the financials. Paula Dempsey: Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. I'll begin with a review of our third quarter financial performance and then provide our outlook for the remainder of fiscal 2025. While sales landed at the low end of our guidance, softer demand in our digital channel required higher-than-planned promotional activity, which has pressured adjusted EBITDA. At the same time, we continue to realize meaningful benefits from our store optimization initiatives, resulting in 11.5% year-over-year reduction in SG&A. We remain committed to disciplined inventory management and ended the quarter with inventory down 6.8% compared to last year. Net sales for the third quarter were $235.2 million compared to $263.8 million in the prior year. Comparable sales declined 8.3% and our tariff-related pause in the shoe category drove approximately 400 basis points to this overall decline as we temporarily scaled back while navigating elevated import costs in the category. Gross profit was $82.2 million versus $95.2 million last year. Gross margin was 34.9% compared to 36.1% in the prior year, reflecting higher promotions and deleverage on the lower sales base. SG&A expenses continue to reflect the disciplined cost structure we're building across the enterprise. SG&A was favorable by $8.6 million, resulting in $66.3 million for the quarter compared to $74.9 million a year ago. As a percentage of net sales, SG&A leveraged 30 basis points to 28.2%. This year-over-year improvement is a direct result of our multiyear transformation to structurally reduce operating expenses. Benefits from our store optimization initiatives and our focused approach to organizational prioritization are enabling us to reduce fixed costs. These gains reflect more than store closures alone. They represent a broader shift towards a more efficient, more variable cost structure designed to flex with demand, strengthen margin resilience and enhance free cash flow. As store optimization progresses, we expect further SG&A leverage and incremental liquidity benefits in fiscal '26. Marketing investment increased by $2.7 million to $15.7 million as we leaned intentionally into customer acquisition and brand visibility during the quarter. These investments support our long-term plan to strengthen top of the funnel, improve brand relevance and drive traffic. We continue to refine our marketing mix towards higher return channels with more personalized targeting and improved attribution. The timing shift of our model search event from Q2 to Q3 also drove this increase. This event continues to deliver high engagement and long-term customer loyalty. Net loss for the quarter was $6.4 million or $0.06 per share compared to a net loss of $1.2 million or $0.01 per share last year. Adjusted EBITDA was $9.8 million, representing a 4.2% margin versus $19.6 million and a 7.4% margin a year ago. We ended the quarter with $17.2 million in cash compared to $44 million last year. As of November 1, we had $14.9 million drawn on our revolving credit facility with approximately $86.2 million of remaining availability. Inventory totaled $128.8 million, down 6.8% from last year, reflecting both lower receipts and our reduced store base. Turning to store optimization, which remains a cornerstone of our multiyear transformation. During the quarter, we closed 15 stores and remain on track to close up to 180 stores in fiscal 2025. Customer retention from these closures continue to perform consistently with historical levels. The stores we're exiting are structurally unproductive and closures are aligned with natural lease expirations, minimizing exit costs. On a Q3 year-to-date basis, we have realized approximately $18 million in lower operating expenses from closing 74 stores this year and 35 total stores in the prior year, and these savings are already reflected in our performance. As we move through Q4 and complete the planned closures for fiscal '25, we expect even greater savings in fiscal '26, which will enhance our liquidity position. This initiative is both a structural realignment, reflecting where our customers increasingly choose to shop with about 70% of demand originating online and a proactive liquidity strategy designed to protect the business, strengthen our balance sheet and enhance the resilience of our operating model. Overall, we believe store optimization will deliver substantial adjusted EBITDA margin expansion in fiscal '26. We are updating our outlook for the remainder of the year to reflect third quarter performance and current trends. We now expect full year net sales in the range of $995 million to $1.002 billion and adjusted EBITDA in the range of $59 million to $62 million for the full year. Capital expenditure is expected in the range of $13 million to $15 million. In closing, we're executing a disciplined and deliberate transformation of our retail footprint. By taking advantage of natural lease expirations to rightsize our store fleet, we're structurally improving our cost base and strengthening the long-term health of the business. The combination of lower fixed costs, enhanced digital capabilities and a more productive store base is expected to drive sustainable margin expansion and generate meaningful incremental liquidity as we move into fiscal 2026. Now we will open the call to your questions. Operator? Operator: [Operator Instructions] Our first question comes from Janine Stichter with BTIG. Janine Hoffman Stichter: Could you elaborate a bit on some of the product missteps that you talked about? What cues are you getting from the consumer to tell you that this is where the challenge is and this is what needs to be fixed? And then you talked about the promotions being higher on the digital channel. Maybe elaborate on why that is or why you think that is and what you saw in the stores during the period. Lisa Harper: Thanks, Janine. It's Lisa. The merchandising missteps were very focused on tops, as we mentioned. So tops were about half of the total revenue miss for the quarter. Shoes were about 40% and then jackets because of their seasonal importance were about 10% for the quarter. So it's pretty -- we've talked through the shoe situation, which is a pause based on the tariffs. We've reintroduced shoes and boots recently are having a great response to them. We'll continue to build that business back up and recapture that revenue as we move into 2026. But for the quarter, the biggest miss and the biggest action was really focused around the tops category. What I would say from a merchandising miss perspective was the advocation of a couple of our core fabrications and core kind of entry point solution-based products for the customer. And so we've been able to chase that product very quickly. It's longer tops, more tunics, brushed waffles, super soft knits and Sally in the woven category. So it's very focused on a few fabrications, very focused on a few end uses. And because we are able to platform that fabric, we're being -- we're back into some of those businesses in the fifth week of December and throughout January and February in terms of receipts. So we expect to see improvement in those categories as we move into early first quarter as we'll have, I think, chased the bulk of what we feel is missing in the assortment right now. So what we've done to avoid that in the future is really enhance, although we have pretty substantive guardrails to this, this was a merchandising this was obviously very disappointing and frustrating for the organization for the quarter. And so we put enhanced guardrails around the process. We've put in a robust assortment planning, multifunctional approach to the categories, particularly. And we are just increasing oversight, and I'm involved in every step of that. I would say that as an organization, they were able to effectively kind of innovate and balance product assortments in all areas except for tops. So I would say that -- I would -- all areas except for tops and jackets. The benefits of that innovation and expansion to the core product is present in denim, non-denim dresses and intimates. And so those areas were able to positive comp. As we mentioned in the prepared remarks, they weren't able to offset the detriment of the tops miss. So if you think about the total miss for the quarter, I'll restate it, it's about 50% tops, about 40% shoes and related transactions with shoes and then about 10% in jackets for the quarter. And I'll turn it over to Ashlee to answer the promotional conversation. Ashlee Wheeler: Janine, I'd say that the accelerated promotional activity was in large part correlated to the miss in the top space. So as Lisa noted, in the absence of some of those core franchises, entry price point solution-based items and a swing into more highly novel or more fashion-oriented assortment. It put a little more pressure on promotional activity, AUR, for example, in the absence of those entry price point categories. That said, I think we've done a really nice job making sure that we're coming out of the season clean. So there are no inventory issues to speak of related to some of these missteps in assortment. Janine Hoffman Stichter: Perfect. And then maybe just one more for me. The full year guidance implies, I think, a mid-teens revenue decline in Q4. Anything you can share about where you're tracking quarter-to-date versus that guidance? Lisa Harper: Obviously, we are able to incorporate current performance into that guidance. We don't anticipate a recovery, substantive recovery in either tops or shoes for the balance of this quarter. We'll start to see some improvement in tops in first quarter. We'll still be -- have a drag in shoes as we go through the fourth quarter and the first half of next year. So contemplate -- all of that is contemplated into that guidance. Operator: Our next question comes from Brooke Roach with Goldman Sachs. Brooke Roach: Lisa, for a couple of years now, the balance of fashion versus basics and opening price point versus stretched product has been something that the business has been chasing. What's changing in the processes to ensure that you have both those opening price points and balance items in your assortment and planning architectures? And other than oversight, how do we ensure that this is something that's more systematic on a go-forward basis as we look into 2026 and beyond? Lisa Harper: Thanks, Brooke. I just called you by your last, I apologize. Thanks, Brooke. So I would say that the issue -- the overall issue and opportunity in this business was -- is about innovation and remaining relevant and commercial. That is balanced against the need of the customer and the request of the customer -- the focus of the customer on price point. And so as we go into first quarter of next year, we will be in terms of opening price point, close to 30% of sales and assortment associated with those categories of businesses that service our customer in terms of core products, solution-oriented, high quality at a price that she has shown us that she reacts to and values. That is built into the architecture, the assortment architecture as we move forward. It is something that we are -- have embedded in that process. Both sides of this are important. First of all, we have to move forward and remain relevant. I think that we've been able to do that with sub-brands. We've been able to do that in the categories that I mentioned before, denim, non-denim dresses and intimates. And the miss really is in the tops area, which had advocated and exited through merchandising direction to many of the core programs. Those core programs are bought and will be -- already have been planned to receive as we get into January receipts going into 2026 sales, and it's part of the assortment architecture. So the need for the business to move forward and innovate with product was important as our customer feedback had been that -- our styling was not keeping up with their demand. We've balanced that, I think, in every area, except for the misstep in tops, where we will be going into first quarter with a much stronger opening price point strategy across the board, but primarily the highest level of opening price point will be in tops as we move forward. It's built into the assortment architecture of the business. I don't know, Ashlee, do you want to add anything? Ashlee Wheeler: Brooke, I might add, if we take a look at the categories where we executed well in the third quarter, so denim as a proxy is a place where we stayed committed to the franchises that the customer knows us for, the Bombshell franchise, for example. We stayed very committed, but we expanded upon that, gave her more innovation through leg shape, wash treatment, finish. And that system has worked very, very well. It's worked well for us in dresses where we've stayed committed to end use covering every aspect of her life and been very focused on multi-end use, it's worked well. Tops where we misstepped in the third quarter, we did not do that, and we walked away from very critical end use and solutions. We have to get back and stay focused on the same balance that we applied in denim and in dresses to our tops category, which is the largest category of the business. Brooke Roach: That's really helpful. As a follow-up, have you seen any larger or outsized shifts in engagement among any specific income demographic or age cohort of your consumer? Maybe said another way, are you seeing any changes in the demographic makeup of your businesses which customers are engaging with you the best? Lisa Harper: In terms of customer demographics or income cohorts, performance has stayed consistent across all of those. What we observed in the third quarter, very different from previous quarters is our most loyal, our most engaged customers pulled back, and we saw that come through reduced frequency and fewer purchases in the tops departments in particular. Operator: Our next question comes from Corey Tarlowe with Jefferies. Corey Tarlowe: Leslie, can we just talk a little bit about the sub-brand momentum and any updates there as that's continued to build in the assortment and how you think about this quarter's results may alter or change the approach in the sub-brand strategy? Lisa Harper: Thanks, Corey. No change in the sub-brand strategy. I think that we have a clear winner in the [indiscernible] brand and think that, that will expand. Nightfall and retro are continuing to perform very, very well. Belle Isle is more -- we've identified it more as a first half brand than a back half brand. And so we'll be adjusting kind of the sales momentum associated with Belle Isle to be probably more 60% first half, 40% back half. And then we've introduced Tru in our active business, which we're very happy with the results there. And Lovesick is still kind of, I would say, in test mode. We don't have a lot of revenue associated with that as we move into next year as we're able to refine that assortment moving forward. I think in general, very, very pleased with the sub-brand momentum and expect it to continue to grow dramatically as we go into 2026. Corey Tarlowe: Great. That's really helpful. And then just a follow-up. Can we talk about the leverage profile and how that changes with all the store closures and what the perhaps new leverage profile might be as we think about easier lapse in 2026 and what that could mean from a margin perspective? Paula Dempsey: Corey, this is Paula. So as we think about 2026 with the store closures, what's going to happen is our profile will be more flexible from an expenses standpoint. So of course, less fixed expenses, and we'll have the ability to be more dynamic from that standpoint. I think from a gross margin, the profile may be staying closely the same to where that total enterprise is today. But what you're going to see is a substantial EBITDA margin expansion in 2026 with the store closures. So currently, we are seeing the store closure optimization work really well. We have delivered over $18 million of cost reductions this year alone. We expect that number to be much greater mid 2026 when we annualize 180 stores. And so that will also strengthen our liquidity substantially for 2026. Operator: Our next question comes from Alex Straton with Morgan Stanley. Alexandra Straton: Maybe for Paula, I think you said you expect significant EBITDA margin expansion next year. I'm not sure if I heard that right. But if so, can you just elaborate more on that and what type of level is in reach? And then just on -- as a follow-up to the sales guidance for the fourth quarter, worse pressure than the third quarter is what's implied. So is that reflecting what you've seen quarter-to-date? And what areas is that are getting worse from a quarter-over-quarter perspective? Paula Dempsey: So going to Q4 guidance, we are all in for Q4 guidance. So what you're seeing is essentially accounting for what Lisa had mentioned before, the miss in tops along with shoes. There is also a seasonality impact in our business typically in Q4. So it goes along with that seasonality impact. As we moved into fiscal '26 with store closures and EBITDA margin growth, what you're going to see there is, if you recall, a lot of these stores that we're closing, actually, most of them are very highly unproductive stores. So by closing them, we're essentially giving money back to the business through reductions in many items in the P&L, right? So such as store payroll or store occupancy, et cetera, et cetera, et cetera. So we're going to see a greater amount of savings from that standpoint. And just to touch base again, we're seeing retention, customer retention, sales retention from these store closures to be well aligned with our historical rates, which is a great sign for us. So everything is going really well from that standpoint. I would say as we are on track to closing up to 180 this year. And I think that's all we have from a store optimization at this point. Operator: Our next question comes from Dana Telsey with Telsey Advisory Group. Dana Telsey: As you think about the current merchandising adjustments that are being made, what are you seeing in the competitive landscape? Do you think of this more as an internal issue that Torrid needs to fix? Or is there changes in the competitive landscape and whether it's product assortment, price point or where your customer is going? Lisa Harper: Thanks, Dana. I do think there's a seasonal aspect to it. I think, obviously, a lot of this is self-inflicted driven by really advocating core products in the knit and woven top categories. I do think seasonally, there are a lot of options that other brands have extended sizes, and it's more sweat shirt-oriented, sweater oriented that are not as fit specific. We certainly didn't see this impact in the tops business in the first half of this year. So it really did accelerate as we go into third quarter. I think we have a real opportunity to build back with the opening price point strategies that we discussed and keep fabrications that our customer really values. More tunics in the mix, more kind of figure flattering solution-oriented products in the knit category and then more kind of wear-to-work and blouse business in the woven categories. But I do think that in the third quarter, there is an ability to choose tops among a broader range of retailers because just the seasonal impact of being less fit specific and more oversized. I don't -- while we -- to that end, we didn't see the degradation in any of our bottoms businesses, which are more fit specific or our dress business, which also we were able to have great representation of end uses and fit solutions. So I feel like it's isolated, very clearly isolated. I do think it could be -- could have been -- I don't have any data to really support it, but just broadly from a mindset, it could have had a larger impact because of the seasonal nature of the products in the knit and woven categories during the time. So again, quickly move to address it. When I think Ashlee mentioned earlier about our less frequency in terms of tops purchases in the third quarter, tops really are a frequency driver for us so that they don't buy denim as often or dresses as often, but they do buy tops more often. And I think that opportunity to by tops other places might have been enhanced by that timing. I do think anything that we've seen in terms of surveying with our customers, they're still very dedicated to Torrid. They're very interested in shopping at Torrid. They're still maintaining their strong relationship and our loyalty program continues to be very highly penetrated. So we have a lot of opportunity to communicate and connect with this customer and understand exactly what's missing. And as I mentioned, the one thing that continues to come up is opening price point that I would say we did have fits and starts with over the last several years, but very deeply invested and committed to based on the analysis and of our previous OPP programs and the expansion related to that. So I think we're going to be able to recapture her tops purchase in addition to maintaining the denim and dress purchase from her as we introduce -- reintroduce these core businesses at an opening price point. Did I answer the question, Dana? Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Lisa Harper for closing comments. Lisa Harper: Thank you for joining us today. We look forward to sharing the progress on the store optimization program and the remerchandising of our tops area as we join you for the fourth quarter and fiscal '25 conference call. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Good morning, everyone, and welcome to today's PVH Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note this call may be recorded. [Operator Instructions]. It is now my pleasure to turn today's program over to Sheryl Freeman, Senior Vice President of Investor Relations. Sheryl Freeman: Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. Third Quarter 2025 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer; and Zac Coughlin, Chief Financial Officer. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH's written permission. Your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH's view as of December 3, 2025, of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company's SEC filings and the safe harbor statement included in the press release that is the subject of this call. These include PVH's right to change its strategies, objectives, expectations and intentions, and the company's ability to realize anticipated benefits and savings from divestitures, restructurings and similar plans such as the actions undertaken to focus principally on its Calvin Klein and Tommy Hilfiger businesses and its current multiyear initiative to simplify its operating model and achieve cost savings. PVH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimates regarding revenue or earnings. Generally, the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP amounts are included in PVH's third quarter 2025 earnings release, which can be found on www.pvh.com, and in the company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I'm pleased to turn the conference over to Stefan Larsson. Stefan Larsson: Thank you, Sheryl, and good morning, everyone, and thank you for joining us today. I want to start by thanking our Calvin Klein, Tommy Hilfiger and PVH teams around the world for your hard work this quarter as we continue to make important progress on our multiyear journey to build Calvin and Tommy into 2 of the most desirable lifestyle brands in the world. For the third quarter, we exceeded our guidance across reported revenue, operating profit and EPS, and we delivered constant currency revenues in line with our guidance. Total revenue for the company was $2.3 billion, down less than 1% in constant currency and in line with our expectations. Third quarter direct-to-consumer revenue was also down 1% in constant currency, partially offset by 1% growth in our wholesale revenue. For the full year, we are reaffirming our constant currency revenue and operating margin outlook and narrowing our reported revenue and non-GAAP EPS outlook to the high end of our previous ranges, reflecting our confidence in our brands and execution despite the continued uneven global consumer backdrop and the impact of tariffs in North America, which Zac will share more details about. We remain disciplined in our execution of the PVH+ Plan, where we lean into the iconic global power of Calvin and Tommy, and focus on the key growth categories where each brand has the right to play to win with the consumer. We continue to expand innovation and newness across our core product franchises and amplify that in both brands with cut-through full funnel marketing that connects with culture and our target consumer. In Europe, revenues declined low single digits in constant currency. And coming into the fourth quarter in Europe, we had an unplanned start to Black Friday and the important holiday period. In the Americas in Q3, our digital channels continued to outperform, driven by strong customer engagement. And also here, the Black Friday and holiday start was on plan. And in APAC, we exceeded expectations again this quarter with strong D2C performance and a notable improvement in China. We continue to build our data and demand-driven supply chain, reflected in healthy inventory levels, which are up 3% versus last year, including the impact of tariffs. We are also investing in key growth initiatives, especially in marketing, and we have freed up over 200 basis points in SG&A efficiencies over the past 18 months. As we lean into the holiday season, I just came back from visiting 7 of our biggest markets across Europe, U.S. and Mexico. I visited over 100 Calvin and Tommy shop-in-shops, met with key partners and walked our owned and operated stores. What's clear from these visits are the underlying strength of the consumer love for our brands and the power and potential of our teams and partners. A common thread you will hear me talking a lot about today is that when we lean into the iconic strength of our brands and combine that with innovation and newness in product, marketing and the shopping experience, we win. I look forward to sharing how we did this in Q3 and how we will expand our impact quarter-by-quarter. Let me start with Calvin Klein, where we continue to build relevance and desirability by connecting Calvin's core DNA to the consumer and cultural conversation. This quarter, we again drove momentum with high-impact full funnel execution in underwear and denim, 2 of Calvin's biggest categories. Building on the strong launch of our new men's Icon Cotton Stretch product franchise, which we amplified through global mega talent, Bad Bunny. This quarter, we brought the same level of product innovation and newness to our largest and most successful women's underwear program. Together with global music superstar, Rosalia, we introduced our new Icon Cotton Modal franchise, driving double-digit growth in these styles globally. Repeating this model, we launched new campaigns with NBA star, Jalen Green, and Real Madrid footballer Trent Alexander-Arnold, driving 20% growth in Icon Cotton Stretch underwear, making our third consecutive quarter of strong growth, and growing total men's underwear mid-single digits. In denim, we continue to infuse innovation in fashion denim and make it easier for consumers to shop their favorite looks, and we delivered strong growth this quarter, continuing the momentum from Q2. Last month, global brand ambassador and K-pop mega talent, Jung Kook, launched our newest campaign featuring Calvin's iconic denim lifestyle. The campaign went viral globally, driving deeper consumer engagement in one of our most important pillars of the brand. In September, we continued to build the brand's aspirational halo through Calvin Klein runway with our Spring 2026 fashion show in Calvin's hometown of New York City. The show drove record social media engagement, earning the #1 spot among all participating brands, and Calvin alone had a 75% share of voice for the entire New York Fashion Week. As we look ahead to holiday, we're engaging the consumer with seasonal Calvin fashion essentials from social and e-commerce to our stores. In the marketplace, when we last spoke, we were just opening our Tokyo flagship in Harajuku, representing the ultimate Calvin brand expression and further strengthening our premium positioning. The opening went very well, and we have seen high-quality traffic and conversion. Next week, we'll further advance Calvin's global retail expansion with the opening of the Calvin Klein flagship store here in SoHo, New York, another iconic brand-building location and a true homecoming for the brand. We also continue to make progress as planned on the transitory operational challenges we previously discussed as we stood up the Calvin Klein global product capability in New York. The challenges created an expected headwind this quarter, but we continue to see the planned improvements in delivery timing and go-in margin we set out for spring 2026. Turning to Tommy. We continue to take Tommy's iconic DNA of classic American cool and connect it to today's consumer and culture. Every season, through our brand campaign, we invite the consumer into Tommy's aspirational world. We then lean into key growth categories and hero our best product franchises, which are both iconic and infused with newness. In the third quarter, we launched our Hilfiger Racing Club fall brand campaign with talent like Claudia Schiffer and Nicholas Hoult, which followed the success of Tommy's partnership with the global blockbuster film, F1 the Movie. Connected to the campaign, we executed high-impact full funnel activations, including global events across key cities. For the campaign, global brand ambassador, Jisoo, from Blackpink was featured by Vogue, igniting broad organic reach and engagement. This is a great example of how we convert influence into brand relevance and consumer excitement, both globally and regionally. This fall, Tommy opened its newest shop-in-shop concept at Galeries Lafayette in Paris, reflecting our multiyear elevation plan to evolve and invest in our shop-in-shops and stores. These investments bring a step change improvement in the consumer experience. And in our test store, we already see the positive impact of the elevated experience with a higher AUR sell-through. Tommy will close the year with this Hilfiger holiday campaign, reimagining iconic Tommy style for the holidays, and we are excited for Jisoo to lead the campaign. Lastly, I'm excited for the next step in our marketing execution. For spring 2026, we are taking Tommy's aspirational world to the next level, with Tommy himself inviting a strong group of global talent into his world, all wearing Tommy's powerful style icons in seasonally relevant growth categories across both men's and women's. I can't wait for you all to see it. Now let me turn to our regional performance, starting with Europe. Reported revenue increased 4%, but was down low single digits in constant currency. Wholesale was down less than 1% as positive fall order book growth was offset by lower in-season replenishment and D2C was down mid-single digits. A few factors drove this. First, after an unplanned start to the quarter and 2 consecutive quarters of D2C growth in Europe, in September, we observed a tougher backdrop with more muted activity from our European consumers. Secondly, the expected delays from the transitory Calvin global product challenges put extra strain on our European distribution center, impacting shipments for both Calvin and Tommy, which made us lose a few critical weeks of full price selling. Thirdly, we had an especially tough season for cold weather outerwear, a big fall category for both Tommy and Calvin. Importantly, we are directly addressing these factors with what's within our control. Independent of the consumer backdrop, where we have driven the most product innovation and newness for this fall in categories such as sweaters and pants for Tommy or underwear and fashion denim for Calvin, we drive positive growth. And season by season, you will see us expand iconic innovation and newness across bigger and bigger parts of the assortment. As I shared previously, we remain on plan to resolve the transitory challenges from the setup of the Calvin Klein global product capability. And for spring, we are on time from our suppliers, and we have captured the go-in margin improvements we targeted. And in cold weather outerwear, even without the delays, the full price selling window is becoming shorter as consumers every season lean more into lighter transitional outerwear that can be worn for a longer period of time. And even though our transitional outerwear across both brands performed well, and we have increased its share of total outerwear, going forward, we need to accelerate this shift even further. In regions where we have already done that, like in APAC this season, it has performed very well. As I mentioned earlier, in Europe, the holiday season and important Black Friday week is on plan. And in parallel to keeping this momentum up, we are preparing for our biggest Partner Day yet in January, where we will bring over 500 of our global partners to Amsterdam to show how we, for spring and fall 2026, are amplifying the increased innovation in product with marketing to cut through even more with the consumer. This includes the next level Tommy Lifestyle campaign, further strengthening of Europe-focused talent and increased shop-in-shop rebuilds. Next, turning to the Americas. We grew overall revenue by 2%, in line with our plan of low single-digit growth, driven by wholesale growth. In a continued choppy macro backdrop, D2C declined low single digits. Within D2C, we drove higher AURs and digital continued to outperform, delivering double-digit growth. This was supported by another quarter of double-digit traffic growth and driven by product strength and elevated mid-funnel marketing. Our team continued to lean into the next level execution of the PVH+ Plan as we work to unlock the full growth potential of both brands in the region. A great example is the denim category, where we grew across both brands and included newness in product, stronger presentation, improved fit guide and enhanced associate training. Looking ahead, we continue to build brand desirability in the region through increasing our refits of our North America retail fleet. Moving to Asia Pacific. For the second consecutive quarter, we delivered better-than-expected performance. Revenue was flat in constant currency, a sequential improvement from Q2, driven by an improvement in both D2C and wholesale with gross margin up versus last year. Importantly, D2C turned to positive growth with notable improvements in China, Japan and Australia. Highly relevant global activations across both brands, amplified by regional talent, drove continued e-commerce growth up high single digits. Driven by our hero products, Tommy delivered double-digit growth in key categories with transitional outerwear and sweaters both up approximately 20% across men's and women's. Calvin saw sequentially stronger growth in fall product, driven by the newly launched underwear programs in both men's and women's. We generated strong results during key consumer moments such as Golden Week and Chinese Valentine's Day, and we just finished Double-11, the largest consumer moment of fiscal 2025, where we drove gross merchandise revenue 15% higher than last year, and Calvin and Tommy again ranked among the top international brands on Tmall. Through strong execution, we continue to deliver sequential improvements in performance. We have increased investments in marketing to activate the full funnel and continue to expand new stores across APAC, all reflecting the importance of the region as one of our key growth drivers. In addition, both Calvin and Tommy were proud to participate as first-time exhibitors at the China International Import Expo, building on our long-standing presence and commitment to the market. Turning to our licensing business. Revenues in licensing were lower versus last year, reflecting the transition of previously announced women's North America wholesale categories. As we have shared before, our large and diversified global licensing business is a key competitive advantage. When we ourselves lean into our core categories to turn the brand-building consumer flywheel, our long-term partners bring their expertise across multiple complementary categories. Consistent with the outerwear category classification business for the U.S. wholesale channel, we recently entered into a new licensing agreement for the women's dress classification with an expected launch in spring 2027. Both categories live outside of our brand-specific lifestyle pads. Additionally, in Q3, we held a Global Licensing Summit here in New York with all our partners, where each of our brands shared their key growth strategies and where our key partners showcased how they, from those brand strategies, drive consumer engagement and growth in the categories they are the experts in. Next, a quick moment on leadership. We are excited to welcome Patricia Gabriel, who joined us last month as Chief Supply Chain Officer and Global Head of Operations. She is succeeding David Savman, who earlier this year took over the Global Brand President role for Calvin Klein. Patricia is a consumer-centric leader with a strong proven track record, and she will help further accelerate our PVH+ Plan progress. And a few weeks ago, we announced that Zac Coughlin, our Chief Financial Officer, will be departing for a new opportunity outside of our industry. I want to thank Zac for his partnership and contributions to the business and to me personally. Over the past several years, Zac has played an integral role in advancing our PVH+ Plan progress and driving important efficiencies across the company. Thank you, Zac, and we wish you all the best in your next chapter. Zac will stay with us through the end of December, and we have already begun a global search for our next CFO. In the interim, Melissa Stone will serve as our CFO. Melissa has over 2 decades of PVH financial leadership experience across accounting, controlling and FP&A, giving her a deep understanding of our global business. And I would like to thank her and our full finance leadership team for stepping up during this time. In closing, we are fully geared up to deliver the rest of the holiday season and the full year as we continue to step-by-step and season-by-season build Calvin Klein and Tommy Hilfiger into their full potential. There are only a small handful of globally iconic brands like Tommy Hilfiger and Calvin Klein, and we have 2 of them. In any consumer backdrop, we remain relentlessly focused on the levers within our control to keep leaning into our iconic brands, and through our PVH+ Plan, continue to strengthen our product, marketing and marketplace experience in a systematic and repeatable way. Everywhere we do this, combining our iconic brand strength with innovation and newness, we're already driving increasingly profitable growth with the consumer today. And with that, I'll turn the call over to Zac. Zachary Coughlin: Thanks, Stefan, and good morning. First, on a personal note, as this marks my last earnings call at PVH, I want to thank the PVH team as well as our customers and shareholders. I am truly grateful for the time that I have spent at PVH, working closely with Stefan and all our colleagues around the globe to help drive our two iconic brands forward through the execution of the PVH+ Plan. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, this quarter, we continue to make progress on our multiyear journey to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world, delivering or exceeding expectations across nearly all key financial metrics for third quarter, maintaining our strong cost discipline to offset a slightly higher-than-anticipated tariff headwind in the quarter. We delivered our overall revenue plan and a sequential improvement in operating margin despite some choppiness in the quarter and an uneven global consumer backdrop. As a result, our EPS was better than expected. Looking forward, following our third quarter results and on-plan start to holiday, we are reaffirming our full year constant currency revenue and operating margin guidance and narrowing our reported revenue and EPS guidance to the high end of the previous ranges. Importantly, we also ended the quarter with inventory up 3% compared to third quarter last year, including a 2% increase due to tariffs. This reflects a significant improvement as compared to the increase in the second quarter of 2025, as we continue to tightly manage inventories. Our inventory is fresh and current and well positioned headed into holiday, and we remain on track to land the year with inventory aligned to our sales plan, excluding tariffs. I will now discuss our third quarter results in more detail and then move on to our outlook. Revenue for the third quarter was up 2% on a reported basis and down less than 1% on a constant currency basis, in line with our guidance. Starting from a regional perspective, our EMEA business was up 4% on a reported basis and down 2% in constant currency for the quarter. As Stefan discussed, sales were on track through August, but coming into September, we saw a tougher start to the fall season. The lower trend continued through the balance of the quarter with the overall result for the quarter being sales in the direct-to-consumer business down mid-single digits in constant currency. Our wholesale business was down less than 1% in constant currency as positive fall order book growth was offset by lower-than-planned in-season replenishment. As Stefan discussed, EMEA results reflected a combination of factors, including muted consumer activity driven by a tougher backdrop in Europe, lower cold weather outerwear performance, and delays related to the transitory Calvin global product challenges. In our Americas business, revenue was up 2%, driven by mid-single-digit growth in wholesale due to the impact of Calvin Klein women's sportswear and jeans wholesale transition in-house. Excluding this impact, wholesale shipments were lower than last year as expected due to a more balanced timing of first half, second half shipments versus last year when shipments were more heavily weighted to the back half. On a normalized basis, wholesale sales, excluding the impact of licensing transitions, are planned up low single digits for the second half. Direct-to-consumer revenue in the Americas business was down low single digits. While we exited Q2 with modest sales growth in stores, the consumer backdrop in the third quarter remained choppy with store revenue down low single digits for the quarter. This was partially offset by robust performance in both our Tommy Hilfiger and Calvin Klein digital commerce businesses, which in total delivered another quarter of double-digit growth. This marked our fifth consecutive quarter of year-over-year growth, fueled by the investments we've made to elevate the online consumer experience. In our Asia Pacific business, we delivered revenue better than planned and flat on a constant currency basis, showing the strength of our Asia Pacific business and marking another quarter of sequential improvement in the region. Notably, direct-to-consumer revenue grew low single digits in constant currency in both brands with a return to growth in our retail store business and continued growth in our digital commerce business. Direct to consumer revenue also grew mid-single digits in China, driven by strength in digital commerce. Higher DTC revenue for the region was offset by lower wholesale revenue. Revenue for our Asia Pacific business was down 1% on a reported basis. In our licensing business, revenue was down 11% versus last year, primarily due to the previously mentioned transition of Calvin Klein women's sportswear and jeans in-house. Turning to our global brands. Tommy Hilfiger revenues were up 1% as reported and down 2% in constant currency. Calvin Klein revenues were up 2% as reported and flat in constant currency. The decrease in revenue on a constant currency basis in EMEA weighed more heavily on our Tommy Hilfiger business, as Stefan discussed. From an overall PVH channel perspective, our direct-to-consumer revenue was flat as reported and down 1% in constant currency. Sales in our retail stores were flat as reported and down 2% in constant currency, as modest growth in APAC was more than offset by low single-digit declines in Americas and EMEA. Sales in our owned and operated e-commerce business were up 1% as reported and flat in constant currency as strong growth in APAC and Americas was offset by a decline in EMEA. Total wholesale revenue was up 4% as reported and up 1% in constant currency, which reflects the previously mentioned transition of Calvin Klein women's sportswear and jeans in-house, partially offset by the decreases in EMEA and APAC. In the third quarter, our gross margin was 56.3%, a decrease of 210 basis points compared to last year. Progress on working through the Calvin Klein operational challenges continued, but our third quarter gross margin was lower than planned due to the unfavorable impact of timing and mix of the new higher tariffs. In third quarter, gross margin reflected approximately 110 basis points due to the unmitigated impact of tariffs. And as we have previously discussed, approximately 50 basis points of the decrease in gross margin was the impact of our North American license transitions. The remaining 50 basis point decrease was primarily due to higher promotions and the impact of Calvin Klein product shipment delays, which included a shorter full price fall selling season in Europe, as Stefan discussed. SG&A spending was down in constant currency and SG&A as a percent of revenue was lower than planned, improving 40 basis points versus last year to 47.5%, reflecting both our Growth Driver 5 Actions and a favorable impact from the timing of expenses. As we discussed last quarter, we will invest more into marketing in the second half of this year to capitalize on key consumer moments and to support our brand building cut-through campaigns amplified by mega talent. Marketing was up in third quarter versus last year, but lower than we initially planned as we decided to shift some of the spending into fourth quarter to maximize our holiday impact and build positive momentum into 2026. EBIT for the quarter was $202 million and operating margin was 8.8%. Earnings per share was $2.83, reflecting a negative impact of $0.37 related to tariffs and a positive impact of $0.14 related to exchange. Interest expense was $21 million, and our tax rate for the quarter was 25.5%. Additionally, during the quarter, we were pleased to complete our previously announced accelerated share repurchase program, reducing our share count by 2.3 million additional shares and bringing the total amount of shares purchased under the agreement to 6.9 million and bringing our year-to-date total, including open market purchases, to 7.7 million shares. And now moving on to our outlook. Starting with the fourth quarter, we are projecting revenue to be up slightly to up low single digits on a reported basis and down slightly on a constant currency basis compared to the prior year, in line with Q3 trends. Overall, for the Americas, we are planning fourth quarter revenue up mid-single digits with growth in wholesale, partially offset by low single-digit decline in DTC sales. In EMEA, we expect third quarter trends in constant currency to continue into fourth quarter. And in Asia Pacific, we expect revenue to be down slightly in constant currency. While underlying DTC trends are expected to remain positive, growth is muted by an unfavorable impact due to the timing of Lunar New Year compared to last year. We are expecting fourth quarter gross margin to decline approximately 200 basis points versus the prior year, including an unmitigated tariff impact of approximately 150 basis points, partially offset by the impact of planned mitigation actions. As we discussed last quarter, the impact of tariffs will be felt much more heavily in the fourth quarter than the third quarter as more inventory sells through at the new higher rate. We expect SG&A as a percentage of revenue to be down 50 basis points compared to last year, reflecting the increased marketing investments I spoke of earlier more than offset by our Growth Driver 5 Actions, which will continue to deliver efficiencies. Overall, we are projecting our fourth quarter operating margin to be approximately 9%, down approximately 100 basis points compared to last year. Earnings per share is expected to be in the range of $3.20 to $3.35. Our tax rate for the third quarter is estimated at approximately 22%, in line with our tax projection for the full year, and interest expense is projected to be approximately $20 million. And now moving on to the full year. We continue to operate in an uneven global consumer backdrop. As such, we are reaffirming our constant currency revenue and operating margin guidance and narrowing the range of our reported revenue and EPS guidance to the high end of the previous ranges. On the top line, we are narrowing our reported revenue outlook to up low single digits compared to increase slightly to low single digits previously. We continue to project revenue to be flat to increased slightly in constant currency. We are reaffirming our operating margin outlook of approximately 8.5% and narrowing our EPS outlook to a range of $10.85 to $11 compared to $10.75 to $11 previously. We continue to expect the tariffs currently in place to have an overall net negative impact on our earnings in 2025, including an approximately $65 million unmitigated impact to EBIT or approximately $1.05 per share compared to previous guidance of $70 million and $1.15 per share. We have begun to mitigate some of these costs through strategic actions this year and expect to fully mitigate the impact over time. But for this year, some we will need to absorb. The net impact of the tariffs and these mitigation actions are embedded within our guidance. Regionally, our revenue outlook remains unchanged for Americas and APAC. In the Americas, we are planning revenue up mid-single digits, including the positive impact of the Calvin Klein women's sportswear and jeans wholesale transition in-house. And in Asia Pacific, revenue is planned down mid-single digits in constant currency. In EMEA, we expect the lower third quarter trends to continue in the fourth quarter and, as a result, we are now planning full year revenue and constant currency to be down slightly compared to last year. We continue to expect gross margin to decrease approximately 250 basis points versus last year. On SG&A, we continue to expect expense to be lower in constant currency in 2025 compared to 2024 and our SG&A expenses as a percentage of revenue to decrease approximately 100 basis points, reflecting significant cost savings connected to our Growth Driver 5 Actions. Our interest expense projection is unchanged at approximately $80 million, and our tax rate for 2025 continues to be estimated at approximately 22%. Before we open up for questions, I just want to conclude by saying that while we are navigating a dynamic and uneven global consumer backdrop, within that, we continue to focus on taking proactive actions within our control and making progress across all dimensions of the business through execution of the PVH+ Plan, building momentum into 2026 to deliver sustainable and increasingly profitable growth for the long term. And with that, operator, we would like to open it up for questions. Operator: [Operator Instructions] Our first question comes from Bob Drbul with BTIG. Robert Drbul: Zac, best of luck, congratulations, and thanks for everything in the last few years. Zachary Coughlin: Thanks, Bob. Robert Drbul: I guess -- I was wondering, I think, Stefan, just when you look at the geographic performance of the business this quarter, can you just spend a few more minutes and just unpack a bit more sort of the dynamics that you're seeing across the Americas, across Europe and APAC and, I guess, just how you think about it a little bit more into '26? Stefan Larsson: Absolutely, Bob, and thank you for your question. You're right. Each region this quarter had its own dynamics. So starting with Europe, as I mentioned in my remarks, we started off the quarter on plan. September, we saw a more muted consumer backdrop. And then internally, we worked through our Calvin transitory challenges that was related to setting up the Calvin Klein product capability. And we worked through those as planned, but they had an effect in the quarter. So we had strain on the DC, all expected, but that cut some full price selling a few weeks. Those were the main drivers and then critically coming into the fourth quarter and the start of the holiday season. And looking at Europe now, Black Friday, Thanksgiving week is as important as it is in the U.S. as an indicator for holiday. So we had an on-plan start there. So the consumer came back for the start of the holiday. Switching to the Americas, revenue grew 2%. E-com was the big driver there. So we drew e-commerce double digits. Strong conversion, strong consumer recruitment. Americas also had an on-plan Black Friday and Thanksgiving week. Then switching into APAC. That's a really great story because we saw this quarter again that we exceeded our plan performance-wise. Notable improvements in China, Japan and Australia. And what we saw during the quarter was D2C returned to positive growth, driven by digital. Both Calvin and Tommy had very strong Double-11 activations, up 15% versus last year. And we keep seeing Calvin and Tommy at the top of the ranking in Tmall during the big weekend. So very strong execution by our APAC and China team. Zachary Coughlin: Yes. And Bob, just to add some financials to Stefan's comments, when you bring all of that together from a total PVH perspective, our third quarter operating margin ex tariffs was almost 10%. And in our guidance as well for 4Q, our operating margin is 10% ex tariffs as well. And so if you compare that to approximately 8% in the first half, the financials are also following those sequential improvements that Stefan has talked about. Operator: We'll take our next question from Jay Sole with UBS. Jay Sole: Great. Two-part question for me. First, Stefan, can you talk about marketing a little bit more and the impact you're seeing from the stepped-up spending that you've done in marketing? And then maybe, Zac, one for you. With the nice control on inventory that you're showing now, how do you think about operating cash flow for the full year? And what kind of impact on working capital do you see kind of going forward? Do you think you have to step up working capital? Or do you think the operating cash flow trend will continue into 2026? Stefan Larsson: Thanks, Jay. Starting with your marketing question, so we are very disciplined in how we approach marketing and where we put additional investments, because every season we invite the consumer into the aspirational world of Calvin and Tommy at the top of the funnel. And we do that connected to our key growth categories and increasingly connected when we expand our innovation into our key product franchises, we build the marketing around that. So in Calvin, we have done this now for a number of quarters where we lean into underwear and denim. And if you look at underwear, you will hear me talk a lot about underwear and denim in Calvin. But if you look at the world of underwear and world of denim together, it's more than 2/3 of Calvin Klein. So when we do these marketing campaigns cut-through at the top of the funnel, this season with Rosalia introducing our newest innovation in our biggest product franchise in women's, then we see a double-digit growth. And then the good news as well is looking at men's. So we had Bad Bunny introduce our innovation in our biggest product franchise in men's underwear previous quarter, in the second quarter. In the third quarter, we continued to bring that product franchise to line with NBA Star, Jalen Green, with European footballer Trent Alexander-Arnold, and we saw the 20% growth in that product franchise. And overall underwear is now up mid-single digit. And similar in denim, so worked with Jung Kook, one of the biggest, if not the biggest K-pop star in the world. And he anchored our denim lifestyle campaign. And we saw it going viral with billions of impact in social within 24 hours. And then we see it driven down to sales increase in our fashion denim. So you will see, both from a Calvin and a Tommy perspective, every season the continued innovation, because part of it is the discipline of driving the brand awareness and consideration into culture and into the front of the eye of the consumer, and then in the middle of the funnel, recruit that consumer with very strong product storytelling and then lower funnel conversion and then building the consumer base, building our target consumer base. And we are starting to build that flywheel and having some real proof points across both Calvin and Tommy. Zachary Coughlin: And Jay, on your second question, we feel great about where inventory is. We ended Q3 up 3% compared to last year, and that includes 2% impact of tariffs, so effectively