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Patrick Cheong: Greetings. Welcome to New World Development's FY 2025 Annual Results Announcement webcast for analysts and investors. I am Patrick Cheong, Head of IR and also the moderator for this session. First of all, let me introduce to you our management. They are New World Development's Executive Director and CEO, Ms. Echo Huang; New World Development Executive Director, Mr. Sitt Nam-Hoi; New World Development, Executive Director, CFO and Joint Company Secretary, Mr. Edward Lau; New World China, COO, Mr. Benny Chan. [Operator Instructions] Now I will pass the floor back to Echo. Shao-Mei Huang: Thank you, Patrick. Friends from the investment sector, greetings. Welcome to New World Group's FY 2025 Annual Results Announcement. Time flies. Half a year ago, when I first shared our company's performance with everyone, I outlined 3 key work directions. First, focus on the property business, continuously advancing and expanding business development to ensure normal and stable business continuity, business as usual. Second, improve the company's cash flow and actively manage our finances. Third, continuously optimize operational efficiency and governance capabilities and regularly provide everyone with the latest business updates. Through our team's dedicated efforts over the past period, we have achieved some modest results. I would like to share 3 key points with you. First, on 30th June, we successfully completed a HKD 88.2 billion bank refinancing. This refinancing provides us with valuable time to focus fully on developing our core business. I would like to once again express my gratitude to every bank for their support. Besides yesterday, we successfully secured the first tranche of an additional HKD 3.95 billion of committed loan facility as today. This amount will be used to address the company's debt-related needs. In the future, we also have the flexibility to scale up further. Second, our core business delivered outstanding results. Despite persistent market uncertainties, we successfully achieved our annual property sales target of HKD 26 billion with multiple projects in Hong Kong and Mainland China selling exceptionally well. Retail and office leasing also delivered strong results with K11 MUSEA and Art Mall in Hong Kong, achieving record-high foot traffic, while sales across multiple tenant categories saw double-digit growth. Third, our debt reduction efforts have yielded initial results. Both total debt and net debt declined throughout FY '25 while cash flow improved significantly and returned to positive territory, reflecting our group's gradually stabilizing financial position. I understand that our recently announced full year results shows a loss of HKD 16 billion on the books. However, there is no need for undue concern as this figure is primarily impacted by several noncash provisions and losses of a one-off nature. I will elaborate on this shortly. Looking ahead to the coming year, we'll continue our 3 directions. Focusing on our core business, actively managing finances and enhancing operational efficiency. Among these, I would like to highlight 2 key points. First, we will seize the opportunity presented by market improvements. With falling interest rates and the rebound in property market sentiment, we will continue to push forward with sales and accelerate cash flow recovery. Second, we must maintain highly prudent operations while pursuing steady progress. Current market uncertainties persist. Interest rates have only been cut once this year so far and the trajectory still contains risks. Our debt reduction efforts are just beginning with a significant journey ahead. Yet I firmly believe our team possesses the capability to navigate all challenges. Next, I would like to discuss the progress of the 7 measures to reduce indebtedness that I proposed at the last results announcement and how we achieved steady progress. First we continue actively selling development projects. In Hong Kong, all 3 of our Pavilia collection projects were met with enthusiastic market response and achieved outstanding sales results. These include North Point State Pavilia, which has successfully kicked off the year when launched. Meanwhile, Deepwater Pavilia in Wong Chuk Hang has generated over HKD 10.7 billion in sales since its midyear launch, making it this year's top selling new development. Last Friday, our first new project for FY '26. HOUSE MUSE in Kowloon City sold out all units listed on its price sheet on the very first day of sales. In Mainland China, we also successfully exceeded our elevated full year targets. Guangzhou's Central Park View, The Sillage, Canton Bay and also Shenyang, The PARKSVILLE, all delivered exceptionally strong results. Second, actively advancing our asset disposal plan. Through property sales and asset disposal, we successfully achieved our FY '25 annual sales target of HKD 26 billion. Our FY '26 annual sales target will be further increased to HKD 27 billion. Third, unlocking the value of the group's farmland holdings to fully advance the Northern Metropolis project. The [indiscernible] Row project in collaboration with China Merchant Shekou commenced construction in March this year said to deliver 2,300 units with sales expected as early as FY '27. The first phase of the Yuen Long sales project developed jointly with China Resources Land has completed the land premium payment. Construction is expected to commence within this year with presales anticipated as early as FY '27. Fourth, we will enhance rental return. Our commercial properties in Hong Kong and Mainland China are performing well. Office leasing remains robust despite current market conditions. And we will continue to strive to increase rental income. Fifth, streamline costs and reduce CapEx and OpEx. We strictly manage expenses with CapEx and OpEx, both showing significant further reductions in FY '25. We will continue to prioritize cost efficiency in the coming period. Sixth, suspend dividend payments. We have temporarily suspended dividend payments to shareholders and perpetual bondholders to preserve cash. Seventh, proactive treasury management. We have completed the previously mentioned HKD 88.2 billion bank refinancing, providing greater flexibility for future business development and financial needs. Moving forward, we'll continue to work diligently and fight every tough battle. Finally, I would like to express my gratitude to the management team, every colleague in the company and all friends and institutions that have supported us. It is through everyone's united effort that the situation has begun to stabilize. Now let me very quickly share our financial performance for FY '25. Specifically, regarding core operating profit and segment results, although we recorded solid contracted sales in both Hong Kong and Mainland China in FY '25, the property delivery volume was lower than FY '24 due to the impact of Mainland Chinese delivery schedule. Besides we incurred some preopening expenses for several newly opened investment properties in FY '25. So core operating profit for FY '25 decreased by 13% year-on-year, while segment results declined 4% year-on-year. Excluding the impact of asset disposals and new openings or new development expenses on revenue, the IP segment recorded a 2% increase in segment results. K11 segment results also rose by 4%, demonstrating that despite the continued relative weakness in the retail and office markets, our investment properties continued to deliver stable performance. Our FY '25 loss attributable to shareholders was HKD 16.3 billion. With the second half recording a loss of about HKD 9.7 billion. While this exceeded the first half loss of HKD 6.6 billion, it was mainly impacted by several noncash provisions and losses of a one-off nature. Notably