flat to last year. We've also spent a lot of time on our inventory purchases over the next couple of seasons. And so we're confident that, that metric will stay a great place well into 2026. And as that translates to cash flow, we expect to have another strong free cash flow year this year. And we'll enter 2026 with a lot of cash, which we think that gives us optionality as we plan to build on the strength Stefan talked about into 2026 as well. Operator: We'll move to our next question from Michael Binetti with Evercore. Michael Binetti: Let me add my congrats to Zac on the new opportunity. I wish you the best of luck at Sirius. As you guys work through the Calvin Klein product design consolidation process, maybe talk to us a little bit about the proof points you've seen around the right path here, and any early feedback you have from wholesale partners that gives you confidence in the work you're doing? And then can you just help us think about the margin recapture opportunity from that work in the spring from the transitional issues that, Stefan, you mentioned a few times now that are on track for spring? And then just last quick one for me. Can I just ask if the weather improving in Europe now in fourth quarter to date, it sounds like, does that create an opportunity to get caught up on some of the outerwear sales that were a bit of a drag in 3Q? Stefan Larsson: Thanks, Michael. We're trying to keep track of the 3 parts of that question. Let me start on the product. The first season product capability build-out effects, the challenges that we have had to go through when we set up the global product capabilities in New York. So as you mentioned, yes, we are on track, both from on-time delivery coming into spring '26 and the margin recapture that we set out to take back. So on both fronts, we are on track, which is really good. And why we need it? Because when we ran into these initial transitory challenges for the team to learn, to get it going, I mentioned that it's painful now, but we had to do it, because in order to build premium products, differentiated product franchises with innovation, we need the global capability to do that. And now we have it for both Calvin and Tommy, so do our -- all of our best competitors in the premium space also have it. But we had to build that. And now you start to see it. Where do we start to see it, back to your question? We see it in underwear. And I was -- just yesterday and the day before, I was with the Calvin product team, David and the Calvin product team, and they took me through how they, in a very strategic way, build out new expanded product franchises around the product franchises that we already have. And then -- so think about it as the 2 big product franchises that we put innovation into, and think about it season by season, how we will expand that into new and neighboring product franchises that are hyper relevant to the customer. And then we bring that to market with the cut-through marketing and the product storytelling, and then in the marketplace. So what David and our regional leaders are doing now is -- and Lea as well on the Tommy side, working very strategic with here is how we are driving product strength, and then all the way into the shop-in-shops and our stores. And one highlight this quarter for me being out in all these key markets we have is, beyond engaging with our great team and our partners, is to seeing the new shop-in-shops coming into play. So it's a 360. And in order to drive that 360 consistently, and that will drive revenue growth that we see in both underwear and denim. And we see it in style icons and key categories in Tommy like sweaters, cable-knit franchise, very successful. But in order to build that 360, we need that strong global product capability. So yes, very promising what I see from the teams on how they are leveraging the strength now of having 2 global product capabilities. Zachary Coughlin: Yes. And I think, Michael, if we think about gross margin, I think it's actually worth looking at 3Q. We know we've got improvements ready for coming in spring '26. But if we take a look at third quarter, margin was down 210 basis points versus last year. 110 basis points of that is tariffs, 50 basis points is the women's sportswear license take-back, and then 50 basis points of headwind of those other performance drivers. As you look ahead at 4Q, the guidance here 200 basis points down. That's 150 basis points of tariffs and 50 of the women's take-back. And so really 0 other performance drivers. And I want to sort of put that in context. If we look at the first half, gross margin was down 260 basis points. 60 basis points was tariff and women's take-back, 200 basis points was those other elements of performance. And so we've gone from down 200 basis points of performance in first half to 50 in third quarter to now flat to last year in the fourth quarter. So we've talked earlier this year about that steady sequential improvement. So yes, we'll see it in spring '26. We're absolutely seeing it already this year. Stefan Larsson: Sorry. Go ahead, Michael. Michael Binetti: Just the last question. I was just wondering if the weather in Europe improving is helping at all in the fourth quarter? Stefan Larsson: Yes. So yes, clearly, and I saw it when I was traveling in Europe a few weeks ago that the weather has changed. And that's sounding like we use the farmer's almanac here, but it's, of course, helping, when it gets cold, to sell cold weather categories. But I believe the most important learning for us and what we see with the consumer is that the consumer is shopping more and more transitional products, outerwear, very prominently in outerwear as well. And we switched more into transitional outerwear and had good performance, but we see the consumer shifting even more. Operator: We'll move next to Dana Telsey with TAG Advisors. Dana Telsey: Stefan, and also Zac, you've talked a lot about -- a little bit Black Friday holiday. I'd love some more thoughts what you saw from the consumer, how does it differ, whether stores, online or wholesale? And how does what happened Black Friday globally in each of the different regions inform you for planning for '26, whether it's first quarter, first half, what you saw, product, pricing, promotionality and channel? Stefan Larsson: Thanks, Dana. Yes. So if I look at Black Friday, and I started Black Friday this year being out at 6:00 a.m., not a lot of traffic going out of New York at 6:00 a.m. on Black Friday, but shopping center almost full parking lots before 7:00 a.m. And walking around in the centers, walking around seeing the consumer, it's really exciting to see that both our brands have a consumer base of wide range in incomes, wide range in generation, but really seeing the Gen-Z consumer being out there 7:00 a.m. in the brands that they love. So always great, best day of the year to see the consumer and see what they are interested in and shopping. And then as we said, in both Europe and North America, we saw that we were on plan. And as I mentioned earlier, that week in itself has become really important, both in North America and equally important in Europe. Operator: And we'll take our next question from Matthew Boss with JPMorgan. Matthew Boss: So Stefan, maybe on the Calvin brand, beyond the operational issues and the time line that you've laid out, could you speak to the pace of underlying improvement for the brand, new customer acquisition metrics, and just performance KPIs or target opportunities you see from enhanced marketing over time at Calvin? And then, Zac, with cost savings ramping in the fourth quarter, could you walk us through any high-level puts or takes to consider for '26 operating margins relative to performance this year? Stefan Larsson: Yes. Thanks, Matt, and thanks for your question. So yes, so starting on Calvin and the brand desirability that we are building quarter-by-quarter. From a consumer recruiting perspective, you see -- in e-commerce it's the easiest to see and the first to see that we build the consumer base in e-commerce. And you see that growth in both North America and APAC. And then on the slower moving metrics, you see us moving on the strength of awareness, consideration, and then you build that consumer base. And where we see the strength is coming back to the key categories. And again, I speak a lot about underwear and denim, but those 2 worlds are, again, over 2/3 of Calvin Klein. And we see the progress both in terms of consumer acquisition, how we get that consumer to want to engage in the mid-funnel product storytelling, and we also improve that product storytelling, and then we see it in the conversion and the sales. And so you'll see us consistently build that target consumer base and then engage that base through the funnel. And then you will see us build out strength. Right now, you see it in the world of underwear and the world of denim. And in Tommy, you'll see it in key growth categories for Tommy, key categories for Tommy and key style icons. And you see that across sweaters, you see it in shirts, you see it in pants, and you see it in especially transitional outerwear out of the outerwear category. But that's how we build the relevance full funnel and then engage the consumer. And in Calvin, last quarter, one thing we did as well was that we refreshed our loyalty program so that we are getting better at taking care of that consumer that we already have. Zachary Coughlin: Yes. And Matt, thanks for the question on cost. I think middle of last year, we announced the PVH+ Value Driver 5 initiative, which was meant to drive 200 to 300 basis points of improvement in SG&A. And I think we're happy to say we've already confirmed greater than 200 basis points of that by the end of 2025. And so that will flow through into 2026, and there'll be more to come next year on that. So a lot of progress on the teams around the world around those initiatives. And for the rest of 2026, we'll have more to talk about, obviously, at the fourth quarter earnings call. Operator: Thank you. This concludes the Q&A portion of today's call. I'll now turn the call back over to Stefan Larsson for any additional or closing remarks. Stefan Larsson: Again, I just want to thank Zac for the partnership over the past 4 years. It's been a great journey. Wishing you all the best. And then I want to thank you all for joining us on this journey where we build Calvin and Tommy into their full potential. And you see us, everything we do is going to go into the strengthening of the consumer offering and driving relevance into these iconic beloved brands. So looking forward to giving you all an update in the beginning of the year. But before that, wishing everybody a great holiday. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen. Welcome to the Zumiez, Inc. Third Quarter Fiscal 2025 Earnings Conference Call. Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's conference call includes comments concerning Zumiez Inc. business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez filings with the SEC. At this time, I will turn the call over to Rick Brooks, Chief Executive Officer, Mr. Brooks? Richard Brooks: Hello, and thank you, everyone, for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with remarks about our third quarter performance and the momentum we're building as we head into the holiday season before discussing our strategic priorities. Chris will then take you through the financials and our outlook for the balance of the year. After that, we'll open the call to your questions. We're very pleased with our third quarter performance delivering top and bottom line results that were up meaningfully versus last year and exceeded our expectations. Comparable sales grew 7.6% on top of a 7.5% increase in the year ago quarter, representing our sixth consecutive quarter of positive comparable sales growth. Once again, it was our North American business fueling our performance as comps in the region accelerated to double digits, bolstering our confidence heading into the critical holiday season. After a successful back-to-school period, sales remained strong throughout the quarter, reflecting the effectiveness of our merchandise assortments and attracting customers who pay full price even during less busy seasons. Encouragingly, our third quarter comp performance was driven by contributions from multiple areas of our business, led by women's and hard goods, which were up strong double digits along with low to mid-single-digit gains from both accessories and men's. High single-digit comps and robust full price sales boosted gross margin, which combined with improved expense efficiency raised operating income significantly year-over-year. Earnings per share reached $0.55 in the quarter, well above the high end of our guidance of $0.29. Looking forward, we are increasingly confident in closing out the year with strong holiday results. The fourth quarter is off to a good start with comparable sales through this past Tuesday, up 6.6%, including an 8.7% comp gain over the Black Friday, Cyber Monday period, which bodes well for the remainder of the holiday season. We are pleased with the momentum we have seen in our results as the year has progressed and are encouraged that we're now seeing comparable sales growth on top of comparable sales in the prior year. We believe that our strategies have the company well positioned to build on our progress over the near and long term. Due to this, we remain focused on the same 3 strategic priorities that have driven our success. First, driving revenue growth through customer-focused strategic initiatives. Our commitment to refreshing our product mix with innovative, distinctive offerings continues to generate exceptional customer response. Momentum from introducing over 100 new and emerging brands annually has carried forward into 2025 with these new and emerging brands representing an increasingly important component of our sales mix and validating our merchandising strategy. Private label performance remains a standout success story, continuing to reach new heights and representing our highest penetration levels in company history. This sustained expansion demonstrates organization's ability to identify emerging trends and create compelling products that resonate with our customers, while simultaneously enhancing our margin profile. Our investments in delivering exceptional customer experiences across both physical and digital touch points, continue to yield results. The enhanced staff development programs and technological capabilities we've implemented allow us to engage with customers through increasingly personalized and meaningful interactions, strengthening the relationships that have been the foundation of our success. Second, sustaining our rigorous commitment to profitability optimization across our geographic footprint. Within North America, our premium pricing strategies continue to support both margin expansion and market share growth. While the operational improvements we've executed throughout the year are generating meaningful benefits. Our continued focus in this area is key to establishing a more efficient and profitable business framework that positions us for sustained success. Regarding our international operations, while Europe continues to face challenging market conditions, we remain committed to our long-term strategy in these markets. We're actively working to drive revenue through our distinctive product offerings, while maintaining our commitment to premium pricing and disciplined expense management. While European comparable sales are down low single digits, the trend line improved from the second quarter, and we continue to see product margin gains through disciplined full-price selling. We have confidence in the long-term potential of these markets, particularly given our ability to identify trends locally in each of the markets before they expand internationally. Third, capitalize on our solid financial foundation to manage volatility by funding strategic expansion. Our financial position remains exceptionally strong, providing us with the flexibility to continue investing in our strategic objectives, while delivering value to shareholders. This financial stability enables us to navigate the ongoing uncertainties in the macro environment, while simultaneously positioning the company for long-term growth. Despite operating in an environment characterized by economic volatility, evolving trade relationships and global instability in certain regions, I'm increasingly confident in our ability to generate value for all of our stakeholders. The fundamental strategies that have powered our success throughout our history, continue to demonstrate the relevance and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory. Our direction remains clear and consistent, maintain our dedication delivering distinctive fashion-forward merchandise through customer connection strategies that have driven our growth, while preserving the operational discipline that has strengthened our financial performance. Before turning things over to Chris, I want to express my appreciation to our entire organization for their continued commitment and adaptability. Your dedication to our values and our customers remains the foundation for all of our achievements. With that, let me hand things over to Chris for our financial review. Christopher Work: Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our third quarter results. I'll then provide an update on our fourth quarter-to-date sales trends. Third quarter net sales were $239.1 million, up 7.5% from $222.5 million in the third quarter of 2024. Comparable sales were up 7.6% for the quarter. As Rick mentioned, the primary driver was our North America business, which shows outside strength even as macroeconomic uncertainty spurred by global trade policy continues. For the third quarter, North America net sales were $202.8 million, an increase of 8.6% from 2024. Other international net sales, which consist of Europe and Australia, were $36.3 million, up 1.7% from last year. Excluding the impact of foreign currency translation, North America net sales increased 8.7% and other international net sales increased 3.1% year-over-year. Comparable sales for North America were up 10%, marking the seventh consecutive quarter of comparable sales growth in the region. Other international comparable sales declined 3.9% in the third quarter, but showed sequential improvement from the second quarter. From a category perspective, women's was our largest positive comping category, followed by hard goods, men's and accessories. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction and an increase in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail, while units per transaction were roughly flat year-over-year. Third quarter gross profit was $89.8 million, up 14.7% compared to $78.3 million in the third quarter of last year. Gross profit as a percentage of sales was 37.6% for the quarter compared to 35.2% in the third quarter of 2024. The 240 basis point increase in gross margin was primarily driven by 110 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores, 100 basis points of improvement in product margin and 30 basis points of benefit from lower inventory shrinkage. SG&A expense was $78 million or 32.7% of net sales in the third quarter compared to $75.9 million or 34.1% of net sales a year ago. The 140 basis point decrease in SG&A expense was driven by a 110 basis point decrease in non-wage store operating costs and 80 basis points of leverage of store wages tied to higher sales and the closure of underperforming stores. These benefits were partially offset by a 40 basis point increase related to annual incentive compensation. Operating income in the third quarter of 2025 was $11.8 million or 4.9% of net sales compared with operating income of $2.4 million or 1.1% of net sales last year. Net income for the third quarter was $9.2 million or $0.55 per share. This compares to a net income of $1.2 million or $0.06 per share for the third quarter of 2024. In the third quarter of fiscal 2025, we benefited from a onetime tax items, which increased diluted earnings per share by approximately $0.09. Our effective tax rate for the third quarter of 2025 was 26.1% compared with 63.4% in the year ago period. The year-over-year decrease in the effective tax rate was primarily driven by improved operating results, the allocation of losses across the jurisdictions in which we operate and the previously mentioned onetime tax item. Christopher Work: Turning to the balance sheet. The business ended the quarter in a strong financial position. We had cash and current marketable securities of $104.5 million as of November 1, 2025, compared to $99.3 million as of November 2, 2024. The increase in cash and current marketable securities over the trailing 12 periods was driven primarily by $50.5 million in cash provided by operating activities and the release of $3 million in restricted cash. This was partially offset by share repurchases and capital expenditures of $38.3 million and $12.5 million, respectively. As of November 1, 2025, we had no debt on the balance sheet. During the third quarter, we repurchased 300.000 shares at an average cost, including commission of $18.61 per share for a total cost of $5.4 million. Fiscal year-to-date through November 1, 2025, the company has repurchased 2.7 million shares at an average cost, including commission of $14.18 per share and a total cost of $38.3 million. As of November 1, 2025, we had $1.7 million remaining on the $15 million repurchase authorization approved by the Board on June 4 of this year. We ended the quarter with $180.7 million in inventory, down 3.5% compared with $187.2 million last year. On a constant currency basis, our inventory levels were down 5.1% from last year. We feel good about our current inventory position. Christopher Work: Now to our fourth quarter-to-date results. Net sales for the 31-day period ended December 2, 2025, increased 7.5% compared to the 31-day period in the prior year ended December 3, 2024. Comparable sales for the 31-day period in December 2, 2025 were up 6.6% from the comparable period in the prior year, and we are seeing changes in foreign exchange positively increased total sales growth by approximately 1.7%. From a regional perspective, net sales for our North America business for the 31-day period ended December 2, 2025 increased 6.7% compared to the 31-day period ended December 3, 2024, while our other international business increased 10.6%, excluding the impact of foreign currency translation, North America net sales increased 6.7% from the prior year, while international net sales increased 2.5%. Comparable sales for North America increased 7.8% for the 31-day period in December 2, 2025 compared to the same weeks in the prior year, while comparable sales for our other international business increased 2.6%. From a category perspective, hard goods was our strongest comping category followed by women's, accessories and men's. Footwear was our only negative comping category quarter-to-date. The increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the period, driven by an increase in average unit retail and an increase in units per transaction. Christopher Work: With respect to our outlook for the fourth quarter of fiscal 2025, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity and estimated sales, product margin and earnings growth given the variety of internal and external factors that impact our performance. This is even more pronounced in today's environment with the current tariff situation that adds additional uncertainty and complexity to pricing and the potential to limit the ability of our customer to continue to spend. Our recent trend line in North America has been very encouraging and provides confidence as we head into the heart of the holiday selling season. That said, we think it is prudent to balance our current domestic momentum with some near-term conservatism given the general uncertainty in the macro environment and recent trends where we have seen nonpeak consumer traffic soften. We are anticipating total sales will be in between -- sorry, will be between $291 million and $296 million for the 13 weeks ended January 31, 2026, representing sales growth of 4% to 6%. Total comparable sales are planned to be in the 2.5% to 4% range. This reflects continued strength in North America and comparable sales planned in the 4.5% to 6.5% range. Comparable sales in our international business are planned to be tougher as we anniversary promotional trends from the fourth quarter of 2024. Internationally, we expect comparable sales to be down in the low single digits, with overall growth in product margin dollars year-over-year as we continue our efforts to drive full price selling. For the fourth quarter, we are expecting product margin to increase modestly from the fourth quarter of last year. Consolidated operating income in the fourth quarter is expected to be between 8% and 8.5% of sales, and we anticipate earnings per share will be between $0.97 and $1.07 compared to EPS of $0.78 in the prior year. We estimate that our fourth quarter diluted share count will be approximately 16.5 million shares, which excludes any stock repurchases beyond the end of the third quarter. Christopher Work: Regarding full year 2025 results, we have performed well in North America during the important back-to-school season and start to the holiday shopping, which is generally a reasonable indicator for overall holiday performance, but continue to experience headwinds with our international business. Overall, borrowing a significant downturn in the economy for the full year, we believe that we'll see year-over-year total sales growth between 4.5%, 5%, and despite the closure of 33 stores in fiscal 2024 and approximately 21 store closures planned primarily in late 2025, which combined, are estimated to have a negative impact on sales of roughly $15 million for the year. We anticipate 40 to 50 basis points of growth in product margin in 2025 on top of 70 basis points of improvement in fiscal 2024. We anticipate driving additional gross margin leverage through other expense categories such as occupancy, distribution and logistics, and finally, we believe that we can hold our 2025 SG&A costs relatively flat as a percentage of sales with our fiscal 2024 results through continued focus on expense management, while also investing in important long-term strategic initiatives. This is inclusive of the previously mentioned $3.6 million settlement of a wage and hour lawsuit in California as well as meaningful growth in our incentive costs on stronger performance. Combined, these expectations will drive a year-over-year increase in operating margins and net profit for fiscal 2025, with anticipated earnings per share between $0.57 and $0.67 compared to a loss of $0.09 in 2024. Included in these fiscal 2025 expectations are the following: 6 new store openings during the year, including 5 in North America and 1 in Australia. We also plan to close approximately 21 stores in fiscal 2025, including up to 18 in the United States, 1 in Canada and 2 in Europe. We expect our capital expenditures for 2025 to be between $10 million and $12 million compared to $15 million in fiscal 2024 and $20.4 million in fiscal 2023. We expect that depreciation and amortization, excluding noncash lease expense, will be approximately $22 million, in line with the prior year. And while the effective tax rates have fluctuated significantly by quarter, we anticipate our full year effective tax rate will be roughly 51% to 54% in fiscal 2025. We are currently projecting our diluted share count for the full year to be approximately 17.2 million shares, which excludes any stock repurchases beyond the end of the third quarter. And with that, operator, we'd like to open the call up for questions. Operator: [Operator Instructions] Our first question will come from the line of Mitch Kummetz from Seaport Research Partners. Mitchel Kummetz: Rick, maybe we can start on hard goods. Could you elaborate on what's driving the strong performance there. I think you said it was double-digit comp in the quarter, and it seems to be your leading category for 4Q to date. I mean, the bulk of your hard goods business, if I recall, is skate. I'm wondering if you're getting any contribution from snow in Europe? Or what kind of trends in skate are you seeing in the U.S. that's driving this? Richard Brooks: Thanks, Mitch, for the question. The driver here to be clear is skate. And it is true across our global regions here in North America as well as improvements in Europe and Australia, too. And I think what we're finally seeing, Mitch, is the reversal of a multiyear negative trend, which has been very painful for us over the last few years. And as you know, and we've discussed in 2020, we reached an all-time high, I think, like a lot of things with bikes, hiking, camping gear, all so much volume got moved into 2020, things you could do outside on your own because of pandemic. And our skate hard goods business at that point reached an all-time high for us. And here in '24, we reached -- in '24 reached an all-time low. So I think what we're finally seeing, Mitch, is a turn in that business. And we're cautious, optimistic now that we're going to see that turn play out over the next few years as we typically would in a new skate hard goods cycle. We'll have to see how that goes on holiday though. And our holiday typically is a good -- and as reflected in November, typically is a -- skate is a good gift-giving category in holiday. So I feel, again, optimistic about how we're positioned there. But I think Mitch this was the long awaited after 4 painful years of massive declines in skate hard goods, this is the long-awaited turn that we've been looking for. Mitchel Kummetz: That's helpful. And then Chris, on the fourth quarter outlook, you guys were obviously performing well through the first 31 days of the quarter. What are your comp assumptions for the balance of the quarter? I mean, I think you said that you're taking a conservative approach just based on some consumer uncertainty. But can you kind of fill us in on kind of what sort of comp is embedded over the balance of the quarter to get to your guide for 4Q? Christopher Work: Yes. I think, Mitch, as we think about the guide, we are assuming on the North America side, that it will just be a little bit softer than what we saw here in November. We saw good November. Obviously, highlighted, as Rick pointed out in his commentary by the Black Friday and Cyber Monday weekend was our strongest point, but we would expect it to slow a little bit here in the interim weeks between Black Friday, Cyber Monday and obviously, the important holiday week right at the end of December. So we are planning just a slight deceleration from November for North America. And on the Europe side, we're really encouraged by where November came in positive comparable sales and margin growth as well, really magnifying the impact to product margin dollars. But we also know, as we commented in the call that we had some promotional activity in December and January of last year, and that resulted in a benefit to sales, but obviously a detriment to margin. And so as we look to anniversary in 2025, we are looking for that trend line to decelerate and turn negative again after being positive in November. But at the same time, driving product margin dollars. So what you would expect to have product margin increases that would offset that sales decline. And that's what we are planning the business at. So the run rate from here for December and January is a negative comp in Europe that would offset those gains that we had in November. Mitchel Kummetz: Got it. And then on the private label business, just maybe speak to the performance in the quarter, where is the penetration today? And how much contribution are you getting from private label in terms of your product margin? Christopher Work: Yes, I'll take a shot at some of the -- quantifying it and then let Rick add whatever he'd like to add. I mean we are incredibly encouraged by our private label as we've talked about for a number of quarters here. And I think what we're really proud of our teams here is their ability to drive trend. I think that we are seeing more and more customers come into our store, asking for our private label brands because they see them as brands and they're willing to pay full price for the value and what they see in those brands. And so that's an exciting thing for us. As you pointed out, we have seen continued penetration in private label. It's up just right around 200 basis points year-over-year to date, meaning it's growing 2 full percentage points as a percent of our overall sales. So really happy with that and happy with how the business is trending. It does run at a higher product margin, but it also is part of our overall ability to continue to add value for our customers, too, where we run 4 for $135 is a promotion, which is 2 tops and 2 bottoms for $135, and that's something that resonates with our consumer. And while we have some branded product in there, it's primarily our private label product that's driving that. So really happy with the trajectory of where private label is at. Richard Brooks: And I'd just add to Chris' comment, Mitch, that it's also -- it's more than -- it's really about a 5-year window here of where we've really worked hard at private label, reinvented our trend process, internally in the organization. And I think what you're seeing is a really great collective effort of our entire organization around what we believe is a requirement now of most new brands and the speed of brand cycles. Most new brands never get to doing cut and sew product. They're screenable businesses. So we have committed ourselves to owning that business through our owned brands. And then the only last point I just want to make that Chris echoed here is we're a full price, full margin here. And I think in these categories, these cut and sew categories in our private label business, I mean, we're in some cases, we're the premium price player amongst our competitors in the market. So it really says we're doing some special for customers. Mitchel Kummetz: And are you seeing more strength on the women's side than the men's? And is that contributing to the outperformance of women's right now? Or is that not really the situation? Richard Brooks: We have good strength across our private label brands in both men's and women's. The mix is different in terms of penetration, but there's good strength in both sides. Operator: And our next question is of the line of Jeff Van Sinderen from B. Riley Securities. Jeff Van Sinderen: Just a follow-up on Mitch's questions on private label. Maybe I missed it. Did you give the penetration of private label roughly what that is now? Christopher Work: Yes. Year-to-date, we're running right just under 31% of total product and to Rick's point earlier, 5 years ago, we were right around 11% or 12%. So we have seen a large run in private label. Jeff, you've been around the story for some time. We've been over 20% in our past. In fact, we were over 20% as recently as 2015. And we saw that decrease that 11% to 12% across the end of the last decade, really on a heavy brand cycle. And now I think we're seeing our private label drive higher numbers than we've seen in the past because I think it's really hitting on trend. Jeff Van Sinderen: And so just -- I know this is a tough question, but where do you think private label penetration peaks out? Does that go to 40? Or is it -- are we kind of probably -- maybe you didn't expect it to get to 31, I don't know. Christopher Work: I think it's a really good question, Jeff. And one, obviously, as you would expect, we spent a lot of time talking internally. But it will go where the customer wants it to go. I think, is kind of our answer here. I mean, we really appreciate working with our brands and the relationship we have with brands. And as we think about the cycles I laid out on your first question, I mean, when we went from 21% to 11% we weren't trying something different. We just saw brands really accelerate and saw brands become more important to our customers. And that's the direction we went in. I will say we grew product margin during that period too. And of course, in this cycle that we're in, we're seeing our private label brands really take off. And along with some of our brands. I don't want to paint any picture that we are more predominantly private label in our stores or anything like that because I think the branded element of what we sell is so important to what we're doing, and it's important to who our consumer is. I mean, you have to remember, this is a consumer that wants to individuate and be unique and different and we've talked over time about 20% to 30% turnover in our top 10 and top 20 because they're on to what's next. And that's an exciting thing about what we sell. It's also a challenging thing about what we sell because you've got to bring in newness. And I I'm just really proud of our buying team that they're able to do that both across our private label to bring in newness and also our brands. Richard Brooks: And I would just add to Chris' comments, Jeff, that I agree with everything you said, and I'll just give you maybe a context is we will have another brand run again. As gate goes off, it's low, it's almost -- it is for us a completely a branded product cycle in skate hard goods. So we'll have runs there. So I think we may see situations where penetration looks like it's going down, but I don't think dollars are going to go down in private label. We'll still grow our business from a dollar perspective. So I think we'll have brand cycles, but I think where we dominate with our owned brands, we'll still be able to grow the business on that side of the business. So it will just be a shift in mix relative to the strength of branded cycles. Christopher Work: It's a really good point because footwear is in that same bucket. Where in footwear, we just don't do private label. So we have a large chunk of our business that is going to be branded. Jeff Van Sinderen: But Footwear has been kind of negative lately, correct? Christopher Work: No