having previously adjusted valuations for some investment properties, the full year fair value loss on IP for FY '25 was only about HKD 400 million including HKD 300 million impairment on the office portion of 11 SKIES. Prior to property development, significant impairment charges were also made. Related provisions for the first half of FY '25 amounted to HKD 3.4 billion, while the second half of FY '25 recorded about HKD 5.1 billion. Although the market sentiments and transaction volume for Hong Kong real estate improved in the latter half of FY '25, property prices remained relatively weak. Therefore, we made corresponding provisions in line with market conditions. Besides, in second half of FY '25, we recorded HKD 5.2 billion of other provisions and one-off losses primarily comprising 3 components. First, due to changes in Hong Kong's overall retail environment, we correspondingly adjusted the valuation of the 11 SKIES retail portion, resulting in a provision of HKD 2.7 billion. Second, we disposed of certain long dormant legacy projects in Mainland China during the second half of FY '25, resulting in a loss of about HKD 1.2 billion. Third, bulk transactions and other businesses also incurred one-off loss of about HKD 1.3 billion. On the expenses side, G&A expenses amounted to HKD 3.5 billion, down 16% year-on-year. This decrease exceeded the 9% decline recorded in the first half of the year, mainly due to our ongoing organizational optimization efforts. By enhancing collaboration between Mainland China and Hong Kong teams, we improved departmental efficiency across functions like IT, finance, HR and ESG, successfully achieving cost savings. CapEx amounted to HKD 12.6 billion. A significant 15% decrease year-on-year, and it is also below our latest FY '25 CapEx guidance of HKD 13 billion. This is mainly due to our continued strict control over CapEx. In FY '26, we will further reduce CapEx to below HKD 12 billion. Regarding debts, our total debts continued to decrease, reaching a level as of the end of June 2025, our total debt decreased by HKD 5.7 billion compared to June 2024 and slightly decreased by HKD 0.5 billion compared to December 2024. This is due to the refinancing completed with banks in the second half of FY '25. Edward will elaborate more shortly. Notably, apart from total debt, our net debt also decreased falling by HKD 4.5 billion compared to December 2024. This is mainly due to our cash flow returning to positive territory. Regarding the refinancing progress and debt reduction that everyone is most concerned about, let me pass the floor to Edward, our CFO, to explain. Edward Lau: Thank you, Echo. Regarding refinancing progress, I believe everyone has read our announcement. I will briefly summarize it here. The amount of our refinancing this time reached HKD 88.2 billion. I would also like to take this opportunity to once again thank all banks for their support. As Echo mentioned earlier, completing this refinancing has strengthened our financial position, including -- this refinancing has extended the earliest maturity date of certain bank loans to 3 years later, specifically 30th June 2028, thereby, enhancing the group's short- to medium-term liquidity. As shown in the right chart, our debt maturing within 2 years decreased by HKD 44.8 billion, falling from HKD 73.8 billion in June 2024 to HKD 29 billion in June 2025. Of this HKD 29 billion, HKD 6.1 billion represents bonds maturing within the next 2 years. About 80% of this amount or HKD 4.9 billion will mature in the second half of FY '27. The remaining HKD 22.9 billion consists of bank loans. Of this amount, about 98%, that is HKD 22.4 billion represents secured loans. This means our debt maturing in FY '26 totals only HKD 6.6 billion, with HKD 1.3 billion being bonds. This refinancing also provides greater flexibility for our future business development and financial needs. Regarding total debt, we successfully reduced it by HKD 5.7 billion in FY '25 from HKD 151.6 billion in June 2024 to HKD 146 billion in June 2025. At the same time, we successfully controlled the scale of net debt reducing it from HKD 124.6 billion in December 2024 to HKD 120.1 billion in June 2025, a decrease of HKD 4.5 billion. The net gearing ratio slightly increased to 58.1%, primarily due to shareholders' equity declining from HKD 224.9 billion at the end of June 2024 and to HKD 206.7 billion at the end of June 2025. This decline was impacted by the previously mentioned property development impairment and one-off losses offsetting the decrease in net debt. However, benefiting from interest rate cut in the U.S. and Hong Kong, our average interest rate decreased from 5% in FY '24 to 4.8% in FY '25. Consequently, the reduction in total debt, combined with lower interest rates resulted in our total financing cost decreasing by HKD 1.3 billion from HKD 8.7 billion in FY '24 to HKD 7.4 billion in FY '25. I will pass the floor back to Echo. Shao-Mei Huang: Thank you, Edward. In the coming part, I will provide a detailed overview of each business segment. Regarding Hong Kong DP, our attributable contracted sales for FY '25 reached HKD 11 billion. All 3 Pavilia collection projects launched in FY '25 were well received by the market, demonstrating buyers' preference for the New World Development brand and products as well as their confidence in us. Our super luxury project, Deep Water Pavilia in Hong Kong Island Southern District offers 825 units across 2 phases. Since sales commenced in May 2025, performance has been exceptionally strong. To date, over 620 units have been sold, generating total contracted sales exceeding HKD 10.7 billion, making it the highest growth in new development in Hong Kong this year-to-date. Our residential project, State Pavilia in North Point offers 388 residential units launched in January during a relatively sluggish Hong Kong property market, it immediately set 3 major records in 2025. That is becoming the first project this year to sell out its first batch of units on the same day, achieving the highest per square foot price for a new development on the Hong Kong Island at the time and reaching a peak price of HKD 51,000 per square foot. To date, over 335 units have been sold with total transaction value exceeding HKD 3.7 billion. Our Kai Tak project, Pavilia Forest commenced sales in July 2024, offering a total of 1,305 residential units. To date, over 690 units have been sold with contracted sales exceeding HKD 4.8 billion, making it the highest selling presale project in Kai Tak's runway area to date. Besides residential properties, we continued to advance the sales of the group's office project in West Kowloon. Leveraging the group's effective sales strategy, the office project at 83 Wing Hong Street has attracted numerous owner-occupiers and investors. To date, the project has recorded cumulative total contracted sales of about HKD 470 million since launch. The Twin Tower Landmark Grade A office project at 83 King Lam Street, Cheung Sha Wan is a leasing project right now. And then there is the NCB Innovation Center at 888 Lai Chi Kok Road recorded sales of HKD 1.3 billion in FY '25. Now I will pass to Mr. Sitt Nam-Hoi to explain our upcoming property project deployment in Hong Kong and progress in the Northern Metropolis development. Afterwards, Benny will share updates on Mainland property development. Mr. Sitt, please? Nam-Hoi Sitt: Thank you, Echo. I will outline our upcoming development projects in Hong Kong. We have ample land bank for short, medium and long term and will continue to drive sales with full force to ensure steady turnover. As Echo just mentioned, in FY '26, besides units from our 3 Pavilia projects, we also have a series of new launches entering the market. This includes last Friday's debut of our first brand-new FY '26 project, and that is HOUSE MUSE, Nga Tsin Long Road in Kowloon City within School District 41, all units listed on the price sheet sold out on the very first day of sales. Besides, we will progressively launch other projects in Kowloon, including 2 Bohemian collection developments in prime West Kowloon locations, one on Canton Road and the other on Kwun Chung Street plus a low-density luxury residence on Rose Street in Kowloon Tong. Besides the 530 units in Phase III of Pavilia Farm, our development above Tai Wai Station, are also expected to be launched in FY '26. The above projects will collectively provide over 2,100 units in FY '26. Furthermore, our JV projects will continue sales such as the Knightsbridge in Kai Tak. Miami Quay, Double Coast in Kai Tak -- Typhoon -- in Kowloon Bay and also the Legacy project on Victoria Road and Mid-levels West will also be launched within this year. The Chief Executive reiterated in last week's policy address, the need to accelerate development of the northern metropolis and has already established a Northern Metropolis Development Committee. The government is currently conducting detailed planning for areas, including the San Tin, [indiscernible], Ngau Tam Mei and Lau Fau Shan. Meanwhile, survey and design work for the Hong Kong, Shenzhen Western Railway commenced this year, with the goal of opening service by 2035. By then the journey from Hung Shui Kiu to Qianhai will only take 15 minutes. Our group has long-standing operations in the district, enabling us to capitalize on policy alignment and accelerate development. We possess about 15 million square feet of farmland area with existing plants expected to provide about 12 million square feet of land bank. Among these, 2 projects have already completed land premium payments, providing about 500,000 square feet of attributable GFA. The first is the Ma Sik Road project, a JV with China Merchants Shekou, which will provide 2,300 units. Construction commenced in March 2025 with the sales expected to commence as early as FY '27. The other is the Phase 4 project in Lungtin, village Yuen Long developed in partnership with China Resources Land. Land premium payment has just been completed, allowing construction to commence immediately. This project will deliver over 700 units also for launch, the earliest in FY '27. Besides these 2 projects, several more are expected to complete land exchange process within the next 1 to 2 years. They include Yuen Long, Lungtin village; Yuen Long, Lungtin village Phase II; Lungtin village phase 5 and also in Sai Kung, Sha Ha. Estimated to add about 2 million square feet of attributable GFA for the group. Over the next 3 to 5 years, we'll continue pursuing urban planning applications and land exchange applications, which are projected to increase the group's attributable gross floor area by about 6.2 million square feet. Key projects include Tong Yan San Tsuen, Wing Kei village, Wing Ning village, and Shap Pat Heung Road. The planning application for Yuen Long, Shap Pat Heung Road was approved by the Town Planning Board in January 2025. And similarly, the Wing Ning village in Yuen Long Land Sharing Pilot Scheme project. The Town Planning Board recently approved amendments to the statutory plan this month to resume the site for residential use. Regarding long-term outlook, the main projects currently planned include in San Tin [indiscernible] village, Ngau Tam Mei and Lau Fau Shan, which together can provide nearly 3.2 million square feet of attributable GFA. In summary, I want to emphasize that we have ample resources locally in the short, medium and long term. And we will cease market and policy opportunities to fully support the group. And for Mainland property development, I will pass the floor to Benny to make a report. Thank you. Unknown Executive: Thank you, Mr. Sitt. On 26th September last year, the Polit Bureau of the CPC, Central Committee explicitly called for promoting the real estate market to halt, decline and stabilize, marking the arrival of a policy inflection points. Then on 13th June this year, the State Council executive meeting further proposed establishing a new development model for the real estate market signaling an even clearer stance on achieving market stabilization and boosting industry confidence. Since this year, local governments have actively responded with significantly accelerated policy rollouts. Major cities, including Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, tier 1 cities have implemented measures across multiple fronts, such as optimizing or lifting purchase restrictions, lowering down payment ratio, reducing mortgage rates and refining price caps. Notably, Shenzhen's new policy released on 5th September this year removed purchase quantity restrictions in multiple districts, further boosting market confidence. Consistently adhering to our philosophy of developing high-quality projects, we have successfully capitalized on policy dividend, achieving outstanding results across multiple regional projects. In FY '25, the group's mainland contracted sales reached RMB 14 billion. Even after adjusting our annual target upward in response to market changes, we successfully exceeded our goals. Numerous projects achieved individual sales exceeding RMB 1 billion. For instance, Guangzhou, Central Park View, benchmark luxury project showed RMB 2 billion upon its launch, demonstrating both strong pricing power and market demand. Other projects like Guangzhou, New World; The Silage and Canton Bay and Shenyang, The Parksville reflect the market's support and recognition for high-quality developments -- residential developments. In addition to outstanding sales performance, we successfully delivered 3 high-end residential projects in this fiscal year, including Hangzhou New World, River Opus; Guangzhou, New Metropolis Mansion and Shanghai City Gather. Then regarding asset disposals. In FY '25, we sold the Beijing Xinjiang Office, Ningbo New World office building as well as commercial properties and parking spaces in locations, including Guangzhou, Central Park View, Ningbo New World and Shenyang will continue asset disposal to accelerate capital recovery. In the coming years, the group continue to launch property development projects in Mainland China. First tier cities are beginning to relax purchase restrictions, guiding the market towards high-quality products. Over the next 2 years, we will continue to market premium projects, including Guangzhou, Central Parkview; The Sillage; Shenyang, the Parksville and so on high-quality projects. And Shenzhen Longgang 188 project will commence sales in FY '26. This is a large-scale project with total gross floor area of 650,000 square meters, offering 3,000 residential units across 2 phases. Its prime location at the core intersection of Luohu, Yantian and Pingshan Districts provide significant transportation advantages with direct access to border crossings and high-speed rail stations within 30 minutes. Over the coming year, the group is also in negotiations for multiple asset disposal. We'll continue to adapt to market changes and leverage our sales strengths. We are confident in achieving our annual targets. Now I will pass the floor back to Echo. Shao-Mei Huang: Thank you, Benny. As mentioned at the beginning, regarding IPs, we continued to deliver solid performance in FY '25. Despite the challenging macroeconomic environment, overall segment results and K11 segment results grew 2% and 4% year-on-year, respectively. In Hong Kong, our office leasing performance remained strong. Our occupancy rate performed well with K11 Atelier in Tsim Sha Tsui and North Point as well as Manning building and New World Tower in Central, maintaining high occupancy rates. For shopping malls, K11 MUSEA and Art Mall maintained high occupancy rates of 96% and 100%, respectively