doubt. This has been our toughest category. Yes. Jeff Van Sinderen: Okay. And then -- so let me ask you this, whoever, which one of you wants to answer. What -- or who do you think you're taking market share from in North America? Do you think it's from the independents? Do you think it's from -- I mean, wherever you feel like however you want to answer that question. And then also, do you think that the demographic you're selling to is changing or evolving? Do you think you're picking up new customers with more private label, maybe more on the women's side? Maybe just I don't know if you give us any thoughts around those ideas. Richard Brooks: Yes, I'll start, and Chris can add on, Jeff. I mean, we are laser-focused on our core customer and that the same core customer we've always been focused on, which is a young person, as Chris said a moment ago that wants to individuate and self-express their identity, they move through adolescent more so than their broader age demographic. So where we're, I think, benefiting is from this, and we may be drawing some people into that because of the faster nature of how I think how forward we are on trend. We may be trying some broader people. But I want to be clear, our focus is on our core consumer. And I think that's always a winning strategy as you think about how you serve your customers. You've got to start with your core consumer and hyper-serve them in this world. And that is our focus. And yes, maybe we are picking up in other areas, but it's because we're winning with, I think, what is one of the most influential consumers in the marketplace today, the person who's willing to lead on trend, that's our core consumer. And they may be bringing others along with them because of our ability to execute on behalf of that core consumer. Jeff Van Sinderen: Okay. And then I'm sorry, on taking market share, any thoughts on who you might be taking some share from? Richard Brooks: I don't have any significant thoughts on that. I think what's happened in -- and again, let's be clear, I think most of our gain, as Chris just laid out here, we've had some. We're starting to see some small transaction gains, but most of our gains has been through executing in, I think, on trend, partnering with our great brand partners and most of our gains have been driven by AUR over the last year, 2 years actually. Now I think we're starting to win some transactions. So I'm not sure -- I think we're reflecting the reality of the market that we discussed about the volatility of the market, too. And I think what it really speaks though, is that our execution levels is we're able to probably own more wallet share, maybe what we're really doing here because it's been AUR over the last 2 years that has really driven our gains. Jeff Van Sinderen: Now in the November period that you just finished, I think the transactions, I believe you said were down slightly. I'm just curious, what did you see in store traffic during this latest period? Christopher Work: Yes, I'd have to break it into 2 different regions because on a consolidated basis, we were down slightly. We were up in North America, and we were down slightly in Europe. Even though Europe ran a comp, again, more AUR, DPT driven than transactions. So we did see a transaction gain in North America. And I think what we saw traffic-wise was decent comps actually throughout the month with week 4 being by far our strongest though. We saw, I think, a really good pickup similar to how we saw Q3 where we saw back-to-school be really strong. And then it actually stayed more stable than we anticipated through the back 2 months of Q3. We saw the same thing in November, where it's stable and good comps, weeks 1 through 3, but week 4, definitely more impressive. Richard Brooks: And the longer term here, Jeff, what I'd tell you is, as consumer's income levels catch up with the rates of inflation we've had over here. I think we're -- the next phase, we're starting to see that. I think as we saw in back-to-school, we ran comp gains as Chris saying here in North America in November. As consumer incomes catch up with the rate of inflation, I think we're going to turn and we'll now be capturing transaction rates. Victor, do we have any more questions from the group? Unknown Executive: I'm not sure if Victor dropped. This is Jill. Jeff, I see you have a follow up? Operator: I see Jeff Van Sinderen is still in the stage. Jeff Van Sinderen: My questions were answered. Operator: And I'm not showing any further questions in the queue at this moment. I'd like to turn the call back over to Rick for any closing remarks. Richard Brooks: All right. Thank you, Victor. And I'll close with just my best wishes to all our -- to all those people who I greatly appreciate following what we're doing here at Zumiez, and wishing you all a very happy holiday season. Thanks very much. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Hugh Duffy: Good morning, everyone. Thanks for joining us. Our presentation this morning will commence with me, Group CEO, Brian Duffy. I'll be taking you through our first half highlights, talking about our growth initiatives in the first half. I'll then be followed by our CFO, Anders Romberg, who will give you more detail and color on the numbers. Then me again to give you a bit more background on our growth pillars and where we stand, and then we'll open things up for your questions. So the top line numbers for the first half year that ended in October, our sales is GBP 845 million. For the half, we were up 10% in constant currency for the group, driven by a very strong performance in the U.S., plus 20% in U.S. dollars. U.K. was decent at plus 5% when we adjust for the store closures that we had last year. All in all, a good half year in terms of sales. In terms of profits, EBIT came in 6% ahead of last year at GBP 69 million in constant currency. Our leverage is 0.6x, EBITDA leverage to debt. Our free cash flow of GBP 48 million was 71% better than last year. Our expansionary CapEx, GBP 37 million following all of our projects. I'll be talking more about in detail as we go through. We completed our GBP 25 million buyback, GBP 14 million were actually going through in the first half of this year. At ROCE, we were up 80 bps at 17.3%. So our pillars of growth much delivered first half year numbers. Showroom investment, both new projects and refurbishment of our existing network. We spent GBP 37 million in total. We completed 8 projects in the half year. We've already done 6 projects in the start of the second half, obviously getting ahead of the holiday period. We applied disciplined hurdles in terms of payback when you look at all of these investments. And as usual, we have a strong pipeline going forward. Certified Pre-Owned has been a really strong business for us, strong both in the U.K. and in the U.S. Rolex Certified Pre-Owned has become our #2 brand in both the U.K. and the U.S. Non-Rolex Certified Pre-Owned is also going well, and clearly well established in this growing category. Ecom, we're delighted with our ecom results that we've had in the half year, up 17% in constant currency. We had good year-on-year growth in the U.K. and then very high levels of growth in the U.S. where we're coming from a smaller base, and having invested in resources in the U.S., both a localized team and a conversion to Shopify platform. So I'm very confident about ecommerce and the prospects that we have for growth. Luxury branded jewelry, clearly, our #1 focus is Roberto Coin in the U.S. where we had a very strong half year at plus 16% in wholesale. And everything about Roberto, we love, there's been a great response to the campaign that we've done with Dakota Johnson. We'll be opening 3 boutiques in November, December and January, and we've launched a new website on Shopify. Here in the U.K., Mappin & Webb Luxury Jewelry Boutique in Manchester, St. Ann's area, we got opened successfully. In terms of acquisitions, our focus clearly last year has been on Roberto Coin and Hodinkee in the U.S., both going well, both really well positioned for growth. And of course, we continue with our discussions and opportunities on further acquisitions in the U.S. market. Client-centric excellence, something that we've always done at Watches of Switzerland Group. The opening of Rolex Bond Street last March really gave us the opportunity of stepping up our focus on clients. We did an extensive training with our team there that allowed us to redefine our Xenia program and Xenia 2.0. And it's working very, very well in Bond Street. We have a Net Promoter Score, as you can see, of 94.5%, which is very, very high. And we're now taking this program and applying it through all of our store network. Additionally, we stepped up our events program, both here in the U.K. and in the U.S. really focusing on our top clients and collectors, and more about that later in the presentation. Now over to Anders. Lars Anders Romberg: Thank you, Brian, and good morning, everyone. I'm Anders Romberg, CFO for the group, and I'll now take you through the financials. Starting with the income statement. This is presented on a pre-IFRS 16 basis and excludes exceptional items. The reconciliation to the statutory numbers are included in the RNS. Our revenue was up 10% versus last year in constant currency or 8% at reported rates, driven by strong U.S. performance. Net product margin for the half was 90 basis points down versus last year, reflecting adverse product mix and a reduction in brand margins due to U.S. tariffs. Our adjusted EBIT for the half was GBP 69 million or plus 6% compared to last year at constant currency or 4% as reported. This gave an adjusted EBIT margin of 8.1%, down 30 basis points from last year due to the net margin rate decline as just mentioned. This was partially offset by leveraging showroom costs and overheads. The effective tax rate was 27.5% for the half, a reduction to last year driven by lower levels of non-tax-deductible items. Our adjusted EPS was 19.6p, an increase of 8%. Statutory profit before tax of GBP 61 million increased by 50% on last year, as prior year statutory profit was impacted by noncash in parallel. With statutory basic EPS improving by 57% or 6.9p per share, benefiting from the share buyback program, which completed this year. Looking at the breakdown of sales in the half, the U.S. was the biggest growth driver. U.S. retail was up 21% in constant currency with robust demand across brands and categories, supported by the expansion of our showroom network. In the half, sales was driven by good volume growth as well as some pricing on average about 4%. We're pleased with the performance of Roberto Coin wholesale with sales growth of 16% in constant currency. There's been a positive market response to new product and the advertising campaign that we launched at the start of the year. U.K. sales grew by 2%, but was impacted by the showroom closures we made around year-end last year. Adjusting for showroom closures, new figure with 5%, a resilient performance in a challenging market, underpinned by the stability of the luxury watch segment and the success of our flagship boutiques. Across both markets, our ecom business continued to do really well and grew by 17% in constant currency. The Rolex Certified Pre-Owned program is doing well and is now the group's second largest brand in terms of revenue. The first half adjusted EBIT came in at GBP 69 million or plus 6% on last year at constant currency. Adjusted EBIT margin was 8.1%, which is 30 basis points down on prior year due to product margin rate decline, partially offset by leverage of fixed costs. The U.S., including Roberto Coin wholesale is the major growth area. And on 48% of group sales, it represents 59% of adjusted EBIT. U.S. retail had product margin contraction due to U.S. tariffs, but this was offset by leveraging the fixed cost base. In the U.K., product margin was impacted by adverse product mix with limited leverage on cost base. Roberto Coin wholesale had an increase in marketing costs due to the production of our new advertising campaign. Product margin remained stable over the half. As shown, Roberto Coin wholesale is quite accretive for the group's profitability. We've delivered strong free cash flow in the period of GBP 48 million, which was up 71% from prior year. Free cash flow conversion was 53%, and I'm expecting the free cash flow conversion for the year to come in between 65% and 70%. Adjusted EBITDA was GBP 91 million, an improvement of 4% year-on-year. In constant currency, it was up 7%. The working capital outflow was GBP 30 million represents the seasonal build of stock for the holiday season. We expect the working capital build to unwind in the second half in line with seasonal trends. We continue to invest in the showroom expansion and refurbishment program, which drives long-term sustainable sales growth. In the first half, our expansion or CapEx was GBP 37 million, and our full year expectation is between GBP 65 million and GBP 70 million. The final payment for the Roberto Coin Inc. acquisition was also made in the half, and we completed our GBP 25 million share buyback program. Our balance sheet shows continued strength. Inventory increased to GBP 503 million, an increase of 5% versus last year, reflecting the higher average unit cost of stock from gold prices in U.S. tariffs. Underlying terms continues to improve. It's important to remember that there is no obsolescence risk in the inventory and very low cost of storage. The reduction in payables is driven by timing of supplier payments. Our net debt was GBP 112 million at the end of the half, a reduction of GBP 8 million from prior year. This gives a net debt to adjusted EBITDA leverage of 0.6x excluding leases. Just a reminder of our capital allocation policy, which was set to optimize capital deployment for the benefit of all stakeholders focusing on long-term growth. We continue to prioritize growth in our business through investment in our showroom expansion. We expect to spend between GBP 65 million and GBP 70 million in this fiscal year, with GBP 37 million spent in the first half. Second is, strategic acquisitions are a key pillar of our growth strategy. Acquisitions must deliver return on investment in line with our disciplined financial criteria within an appropriate time frame. We'll continue to maintain balance sheet flexibility and to be opportunistic for investment in acquisitions and showroom developments. Surplus capital above and beyond the requirements for these investments will be returned to shareholders. We were pleased to complete the GBP 25 million share buyback program in the period. The second half of the year has started well. We're trading in line with our expectations and are well-placed as we enter the holiday trading period. Today, we are reiterating our full year guidance of 6% to 10% revenue growth at constant currency with an adjusted EBIT margin percentage flat to 100 basis points down on last year. As noted previously, capital expenditure is expected to be between GBP 65 million and GBP 70 million. Our guidance reflects that FY '26 is a 53-week year. It includes visibility of supply of key brands, and it reflects confirmed showrooms, refurbishments, openings and closures, but it excludes uncommitted capital projects and acquisitions. With that, I'll hand you back to Brian. Hugh Duffy: Thank you, Anders. Just again, a headlines of our growth drivers for our business, showroom investment, Certified Pre-Owned, ecom, luxury branded jewelry, focus on acquisitions and clearly, our focus on our clients. In terms of showroom investment, looking firstly at the second half of last fiscal year that clearly benefits this full year. The center piece of our program from the last fiscal year was obviously the opening up the flagship Rolex Boutique in Bond Street. It's been a great success. It's exceeding our expectation, and the client feedback about it is absolutely fantastic, 4 floors of retailing, 1 of Certified Pre-Owned, then we have a service area and then 2 floors of regular retailing. The team are fantastic. The client feedback really couldn't be any better. Looking at some of the other projects that we did in Tampa, Florida. We relocated to an enlarged space, and that really is the best space in the malls between LV and Tiffany and a wonderful presentation of Rolex and the other brand partners that we have there. Our Betteridge store in Colorado and the ski resort of Vail, we again took the store next door, allowing us to expand the presence of everyone there, including Rolex, as you can see, beautiful alpine design. At the bottom there, you can see Lenox in Atlanta, Atlanta, Georgia. This was previously a multi-brand space for us with a very nice Rolex shop-in-shop. We were so successful with Rolex that we agreed to convert the entire space to Rolex boutiques, now 3,000 feet. It's fabulous and really doing good. We love the town of Atlanta. And I'll show you later what we did with the brands that we effectively displaced in the multi-brand. Top right is Jacksonville, Florida. We had come out of Jacksonville because of the location wasn't ideal. It took us a bit of time to get back in again, but it was worth the wait, as you can see from that store top right that we opened in February. Bottom right is our first venture into Texas. We love Texas as a market and as a state. We had bought a store that didn't have Rolex or Cartier and other top brands, and we now do in this wonderful execution that we have of Watches of Switzerland that opened back in March. Looking then at the first half of fiscal year '26, we opened this beautiful house, the Manchester in King Street. It's spectacular. It's a joint venture with our partners from Audemars Piguet. We refurbished and expanded in Goldsmiths Kingston. The next one along is the oldest Rolex retailer in the world in Newcastle in Blackett Street, which we refurbished and expanded the retail space in July '25. That's spectacular. The multi-brand in Mayors in Atlanta, which we displaced with the Rolex Boutique, we effectively opened a multi-brand directly opposite as you can see here in August '25. Also in August, Mappin & Webb Cambridge, we expanded in September '25. Merry Hill in Birmingham, again, we expanded the new luxury jewelry boutique in St. Ann's opened in September as did relocation of our Goldsmiths in Peterborough. So the second half, we've been very busy with the opening in the last week of October in Southdale, Minneapolis. A beautiful store, doing well. We've relocated our store in Sarasota, Florida in November. Back here in the U.K., Goldsmiths Oxford, we expanded and converted in November '25. Mappin & Webb Birmingham actually opens this week, an expansion and a conversion. Bottom left, also opening this week as the new multi-brand space in Terminal 5 in Heathrow, directly adjacent to where Rolex currently is. I'd mentioned already the mono-brand stores for Roberto Coin, one opening in November in Hudson Yards, New York in December, in fact, this week, in Las Vegas, and then Miami will open in January. And then in my hometown of Glasgow, we are doubling the space of the Rolex boutique. Work is underway