with foot traffic reaching record highs in FY '25. In August this year, both malls achieved the highest single month foot traffic since opening, with overall foot traffic increasing 20% year-on-year. Leveraging its prime location, unique positioning and robust foot traffic, MUSEA continues to attract numerous major international brands. Since July last year, over 10 international first-tier luxury brands have successfully opened new stores, upgraded existing stores or expanded their footprint. Among these, Loewe's newly upgraded concept store, Saint Laurent's Hong Kong flagship store and Rolex's special concept store opened in FY '25. Upgrades for AP and VCA stores were completed during the recent summer holiday period. Looking ahead, Prada's new duplex store and Balenciaga's new store will open sequentially in FY '26. This summer, international luxury brands at MUSEA achieved over 20% year-on-year sales growth. Besides, we continue to promote interactive experiences for our customers with 2 major events taking place at K11 MUSEA this summer vacation. First, the Cristiano Ronaldo Hong Kong Museum, the first of its kind in Asia opened in early July, drawing numerous fans. Second, the large scale exhibition of the popular Japanese anime character Chiikawa was held at K11 MUSEA's Waterfront in August. These events further boosted MUSEA's foot traffic and sales performance. Art Mall positioned to target the Gen Z market has capitalized on the green economy trends by actively introducing multiple anime and trendy pop toys brands. Examples include the globally popular Popmart and CardGame giants, [indiscernible] and Toys"R"Us first life play concept store in Asia, successfully cultivating a stable young consumer base. The green economy has significantly boosted sales performance for related merchants with sales from anime and trendy pop toy merchants increasing by over 65% year-on-year in FY '25. In Mainland China, our overall project occupancy rates remain sound primarily due to our effort in brand enhancement and tenant mix adjustments, which delivered richer experience to consumers and sustained consumption momentum. Shenyang K11 introduced 7 new brands to Northeast, China and Shenyang, first store in FY '25, cohosted over 30 events with tenants, attracted more than 13 million visitors throughout the year and achieved record-breaking sales. During FY '25, 2 new K11 projects opened in Mainland China, Shenzhen ECOAST and Ningbo K11, Shenzhen ECOAST, the first K11 flagship project in Mainland China, grandly opened before this year's May Day Golden Week. Since its opening, it has recorded over 12 million visitors, averaging 100,000 daily foot traffic. On the first day of May Day holiday alone, 300,000 people came and high foot traffic was maintained during public holidays like the Dragon Boat Festival, establishing it as a new cultural and tourism hotspot in the GBA. Ningbo K11 was opened in September last year and has gained strong market recognition. Since opening, it has recorded more than 5 million visitors. The project has also brought several new stores to the local area, including Ningbo first Tsutaya book store establishing itself as a landmark in Ningbo and the East China region. In the coming period, we'll continue to see several major investment property projects officially open including Guangzhou's second K11 will open on 29th September 2025. That is next Monday, creating another landmark TOD complex for Guangzhou, Chenglong [indiscernible]. On 28th May this year, we signed a strategic cooperation agreement with the Shanghai government officially launching the major project K11 Atelier to establish a lifestyle hub for high-end consumption and cultural experiences along Huaihai Road. The K11 office Atelier session will open in second half of next year with key initial partners, including MS and a Singapore-based law firm, Rajah & Tann. Meanwhile, the Guangzhou New World Art Centre project has entered its harvest phase. The project boasts a total GFA of 740,000 square meters. Apart from residential units, it encompasses diverse formats, including K11 Art Mall, K11 Atelier hotel, salable commercial components such as office towers and retail streets. Office buildings and commercial streets have been progressively delivered. Phase 2 has reached a structural completion and is expected to achieve full completion by the end of 2025. Regarding CapEx, as shown in this chart, you can see that our CapEx for FY '25 further decreased from HKD 14.8 billion in FY '24 to HKD 12.6 billion, mainly due to, one, we continued to strictly control spending on each project, optimizing and enhancing construction cost efficiency while maintaining high building quality. Two, regarding land bank, we aligned with government policies this year, seizing opportunities to convert farmland into land bank. This reduced both the cost of replenishing land bank and capital expenditure. In FY '26, we'll continue our effort to control CapEx, strictly limiting it to below HKD 12 billion. In terms of operating expenses, we have optimized our corporate structure and processes to reduce daily operating expenses. Our G&A expenses in FY '25 amounted to HKD 3.5 billion, representing a 16% decrease compared to the previous year. Comparing with FY '23, it is down 30%. We'll continue to effectively control our operating expenses, ensuring that every dollar counts. Based on our current financial situation, we have decided to continue suspending dividend payments and perpetual bond coupon. I'd like to take this opportunity to review our progress in treasury management. First, our company successfully completed HKD 88.2 billion refinancing project in FY '25. Second, we also successfully secured the first tranche of an additional HKD 3.95 billion in committed loan facilities yesterday with the option to scale up further as needed in the future. Third, our company's cash flow has improved. Fourth, overall total debt continues to decrease with net debt reduced by HKD 3.6 billion over the past year, and the net gearing ratio has stabilized. Moving forward, we will continue to enhance our company's cash flow, actively manage our finances and prudently handle our debt obligations to achieve steady progress. Finally, I would like to once again express my sincere gratitude to all investors, especially banks for their tremendous support over the past few months. This has strengthened our confidence and we believe the future will get better. Thank you all. Patrick Cheong: Thank you, Echo. Now we will start Q&A session. We have already received many questions. So we have actually categorized them briefly. Our management will answer them one by one. First question, our debt position. So in FY '25, net debt decreased. So does the company have concrete goal for debt reduction and timetable? Shao-Mei Huang: Let me take this question. Now reducing indebtedness is our important work, and I have been emphasizing this. In the coming year, we will strive for progress in stability, we will seize market improvement opportunities to manage our treasury and cash flow. We have put in place 7 measures to reduce indebtedness. And this year, you have seen initial success and achievements. Our total debt and net debt in FY '25, came down by HKD 5.7 billion and HKD 3.5 billion, respectively. Well, this year, we have completed HKD 88.2 billion bank refinancing. For the group we increased short-term and medium-term liquidity. As a result, in the future, in the coming few years, we'll have more time to steadily develop with full force our core businesses. We will continue to strive for steady progress and promote sales and actively improve cash flow to reduce total debt. That is our top most target. We have not set short- to medium-term target for net gearing ratio because that involves a lot of asset disposal progress, cash recovery and interest rate environment factors. Patrick Cheong: Next question is related to your [indiscernible]. So some time ago, New World announced that for a number of perpetual bonds, coupon payment will be deferred. So now you have completed the refinancing project. When are you going to resume payments? In the market, there are rumors that the company will discuss with bondholders about LME options. So when will that be a concrete proposal? Shao-Mei Huang: Edward can you take the question? Edward Lau: Thank you, Echo. Concerning deferment of payment of perpetual coupon while our group has adhered to our prudent capital management principle and that is a decision to preserve cash. All along, our company has been actively managing our finances. Our goal is to lower total debt. We comply with all debt obligations for perpetual coupon distribution. We comply with all contractual terms in our action. So in relation to coupon payments and related changes about the perpetual, we will go according to the contract and related regulatory requirements. And at appropriate times, we will make disclosure and make announcement. Recently, the market -- there are a lot of speculations and rumors in the media about New World. So everything should be based on official announcement, please do not believe in market rumors. As I said earlier, our company has the objective of reducing indebtedness. So the management will continue to keep an open mind to assess different financial tools. In the future, if there is concrete arrangement, we will make disclosure according to the loss. Patrick Cheong: The next question is also about debt. So all along, the company emphasizes that reducing indebtedness is the goal. But yesterday, you took out a new bank loan. So what is the use of the proceeds? And for this new bank loan, is it in conflict with your goal of reducing indebtedness? Shao-Mei Huang: Edward? Edward Lau: As Echo mentioned just now yesterday, we got the first tranche of additional HKD 3.95 billion committed credit facility. We're going to use it to meet debt related needs of our company. As stated in the announcement in the future, we can increase the scale according to needs. As said earlier, this year, we have successfully controlled the scale of net debt. For the whole year, net debt decreased by HKD 3.5 billion. This shows that our cash flow has improved. So while risk will be controllable, we will make good use of financing tools to help our company to increase or enhance liquidity. We will continue to actively improve our cash flow and expedite capital recovery and also our asset disposal plan. So for all these goals, they are for the purpose of reducing indebtedness in the long run. Patrick Cheong: Next question is about the majority shareholder. Will the majority shareholder consider injecting Capital? Unknown Executive: I will take this question. sometime earlier, we issued an announcement to clarify. So far, we have not received any capital injection plan from the majority shareholder. Patrick Cheong: This question is a similar question. Is that -- right now, is it true that the company continues to undertake that there won't be rights issue? If there is no rights issue, will you consider share placement. If so, then are you going to place the shares to the majority shareholder? For CTF service and CTF jewelry, recently, they issued convertible bonds, one after the other, will New World also consider issuing CB? Shao-Mei Huang: Let me take this question. Some time ago, we said that our major goal is to improve our cash flow right now. As management of the company, we will prudently consider any capital tools and options. But so far, we do not have any plan about rights issue, share placement or issuance of convertible bonds. Patrick Cheong: Next question. About this year's P&L. Unknown Executive: This year, for the whole year, results still showed a loss of more than HKD 10 billion. Patrick Cheong: So at the next result announcement, do you think there will still be a loss. When do you think you can achieve a turnaround? Edward? Edward Lau: Just now Echo said that this year, on the book full year results, our full year loss was affected by one-off provisioning and one-off loss. So there are impacts about interest rate environment, overall macro market environment and so on. The U.S. Fed so far had cut rate once. But overall interest rate trajectory still sees a lot of uncertainty. It is difficult to make any forecast now. As mentioned just now, we'll continue to optimize our operating efficiency, we will enhance our property sales results and recurring revenue. We will strictly manage our expenses. We will try our best to achieve steady progress. And when the market improves, we are confident that our profit will improve. Patrick Cheong: The next question is about 11 SKIES. Are you talking with airport authority about lowering rent or selling 11 SKIES? Shao-Mei Huang: Let me answer this question. All along, we have got deliberation with airport authority. There are external rumors about 11 SKIES, and the airport authority has made a response sometime earlier. You can take reference from that response. So far, we do not have anything to add. Patrick Cheong: Next question is about the recent policy address. The policy address states that the government wants to expedite development of the north metropolis. What kind of help will that be to New World in specific. Shao-Mei Huang: Mr. Sitt? Nam-Hoi Sitt: Thank you, Echo. The group welcomes the government's decision to expedite development of the northern metropolis and there will be the setting up of Northern Metropolis Development Committee. This is conducive to the creation of new economic opportunities for Hong Kong. We have 15 million square feet of farmland -- land bank. A lot of them is in the northern metropolis prime sites. We will use different channels to release value of the farmland and to expedite capital recovery. We'll actively bring in strategic working partners to enhance development potential. Now we work with China Merchant Shekou in [indiscernible] Ma Sik Road project. We have completed payment of land premium. And this year, in March, construction commenced. 2,300 residential units can be offered and sales can start in FY '27 the earliest. We also work with China Resources Land in Yuen Long Lungtin Tsuen Phase 4. We completed land premium payment this month. After that, construction will commence. 700 units can be offered, and they can be launched as soon as FY '27, the late -- the earliest. Patrick Cheong: The next question is about Mainland China property development. So what are the management's views in Shenzhen. Recently, there are new policies released? What kind of help will that be to the company? Shao-Mei Huang: Benny? Unknown Executive: Yes, in Shenzhen, there are 2 projects that will be launched soon in the market. In Shenzhen, there are new policies, they will definitely help the sales of our new projects. Let me add a few points about the new policies. They cover 80% of the areas of Shenzhen, number of units purchased restriction is abolished for non-Shenzhen [indiscernible] people. The purchase restrictions are lowered. And then for first units and second property unit mortgage rates, it is unified at 3.05%. And this has lowered the cost for property buyers significantly, and it also helps the purchase desire. In the first week after the new policies, for firsthand residential transactions in Shenzhen, comparing with August same period, there is an increase by 40%. September and October, our traditional peak season, together with these new policies, turnover is being driven and the main demand is from upgraders. And for our 2 projects in Shenzhen, the first one is the Longgang 188 project. It is in the nonrestricted area. There is convenient