and that should open hopefully, early summer '26. And then bottom right, will be the new Terminal 5 location for Rolex. Work is underway here again in terms of design and planning, and our hope is to get this open also for summer of '26. It clearly is a multiple in terms of size and impact versus where we are today, so that will be spectacular. Certified Pre-Owned continues to do very, very well for our business. We're now well established in this category. We've managed margin well throughout this time and our 2 years into the program. We run all of our Rolex stores in the U.S. We run 26 showrooms in the U.K. And as we continue with our various projects, we will be in all stores in the U.K. So a lot more to come from Rolex Certified Pre-Owned. Ecom, we feel very good about the decisions that we've made. We're up 17% as a group overall. We have a new website and we're converting all of our websites to Shopify in the U.S. Watches of Switzerland is up and running on Shopify. And Roberto Coin up and running on Shopify and the other phase here will happen in the months ahead. Within Pre-Owned, we can offer Rolex Certified Pre-Owned, as you see here, which clearly is an important destination for the Rolex shoppers. You can also see Cartier here, which is our best-selling brand online, both U.K. and U.S. And then in the middle, you can see Hodinkee exclusive that remain available online in the U.S. We've also added other brands as we've gone, and there's a lot more to come from ecom business, both here in the U.K. and particularly in the U.S. Roberto Coin, we love everything about the brand. And you see here some great images of Dakota Johnson, the campaign that we launched in summer and really only kicked in, in the fall and holiday season that we're in now, but great response to the campaign both from end clients and from our wholesale customers. We've been working with the teams in the U.S. about expanding our space in Roberto Coin in-store, both in top department stores and in top independent stores, and that's going very well. Our designers and architects in the U.S. worked with our teams in Italy to come up with a new showroom and shop-in-shop designs, which look great. We've expanded the presence of Roberto Coin in our Mayors stores, which I'll show you shortly. We have the new website and we're also working on opportunities of product merchandising. So a lot of growth initiatives for Roberto Coin. This is to show you how Roberto Coin was presented on the left-hand side in the Mayors stores. It was a great success in Mayors, it was very productive and going very well. But having now moved it to the space, you can see you on the right, that clearly is a huge elevation of the brand. We've actually increased productivity and we've more than doubled sales. So this is good clearly for our business overall, but it's also good as examples that we can now take to our wholesale partners and look to introduce shop-in-shops in other stores. Mono-brand stores that we are in the process of opening. Top left is Hudson Yards, New York, which has opened, has been open for 2 weeks. All going well. The right-hand side is the Forum Shops and Caesars in Las Vegas. We'll open this week. At bottom left is Miami Design Center, which will open in January. This is the website that looks fantastic, very, very user friendly, very easy to navigate, very easy to find your product or to find out information on the brands, great videos both of Dakota Johnson and great videos from Roberto himself about his inspiration and background and product clearly. And there's been a fantastic response to this new website. The luxury branded jewelry boutique in St. Ann's, we opened in September. We had a great event in October, as you can see from the image on the left. It's a fantastic location, listed building and a great response from our clients. On the left, you can see how the Rolex store looks already for Christmas time, and Bond Street looks really spectacular and continues to trade very well and ahead of our expectations. We've been doing wonderful events there, the highlight of which was an event with Roger Federer. He really was a fantastic ambassador of Rolex, really spending time with our clients and a great representative of the brand and our clients were thrilled to be there. You can see the scores that we're getting from our client feedback, 94.5% Net Promoter Score. And of the clients that respond to your questionnaire, 98% say that we either met or exceeded their expectations. By far, the majority are saying we actually exceeded the expectations. Other events that we've done throughout the country with Rolex, and you can see they're pretty spectacular. Our clients love to be there and it really is all part of our client excellence and client-centric focus that we have. Other events, we launched fairly quietly at the AP House in Manchester with our partners at AP leading up to this event that we had in October. This space is so perfect for hospitality and events, as you can see, and really great evening. An example here of us taking over the Aventura store with Roberto Coin, bringing our top jewelry clients along. It was a hugely successful event and it's our sales teams or sales colleagues in the U.S really at their best. And another event in New York in Soho, where we launched the Porsche exclusive product. We did it with Ben Clymer effectively hosted the evening, and we had none other than Orlando Bloom there who's a great enthusiast both for watches and for Porsche, a really great combination. But it was a fantastic event, and we really had to control the number of people that were coming, huge interest and a really great example of us using new partners and connections with Hodinkee. So overall, we have strong momentum across the group. It was a standout performance in the U.S. at plus 20%. Our model is clearly working and approach to our clients, our design of stores and our training of our great teams. Our registration of interest list continue to grow with a high conversion overall. So no change on that. Certified Pre-Owned, clearly well established in line with the ambitious expectations that we had presented to the market before. Ecommerce, very strong U.S. investments that we made are clearly driving a very strong sales performance in the U.S. Great progress with Roberto Coin, a lot more to come. Great progress also with our friends at Hodinkee and we are in the process of developing some important growth initiatives with them that you'll hear more about in our fiscal '27. Great delivery, strong delivery of our catalog of projects with a lot more in the pipeline. We're well positioned for the holiday season. We're off to a good start with the 5 weeks of November and now behind us, and we'd be happy to reiterate our guidance. So let me pass it over for your questions. Operator: [Operator Instructions] Our first question this morning is from Chris Huang of UBS. Chris Huang: It's Chris from UBS. And I have 2 questions. The first one on your FY '26 sales guidance. I mean you commented that you started the second half in line with expectations, and you generally feel good about the holiday trading period ahead. So if we take the midpoint of the sales guidance at 8%, if my math is correct, that would imply H2 to be around 6%. But when I think about the moving blocks within the group, in theory, you should no longer see any meaningful impact from store closures in the U.K. The momentum in the U.S. seems to be still solid double digit. And at Roberto Coin, I would expect the full benefit of the price increase you did in October to help the numbers in H2. So with all of this in mind, and of course, we just started H2. But I'm just wondering if you think there could potentially be some upside for the year? That's my first question. And then secondly, generally on operating leverage. If we really look at your H1 P&L, you actually showed quite impressive OpEx leverage under control, driven by the U.S. retail channel. So I'm curious to know the level of growth you would need generally to start to see fixed cost leverage. I assume it's going to be quite different in the U.K. compared to the U.S. given the product mix. So if you could provide some regional color, please, just to help us a bit more on modeling. Hugh Duffy: Yes. Thank you, Chris, for your questions. I'll take the first one, and Anders will answer the more complicated one on the P&L and leverage. We feel really positive about the second half that after some uncertainties around the U.K. consumer still by no means upbeat and the budget didn't help. So we'll see how that might affect behavior in the Christmas period. Similarly, in the U.S., as we've reported to the market before the consumer seem to ride over the price increases that happened over late summer. But we are moving into the more gifting season. There might be a bit more price sensitivity there. We don't have allocations yet there on a calendar year basis. So we have 4 months of the fiscal year in which we, as yet, don't know what the allocations will obviously be from our key partners. So there's still a bit of uncertainty around there. We are delighted that the tariff situation has improved from the 39% down to the 15%, but that's still a reasonable increase on landed cost of product that's coming in. And again, what might be the response from the brands. And at this point, we don't know that either. So that level of uncertainty is around. Having said that, we have started the season well and we're going to it with good momentum. But putting it all together, we feel that the prudent thing to do is confirm our guidance at this point. And obviously, we'll look forward to updating the market post Christmas. Lars Anders Romberg: In terms of the operating leverage question, we haven't ever been that explicit. But if you look at the leverage that we get historically on our cost base, it's been the factor that's been driving our profitability over the last decade actually, and we'll continue to do so. Product mix is a factor. Obviously, the product margin is the highest cost we have in the business. So the component of Pre-Owned coming into has been somewhat diluted as a percentage. Cash-wise, it's absolutely fine. So in terms of our cost base, it's driven by inflation, obviously, and space expansion and also the 2 major factors, which were partially offset by becoming more efficient in our operations. So I'm not going to say what sales growth we need in order to get the leverage. Operator: Next question is coming from Richard Taylor from Barclays. Richard Taylor: Yes. I see there were some comments recently from the Rolex CEO at the Dubai Watch event regarding the relationship with retailers and how they -- basically, they have no desire to change that. Just keen to understand now that a bit of time has passed since they bought Bucherer, how you would observe Rolex's behaving with regards to their retail partners? I know there's a bit of change in the German market recently, for example, but any insights you may have more generally and obviously, the U.K. and U.S. markets in which you operate will be helpful. Hugh Duffy: Okay. Thanks, Richard. We obviously bet as everybody did, the comments that were publicized that Jean-Frédéric Dufour made at Dubai Watch week. No surprise to us because it's effectively what we said when the acquisition was announced and we did an RNS at the time that was approved by Rolex and the news then was that this wasn't strategic, it was the acquisition was made for other reasons. And nothing would change with regards to how Rolex were managing partner relationships and product allocation and projects. And our experience since then has been exactly that. There's been no change. We obviously work hard at developing our partnership and relationship looking at a number of projects that is always very objective. The discussions that we have and everything has carried on exactly as it was, and it's what we've been consistently seeing and it's what we've consistently experienced from that relationship. So obviously a long, long relationship for our group, get back literally over 100 years. And it's a big part of our business. It's our most important partnership, and I'm delighted that we continue to make the progress that we do and, I'd say, honestly, our relationship has probably never been so good. David might want to comment on the U.S. where he manages the relationship directly. David Hurley: I mean, again, the conversations that we had about this were when the acquisition happened, we've never had it since we've seen -- they've been consistent always in the way that they deal with us. And we've had an incredibly strong pipeline of refurbishments expansions over the last year and some new stores as well like Southdale in Minneapolis that we just recently opened, that's performing very well. Locations like Legacy West in Plano, Texas, where we didn't have Rolex originally. And we continue to have a strong pipeline of projects going forward. So no changes whatsoever. Operator: [Operator Instructions] Now I'll go to Jon Cox of Kepler. Jon Cox: Congrats on the figures. The print looks pretty good. A couple of questions for you. Just starting off with the U.K., and it's been pretty soft for a couple of years. I'm just wondering what your thoughts are going forward. And if you maybe believe that some of the tourists that used to come into the U.K. buying watches have gone for goods with the so-called tourism tax? Or would you be confident that eventually the U.K. should bounce back if you just look at historical trends when for a few years, the U.K. was amongst the strongest growing markets, maybe some sort of post that boom period hangover, and we should start to see a recovery at some point. That's the first question. Second question, just on the T5 Heathrow, just wondering on the sort of size of that. And well, from my own experience, going through airports, ever trying to go into a Rolex store, the room was empty anyway. And even if -- it's very difficult, obviously, we're trying to leave a name at a Rolex store at an airport. Just how we should think about it? Should we think about it as a decent sized store opening in the U.S.? Or is it anywhere near to Bond Street? Or just to give us a bit of a feel what may be happening there? And then the last one, just on -- you keep saying Rolex CPO is now the second biggest brand. I'm just always scratching my head trying to work out how much Rolex and Rolex CPO is a combo of your business. And then in addition, you have Roberto Coin where clearly jewelry is a very strong business at the moment. Just trying to get a figure or some sort of indication, Roberto Coin, Rolex, Rolex CPO, is that close to 70% of your business now? Hugh Duffy: Thanks for your question, Jon. A lot there. The U.K. market I'd describe as having come through a real volatile period. You described it as soft. But if you look back at the kind of tail end of the second half of '23, I think we described it as a bit worse than soft, very, very high price increases. The value was what it was. But from a volume standpoint, the market really was impacted in a way that we had never witnessed before. We've come beyond that. I think the brand is very typically -- they're ultimately very pragmatic and how they look at our market, pricing has been modest, new product introductions have been good. And we see the market as very recognizable, very much normalized. We were plus 6 in the second half of last year, plus 5 in the first half of this, which we regard as clearly very, very stable and consistent. With regards to tourism, obviously, we're way down in tourism, but if you compare us to fiscal '19 or fiscal '20 when the VAT-free was effectively removed. So it's in our base. It's on our comparison numbers. We are 95% domestic in terms of our sales. So that's the category, and I think we've done amazingly well to have obviously refocused our business on domestic successfully. And our view has been consistently and remains VAT-free will come back at some point. I think the arguments on behalf of it coming back are really compelling on behalf of the U.K. economy and the treasury. And if the government keeps saying as they do that they want to support growth, then there's a gold nugget, excuse the pun, lying on a beach somewhere that they could pick up and really have an impact. So we continue to support lobbying and trying desperately to get the government to take a more serious look at it, which I do believe they will do it at some time, but hard to predict when. The new space in T5, can't confirm exactly the space. We're still working with Rolex and Heathrow. It's a very, very prominent location. It's a multiple of size versus where we are today. It's double height. It's really going to be very, very impactful. We make some product available to your point of walking into empty stores. I want to make sure that, that's not the case for this beautiful store we have. It's not quite the case today either with Rolex in T5 and T2. So we're working through all that detail, but it's going to be a really nice store. I think really part of what is a major refurbishment and upgrade that's happening with the luxury retail in T5. CPO is our second biggest brand. We had ambitious goals that we've told the market about for developing the CPO business, and we are achieving those goals, and we're only 2 years into the program. So let's see how big it becomes, but we're learning, we're developing, we're expanding presence. We're putting in more branded areas. I think very importantly, our salespeople are getting very good and very experienced at selling pre-owned. So we feel very good about it. It's a huge market in the U.S., obviously, and it's a big and growing market in the U.K., and we have a very strong position in both markets. Roberto Coin is our big focus in terms of getting into the branded jewelry category in a strong way. It's a huge market in the U.S. and Roberto is a great brand with absolutely great product. And we've got some ambitious plans as to how we're going to develop Roberto in that market. And yes, we'd expect it to become a bigger proportion. But we're not giving any numbers, and we're not obviously talking beyond the current year where we've reiterated guidance. But we will be updating the market in all these growth initiatives in due time. But so far so good in them all. Jon Cox: I want to just follow up on the Rolex CPO. I seem to remember that long-range plan from a year or so back. I think is 20% of Rolex will be CPO in the U.S. and 10% in the U.K. by FY '28? You say that you're ahead of plan. You must be pretty close to those figures. Hugh Duffy: What we said and where we are is that we are in line with the ambitions of that plan, and it was an ambitious plan and delighted that we're tracking very well with the expectations that we had of it. We will update the market in due time about all of our growth initiatives, as I say, so far so good in them all. David Hurley: The other thing I would say about the U.S. numbers for the first half as well is that it wasn't just Rolex or Rolex CPO that supported the growth. You have the other part of our vintage