traffic. Within 30 minutes, people can go to the border control points and high-speed real station. Apart from local residents, there are many Hong Kong people who may be interested to buy properties in Shenzhen, they will be attracted to the projects. Another project in Shenzhen is in Nanshan, Xili urban renewal project. So all the demolition works have been completed. The main body construction is being approved by the government already. In 2026, we will launch the project to the market. Patrick Cheong: Next question about K11. Some time ago, the former CEO of New World, Dr. Adrian Cheng, established K11 by AC. So together with K11 Group, especially -- together with New World Group and K11 brand under the group, what are the relationship? Shao-Mei Huang: Let me take this question. K11 is wholly owned registered trademark and brand of our group. When Dr. Adrian Cheng left our group, he sought the consent of our group to use K11 by AC brand. K11 by AC current investment businesses and operations, including the asset-light management projects are not related at all with K11 and New World Group. At the same time, the Hong Kong K11 MUSEA that we are operating and managing, K11 Art Mall, Guangzhou K11 and Shanghai K11 and also the K11 projects mentioned in our annual reports are totally not related to K11 by AC. Finally, I would like to supplement that apart from our group series of companies, K11 series under our group at present do not manage other property projects developed by third parties. Operator: Next question is about asset disposal. Some time ago, there are rumors in the market about K11 Art Mall. Apart from that, does the group have planned to sell Shanghai K11. This year regarding asset disposal, do you have any concrete goals? Now, the market is not that good. There are many developers which want to sell properties to achieve encashment. So when you dispose of assets, do you encounter big difficulty? Unknown Executive: Let me answer this question. Regarding false market rumors, we will not make further comments. But I would like to state the point that from time to time, our group receives asset inquiries from potential buyers. This shows that our assets are of good quality, and they are attractive in the market. In the market, there is both buying and selling. This is normal. These are normal behaviors. I would like to emphasize that we will only sell our assets when our targeted price is reached. Patrick Cheong: Because of time, I will now read out the last question. This question is about recent rate cuts. Recently, the rate cuts -- how much help is brought to your interest expenses? How much interest is saved in the coming FY, how much money do you think you need to repay? Shao-Mei Huang: Edward? Unknown Executive: Thank you, Echo. Yes, rate cut helps our group to lower funding costs. Based on our current debt structure, if interest rate falls 1%, we can save around HKD 800 million annual interest expenses. As mentioned earlier, debt that will mature in the coming 1 year amounts to only HKD 6.6 billion. We will actively do financial planning. We'll use diversified tools to manage our refinancing risk. Patrick Cheong: Thank you, Edward. Finally, once again, thank you all for joining New World Development's FY 2025 Annual Results Announcement today. Thank you.
Unknown Attendee: [Presentation] Please put your hands together for our group CEO, Graham Lee. Graham Lee: Sure. Thank you. Good morning, everyone. It is a pleasure to be here with you to share the results of our last 6 months. It -- is I mean this is quite something for me to be standing here. It's been 2.5 months since I've had the privilege of being CEO, and I have loved every single minute of it. And the reason for that is all of you, every single one of you. All of the 17,000 people in the branches -- from the branches to the [ BSE ]. From the newest consultant through to our Board of Directors, thank you very much for your support for me. Thank you for the excellent work that you've done. And thank you for continuing to strive to be better for our clients. It is more than 20 years since I joined Capitec. And in that time, there's a couple of things which have always been true. We've stayed true to our fundamentals, and we've always put our clients first. So in the spirit of that, we are now up to 25 million clients. It comes from our personal banking, that's 24.4 million. All of our merchants and core businesses as part of Business Banking and the 0.25 million clients contributed by AvaFin, but together, we're now at 25 million clients. Now despite the huge denominator, we've still grown that by 8%. But there were a few exciting segments, which have grown even more steeply, and they give me great optimism for the future. They include young clients. So we're doing very well in youth and also in our clients who are higher income owners, earning more than ZAR 50,000, that's up by 24%. Even more importantly are those clients who use us the most. So our app clients who go on to our app every single month, every single day even who buy our digital products. And most importantly, our fully banked clients, up by 11%. Now that's a really important number because that 38% of our clients contributes roughly 3/4 of all of our income. And then there are two areas which I'm particularly excited about. And that are -- those are Capitec Connect and our core business offering, our business solutions to help grow South Africa. And if you look at Capitec Connect, that's grown by 76%. Now I just need to clarify something here. We've changed our definition of an active client from a 6-month active definition to a 3-month active definition, but both of them grew by pretty much the same rate. We did that to simply be more comparable with the rest of the market. And then in GlobalBiz, our GlobalBiz clients are up by 57%, which is fantastic growth. Our innovation for our clients has resulted in headline earnings of 26% increase, ZAR 8 billion. Now, this is balanced through all parts of the business. If you take a very traditional view of a bank's income statement, you look at the net interest income, and that's gone up by 27%. Strong growth in book, strong growth in a healthy book. And that is at a credit loss ratio of 7.9%. Now that's including AvaFin. AvaFin we're comparing 6 months this year to 4 months last year. So the sales of them has gone up more steeply. If you take AvaFin out, Capitec is at 6.8% credit loss ratio, which is down from 7% this time last year. Then if you look at our noncredit part of the business, all of our transactions connect, VAS all put together as noninterest revenue that's grown by 19%. And that means that of all of our income from operations, 65% is -- comes from business other than credit. Those Fintech businesses, what we're -- what I'm now referring to, strategic initiatives is very much an internal term for ourselves. But looking out there in the world, the businesses that are largely fintech are fintech, our value-added services, the digital experiences that our clients love so much in news daily as well as Capitec Connect, that's gone up by 40%. It's incredible growth. Our net insurance income is up by 45%. Now there are some adjustments that need to be made in order to get a like-for-like growth. And the reason for that is since the transfer of business from ourselves and taking on all of the funeral business onto our own license, there are some movements in the income statement. Where once the interest tax and so forth was netted off in the sale, we now gross them up both in the -- above the line of the income as well as in the tax. But I'll be unpacking that for you a little bit later on. OpEx for the entire group is up by 16%. And again, excluding AvaFin, it's down, it's a little bit lower, it's at 14%. And all of that means that we grew our return on equity to 31%. Now during the year, beginning of the financial year, we simplified and reduced our fees. So one of the things I'd like you to keep in mind is when considering results, remember that despite the fact that we gave back, not only did we not increase our fees and charges by inflation, we actually reduced them. And the net result of that was giving back ZAR 203 million in fees to our clients. So our financial results, the growth is on top of that. Looking at the income statement in detail, there are a few things that I'd like to highlight on income statement, excluding AvaFin. So what you see up on screen right now are the bits just without AvaFin. So looking at the South African credit business, we grew our net interest income by 23%, and that's on the back, like I said, of growth in a really healthy book. Our total net insurance income of 45%, you need to adjust for the sale, tax, you need to adjust for the profit sharing from Sanlam and you need to adjust for the finance charges. So that is actually at a normalized rate of 20%. OpEx of South Africa alone is 14%, and that taxation line goes up. The reason that goes up is because of that gross out from the sale in the insurance business. So the tax comes down there. And for the next year or 2, it will look a little bit higher. Overall, growth for South Africa is at 25%, and AvaFin contributes nicely and lifts our overall earnings to 26% growth. And you can see that in the changes to the earnings contribution. If you look back a year, to August 2024, our Personal Banking contributed 49% of the overall income. AvaFin was only 1%. Business Bank 3%, and you can see that Insurance is 24% and all of our Fintech was around about 23%. In the last year, AvaFin has more than doubled to 2% contribution. Our business banking is also nearly doubled to 5% of the group contribution now, which is fantastic, Insurance at 26% and Fintech, 26%. But the other point that I'd like to make is we continue to grow our physical network. We continue to grow the physical number of branches and our cash distribution, the physical number of our cash devices because our personal bank, all of the clients and distribution and data from that personal bank, they are the launchpad for all of our opportunities. If you take a step back and look from our data, take a view of the South African economy, it is -- well, there are some mixed signals in the broader economy, okay? There are some concerns about rising retrenchment, particularly in some of those industries that are more affected by international trade policy, but this is balanced by optimism. It's balanced by optimism in some of the green shoots that we're seeing in the cooperation between business and government, which is having positive outcomes. However, I'd actually like to stress something far more interesting, which is that with our 24.4 million Personal Bank clients and the more than 300,000 GlobalBiz and merchants, we have very rich data about South Africa, about the entire economy. Economic growth for the whole country is not where we want it to be. Some of the indicators are negative, but we have the data to be able to see and take advantage of the opportunities. And one that I'd like to share is people earning in the emerging market. So what you see in the graph on the top right is the growth in people. This is our fully banked clients who earn a salary, and we've grown them by 7% compared to those people who are entrepreneurs, who have multiple income, who are hustling. And the number of those clients has grown by 15%. Then on top of that, if you take a like-for-like sample; August last year, and August this year, that same set of clients and look at the growth in their income. Salary earners, their income has grown on average by 6% and that's to be expected. But those same entrepreneurs and hustlers, their income, the inflows into their accounts has grown by 15%, more than double, almost triple. And that really is good news. Card machine flows alone to those people has gone up by 26%. Moving on to our launchpad, Personal banking. There's continued diversification in our income streams. There was a time 15 years ago when we were largely a credit business. Now we are so much more than that. Credit income, though, continues to contribute strongly. That's up 24% in the last year. Net transaction income is up 6%. Now this is net transaction income if you strip out all of the new innovative types of transactions that we're doing through VAS and Capitec Connect, and they've grown by 40%. Now that 6% number might seem subdued, but there are a few things that you need to take into account. So the first is we reduced fees. So that's 6% growth, the first adjustment you need to make in order to get a real understanding of what our true growth rate is, is to add back the fees that we reduced it by. Then we continue to encourage our clients to move from getting their notifications on SMS, which is a fee-bearing transaction to an in-app message. It's safer. It's faster. It saves them money. It's good. It's good for our clients, and they have continued to migrate. And then more and more clients are using the send cash functionality because it's slick and useful and cool to do cash transactions for themselves. So you see a reduction in the number of clients using their card and more clients using the digital mechanism for getting the cash withdrawal. When you account for all 3 of those things, our growth in net transaction income is actually 12% and the growth in volumes is 20%. And now all of those things are positive for our clients and intended. They're part of our strategy. Digital volumes continue to grow really strongly. So cash overall, pure cash at the ATM with a card has grown only by 3%. Now if you consider that relative to how fast our clients have grown, you can see clearly that cash per client continues to come down, and that shift us towards all form of digital electronic payments and cards. Digital payments, including Capitec Pay is up by 28%, and card payments have also grown strongly from a big base by 23%. Now unpacking that just a little bit more. If you look at physical card alone, that's up by 19%, but the dramatic change has come in the use of pay wallets. So Apple Pay, Garmin Pay, Samsung Pay, that's gone up by 131% in the last year, really strong client uptake of a form factor, which we know they like very much. If you look at e-commerce, so that's all of the transactions made to buy something online, including and led by Capitec Pay, that's gone up by 35%. Our pure VAS transactions, buying airtime, electricity, our new advances, vouchers, all manner of those digital transactions, including buying new license, they've gone up by 20%. And pure electronic payments were up by 23%. Strong growth across all types of digital payments. And then I would like to take just a minute to do some marketing. If you are traveling internationally, and you do not have a Capitec card, you should get one. We have recently, and recently means from this morning, dropped our international card payment fee for physical card overseas, down to 0. We have never charged an FX margin. And given that our clients in the last 6 months have done more than ZAR 1 billion of physical transactions overseas. It means that compared to what we would have charged them if we acted the same as all of the other card providers, we've saved our clients ZAR 25 million. Focusing on credit for a little bit. Many of you who've known me for a long time, know that I spent a large part of my career at Capitec in credit. And I did come back into my office a month or 2 back, and there was a chocolate on my desk with a small sign saying, my first love is credit. And you're right. Okay. Credit sales growth. So in the Personal Bank, we've had really strong growth in our loan