business, but you've also got brands like Cartier, that's been our fastest-growing brand now for the last 2 to 3 years, has a really healthy mix in terms of the sales across all brands and across all price points in the U.S. Jon Cox: You mentioned updating the market. Can I just push you a little bit on when that may be? Hugh Duffy: We don't have an exact date yet. We have a lot going on. We are working hard with our new colleagues at Hodinkee and Roberto Coin, for example, and a lot of other projects. But as soon as we have a date, we'll obviously update the market, but we don't have an exact date yet. Operator: Next question will be coming from Adrien Duverger of Goldman Sachs. Adrien Duverger: Sorry, can you hear me? Thank you so much for the color you provided so far. I have 2 questions, if possible. The first one would be on your -- on the space contributions. So we're seeing an exciting pipeline of projects with both openings and relocations. I wonder if you could help us understand the expected contribution from that space growth for this year and over the midterm in the U.K. and in the U.S. And my second question would be on the margin outlook. So you reiterated the target for adjusted EBITDA margin to be flat to minus 100 bps. Could you help us with the different building blocks implied in there? Because I know that there must be some impact from some of the manufacturers taking some margin points from retail partners. There must be some impact from relatively recent acquisitions with Roberto Coin and Hodinkee. And also if you could help us understand what we should expect in terms of seasonality for this year? Lars Anders Romberg: In terms of our space contribution, it comes down to very much allocation of products from some of our key brands, actually. So we never give space. It's less relevant in our category than you will find in most other retail formats. In terms of our margin guidance for the year, obviously, we haven't seen how some of the brands are going to respond to the tariffs. We've seen some actions taken, and we've sort of modeled out various scenarios of pricing versus margin contraction versus some pricing and no margin contraction. And I think we modeled through every possible scenario we could think of. And at this point in time, we feel that the margin guidance that we've given still holds water. We're up against some tougher comps in the second half in the U.S. We did have a few big boxes opening up. So we had Lenox in Atlanta. We had obviously Plano in Texas, and we have Jacksonville come on stream. So the comps in the second half in the U.S. market is going to be a little bit more tough. We are going to continue to spend a bit more on marketing throughout the year, which we think is driving new clients into the franchise. So it underwrites our strategic growth plans. So all good. Ecommerce in the U.S. has been off to a really, really good start and is growing exponentially. However, we're buying traffic in that sector in order to sort of reach the scale where we started to get the drop-through in terms of margin. So it's somewhat dilutive as you go through that buildup phase. And once we hook in the Hodinkee traffic, we expect that channel to become accretive. Operator: Next question will be coming from Piral Dadhania of RBC. Piral Dadhania: I have 3 fairly short ones. The first is on the U.K. consumer in the context of your current trading commentary. Could you maybe just give us an indication how the U.K. consumer has responded post the budget from a week or two ago? Have you seen any inflection or change in consumer behavior, change in traffic trends, change in conversion rates post that -- the announcement of the U.K. budget? The second is on capital allocation. Maybe just a word on pipeline for M&A. You spent -- your acquisition spend in the last 3 to 4 years has been fairly sizable. It does feel like you're maybe deemphasizing the contribution from future M&A. I just wanted to understand where the priorities may be in that context and whether we should expect a step down in acquisition spend in the next year or two? And if not -- and if that is the case, excuse me, then should we maybe also expect a new share buyback plan to be put in place as you think about the most efficient uses of your cash flow? And then the third and final question is just on feedback in relation to the multi-brand Mappin & Webb jewelry store concept, the multi-brand one. I think it's been a good few months now. Could you maybe just give us a couple of words on how that's progressing and what learnings you can take away from that? Hugh Duffy: Okay. Thanks for your questions. U.K. consumer, November has been fine. And like everybody, we're concerned about the budget and the delay of the budget certainly didn't help the mood of the country by any means. But post budget, it has not got any worse, I would say. And as we've reported, we've started the season well. We have November behind us and the consumers behave in a normal fashion. We did anticipate maybe a bit more interest in value. And so when we planned for the season, we had a slight nuance towards offering a bit more value, particularly online, and that is driving some good performance overall. So probably a bit more reassuring than might have been the case post budget, and the consumer behaving normally, and we are happy with the business that we started the season with. In terms of M&A, just to give you some numbers, I mean, at the end for fiscal year '25, business split down in the U.S., 37% of the business was what we bought, then 36% was us having double the value of the acquisitions. So the sales of the acquisitions that we had made and then the balance was effectively from new projects. So as we go forward, over $1 billion now in the U.S., obviously, as we go forward, acquisition remains a key part. We love what we've done with Roberto Coin and Hodinkee, great people, great businesses and great complements to our portfolio. And we have big plans that we'll look forward to updating the market on when the time is right. And we remain active on strategic acquisitions. We have always had and we still do have active discussions that are going on. There's a bit more realism or pragmatism, if you like, with regards to valuations. And we've got a bit confident that acquisitions will be a key part of our growth in the U.S. market. Share buyback, Anders. Lars Anders Romberg: Yes. I mean, obviously, as you've seen, we're guiding towards GBP 65 million to GBP 70 million of CapEx in our existing franchise and new projects during this year. And that whole reset of our network is going to come towards the tail end once we finish off our next fiscal year. And as a result, the need for capital expenditure in that network is going to decline as a percentage of sales as we go forward. So yes, I mean, we always look at deployment of our capital structure, and we are a growth story, and we continue to focus on that. In case we can't find any way to deploy our funds meaningful with good returns, then yes, share buybacks would be an option. It's something that we always discuss with our Board. Hugh Duffy: And your last question, so we love the stores that we opened in St. Ann's, the Mappin & Webb branded jewelry store, a fabulous team that we appreciate. Our team did a great job, I think, in recruitment and training of the team, great client response. Sales are building and obviously, the month of December is going to be very important. But clients love the store. They love the downstairs area where we've got hospitality and client engagement, and a fantastic portfolio of brands, many of which have never been available outside of London before. So we feel very good about it. Operator: We'll now move to Kate Calvert of Investec. Kate Calvert: A couple for me. First question on Roberto Coin. You mentioned a positive response to the new ranges. Could you give a bit more color on what has gone down well in the new ranges? And I'm just wondering, how current is the stock in the wholesale channel? I mean is there much old stock in there? Or is it quite clean at the moment from your perspective? And I suppose I'm quite interested in your sort of slightly wider thoughts on the U.S. jewelry market running into Christmas. I know it's a slightly different offer to Signet, but Signet were recently a bit more cautious on outlook for the holiday season. So I was wondering if you could give a bit more color on that. And then my final question is on the U.K. that you did see quite a negative mix effect from pre-owned growth, I believe. So as you continue to roll out the Rolex and Pre-Owned should we expect that negative effect to continue into FY '27 or are we past the worst of it? Hugh Duffy: Okay. Okay. Do you want to comment on there? David Hurley: Yes. I mean first of all, in terms of the ranges or what's working, quite honestly, everything has been working at the moment in the first half of the year. We've got such a wide range of products and price points. And we're proving it in our own stores first with the space expansions that we've done and elevating of the brand more than doubling the sales in the first half, and we've seen a great positive response to new products that's gone out there as well in terms of aging of product. We have no concerns in that area at the moment, either in our stores or with our partners. And it's just -- we're really still in our infancy in terms of what we can do with Roberto Coin. So we've proven it first in our own stores, but we've more than doubled the sales, and there's a lot more to do just within our own multi-brand environment. We've opened up our first store in Hudson Yards. We open up our second tomorrow, I think, in Vegas. We're going to continue. And I think it's an open door with some of our partners to expand the brand within the wholesale network as well. It just takes time in terms of green spaces and then building out the shop-in-shops. We've only just launched robertocoin.com. We've seen a positive response to that as the replatforming of that from the old system to Shopify. So a great response to the marketing campaign. So we're very, very optimistic about the brand. I think going through the holiday season, but more particularly in the longer term as we roll out our strategy. Hugh Duffy: Yes. And the package that we are able to bring to the market are putting great emphasis on the collections that Roberto and his team have designed, the 2 biggest collections are Love in Verona and Venetian Princess, and obviously a good featuring of them in the advertising campaign. So you naturally sell in more on the back of that in the sell-out of those collections, that's also super positive. The last thing is we have been in a very different market to Signet, I would say. And the luxury branded jewelry market continues to be -- it's the biggest one in the world per capita and in the absolute. We're delighted to be a part of it, and it continues to be very good. So as we've continually said, so far so good on the season, and we are reasonably upbeat about December. Lars Anders Romberg: In terms of the U.K. mix question, Kate, obviously, yes, as we've accelerated sort of our presence in the pre-owned business that had an adverse impact on our product margin. I think the step-up that we've seen has been extraordinary in the U.K., which is positive is what we wanted. So I think it's going to slow down in terms of dilution. The offset against which we're doing really well in some of our strategic partner brands. So we've put more emphasis on a brand like Tissot for instance, which is margin accretive. And we see some really good new product initiatives coming through in some of the other brands like TAG. So I think the dilution impact on product margin is going to stabilize. Operator: [Operator Instructions] We'll now go to Melania Grippo of BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got 2 questions. One is on your waitlist. I was just wondering if you have seen any changes in terms of consumer behavior and customer signing on it? And my second question is instead on price increases for 2026. What's your expectations in terms of brands increasing their prices for both watches as well as jewelry? Hugh Duffy: On -- sorry, the first question was on registration of interest list. No big change to be honest. In the U.S., we continue to, net-net, add names overall and pretty much all of the business if we so desire in the U.S. could be going to people around the list. I think as we've reported to you before, we have some products in the U.K. that are not fully dependent upon the list. We make some availability of our product in the stores, somewhere between 15% and 20% of the sales that we're now doing is from stock that's in-store, which is a very healthy trend as far as we are concerned. So I mean, demand overall for the brands that we manage through our waitlist remains very, very strong overall. Price increases, yes, we've got to see what the brand response is going to be to the 15% tariffs. I think it's reasonable to assume that the pricing is going to be an element of it. The 15%, if you're going to recover it all through our retail pricing, it'd be somewhere around 7.5%, 8%, something like that. We really don't know at this point. But I think it's reasonable to assume that pricing is going to be there, will it all be in the U.S. or will it more likely, I think, be a spread in different markets. I think probably that's the case. But we don't assume any pricing in our numbers going forward. But yes, my bet would be that will definitely be pricing activity as it always has in January, but it will take into account the tariff situation. Operator: As we have no further audio questions, [ Scott Lichten ] , we're going to call over to you for any questions submitted by webcast. Thank you. Unknown Executive: Thanks very much, George. And we've had a few questions submitted through the webcast. First is from Deborah Aitken from Bloomberg. The question is, U.S. markets, profitability has grown quickly, considering the company is still deep in restructure and expansion. Can you give us your midterm view on profit potential from the U.S. market given it's less mature and with jewelry still to build its share in your total revenue mix there? Hugh Duffy: What I would say is we really have moved beyond the period of having to build our organization resources in the U.S., support from the U.K. We clearly have done an amazing job to go from pretty much nothing to the $1 billion business that we have today. We have invested in resources with our head office down in Fort Lauderdale and offices up in New York, and a very obvious example of that clearly is localizing the ecom team that we were previously supporting out of the U.K. But we've really added to the resources and the infrastructure and feel very, very good about how the business has been managed on a day-to-day basis. We've obviously got our best man on here, the guy to my right. But they're really doing a great job. And our team between the U.K. and the U.S. teams, how we've managed the growth of supporting our business and the operational excellence that we achieved, really I'm very impressed by and very, very pleased with. We will, again, we'll talk to the market about where we are headed going forward. We wouldn't give any midterm indications today, but it's 61% of our profits now coming out of the U.S. There clearly has been leverage at the store level with the strength of the market and the market share gains that we've made. And it's a great growth prospect for us both in terms of top line and profitability. Unknown Executive: Follow-on question from Deborah. Can you share with us plans with some of your key brands pipeline and projects and timings? And are any areas which have not delivered as expected, which strategy rethink might be sought in fiscal 2027? Hugh Duffy: Yes. We prefer not to talk about sort of specific projects at a brand level. We have listed the projects that we've got coming up for the current year. Looking at them as a group, we get good paybacks. Overall, it's been a cornerstone of what we've done over this last 10, 11 years, and it continues to be the case. Of course, there will be some projects that don't quite hit the expectations that we had set for. Unfortunately, there are not too many. And if we look at the overall mix of what we've achieved there are more in which we would say we'd probably overperformed versus our financial criteria than underperformed. But we would talk about specific projects that way. If you want to add, Anders? Lars Anders Romberg: No. I think, obviously, with the acquisition of Roberto Coin and obviously, we've done the segment reporting, so you can all read. If we can get that brand to accelerate growth, of course, it's very accretive for our profitability. So there's no secret there. So that remains a high-level priority, obviously for us. And we have a few things that we are investing in that currently aren't accretive like an ecom proposition in the U.S. market that today is dilutive for profit, but long term, probably will be accretive as we have it in the U.K. So we'll see. David Hurley: I think, yes, we're 8 years young in the U.S. Some of our stores are only opened a couple of months. We're continuing to develop our client base. We're continuing to understand better and better what they need. We're continuing to add new clients. We're making sure that for the super high demand product that we have, where we're giving a significant percentage to new clients. So a lot more that we can do to develop that events have been continue to deliver more and more in terms of ROI. We did some fantastic events this year. Brian mentioned the Porsche event, the Venetian Ball that we did with Roberto Coin just at the end of the half. And there's still some. Brian talked about the growth that we've got from obviously, acquisitions and then how we've developed them. And some of the acquisitions that we've done, we've yet to fully mature. Betteridge, for example, we've refurbished one of the stores in Vail, which is fantastic. But we still have the full story in Greenwich to do. Aspen to do as of yet. And Hodinkee and Roberto Coin are obviously just in very early stages. So just a matter of planning it out and executing it. Unknown Executive: Super. We've got -- that's the end of the questions we have at the present time. Maybe, Brian, if we could hand back to yourself for closing remarks. Hugh Duffy: Okay. Thank you. Thank you, David and Anders, as well, thanks for all your questions. We are really pleased about our first half, pleased about our start of the second half overall. I think it's clear that the category that we're in is a very resilient category that we can see here in the U.K. It's an underdeveloped category in the U.S. I think that's clearly proven and very much responding to investment from us and others in the market and very well positioned for growth. So very happy at what we've done, happy about the start of the second half, delighted with the job that our teams are doing across both our markets, U.K. and U.S. And I appreciate you all joining us this morning. Thank you.