disbursements. That red line, you can see a clear step change. So we are hitting record levels, but we're doing so without taking on additional risk. And what I mean by that is we have not changed our risk appetite. That does not come from us being willing to take on any form of less healthy or worse book, rather it comes from excelling in our credit operations, in using our data and our algorithms to better create personalized offers for our clients and messaging for the clients, and that's increasing the volume of applications. The actual approval rate has remained stable as our risk appetite has remained stable, but bringing our clients in more through the right messages, serving them in more locations, greater distribution and doing so more efficiently, that's what's creating the lift. Particularly, if you look at clients earning more than ZAR 50,000, really strong growth in that as well. 20% of total sales now, more than ZAR 6 billion to those higher income -- higher earning clients. As I've said now several times, it's a healthy book that we're growing at. So we've grown our Personal Bank lending book by ZAR 7.8 billion. And in doing so, we've done it in such a way that we've reduced the roles to default. And we've reduced the roles to debt review which means that both our coverage ratio, our ECL, and as well as the credit loss ratio have both come down exactly as per our plan. Looking at where that credit is coming from, first of all, we've grown really strongly in credit cards. Now you may have heard in my voice earlier that we are proud of the value that our credit card gives to clients. In addition to that 0 currency conversion fee, we don't charge a margin. Every single credit card client gets a gigabyte every month as well as 1% back on all of their spend. And because of that, we're now attracting more and more clients, including more higher income clients. Purpose lending is contributing beautifully as well. We have improved our distribution. We have signed up more partners and working closely with those partners, embedding a better experience of providing credit where the clients need it at the point where they need that solution and then working with them to improve the experience. We have dramatically increased our purpose lending. And this is lending for a good purpose. It has a lower cost to the client. It is a lower risk to us. And all in all, it's a very good part of the business for us. And then clients continue to operate more remotely. They continue to use the app and they continue to use Capitec Direct, and we've seen really good strong growth there largely through data-driven messaging, the appropriate message to the client at the appropriate time. We are adding on more credit solutions. So I mentioned earlier that we've had a really big take-up in our credit card from people earning above ZAR 50,000. But those are not the only clients who want to give those fantastic offers too. The free data and the interest back and the no charges, we want to make as accessible as possible to everybody. And so we have added on additional credit card to make our Capitec credit card more accessible to a much broader set of the population. It is lower exposure, and it's fast to repayment. And what that does is it instills discipline and helps people to build a credit score for the future. More than 65,000 of those cards were given in the 6 months till August. We're also working more closely with our partner SA Home Loans to provide better home loan for our clients. Since February, we granted ZAR 720 million. And we are going to extend that partnership into a new special purpose vehicle to give a better offer to our clients in the coming months. And then, all of those entrepreneurs around the country, they don't just transact. They also need credit to grow their businesses. And we've been enabling that through our multiple income offer, which has grown very strongly, ZAR 984 million, as well as our new repairs you earn. So understanding the variation in flows that entrepreneurs have throughout a month and being able to provide a collection mechanism suitable for them opens up accessibility to far more clients. Moving on to Capitec Connect. So it's very exciting. We are now at 1.1 million clients. And there's a really strong net income contribution of ZAR 165 million. But Capitec Connect is not only about contributing to the bottom line. It's not only about generating revenue. It is to create value for our clients. So as we scale, we will continue to drive down prices and give more data as givebacks to reward our clients for good banking behavior. We gave 449 terabytes back over the course of the last 6 months, and we have just recently started with a new giveback, which is that if your Capitec Connect SIM is the SIM for your verified number, for your banking, with every single purchase, we'll give you 20% extra free. Because of that, we have tripled, more than tripled our usage of data. So it's now at 14.9 terabytes, and you can see on the slide, just for fun, that's 4.3 billion songs. Something else just to be proud of. There was a recent survey done, the South African Telecom Sentiment Index, and we came on top. I think that is a fantastic tribute to the team. That really is a testament to the fantastic work done by all of the Capitec Connect team. Well done. We've also launched devices. So if you go into app right now, you can order any one of 22 devices, and that range will get wider. With that purchase, we will give you free data, and our finance offering is the best in the market, 0% deposits and the lowest finance charge. So we are going to change how our people get access to smartphones. And through that increase the number of people who have them who use our app who use our other digital services, there's a virtuous cycle here. Looking at savings. Now savings continues to be an important barometer of trust in Capitec. So I am very pleased that we've continued to increase our market share strongly, particularly in the access anytime, fixed deposits and notice accounts. So we changed the structure of our interest rates. We changed from a tiered main account to a single flat rate for everybody. And then we strongly increased our interest on our call and notice and fixed deposits to be much more competitive and to encourage people to be much more deliberate in their savings. Because of that, and you can see on this slide, we are up 31% in those strong long-term purpose accounts. And overall, between our access any time call, notice deposits and fixed term plans, at now 68% of our entire deposit book. This is what we intended. We look forward to growing it even more strongly, and encouraging clients to be more purposeful in their savings and earn even higher interest rates. If you look just at notice, our notice accounts are very popular. The 7-day notice deposits, it bridges the gap between those who are not able to save at all and those able to save a little. And there's been phenomenal growth. It is really enabling a savings culture amongst our clients. Moving on to insurance. We've had 19% growth in the sum assured. Now a recent survey done by Swiss Re tells us that, that is 39% of the whole of the South African market. It's ZAR 481 billion in sum assured. And that's 15.8 million lives covered. And since November, 100% of the business is on our own license. We've got a strong focus in insurance on making sure that the 3 products we have are exceptional, that the client experience the entire way through is the best that it can possibly be, and that's what our focus will remain for the short while. If you move on to life. So our new Life Cover, that's new, and there's already ZAR 72 billion in sum assured covered. Now you add those two together, that means the total sum assured for lives covered in South Africa is now over ZAR 0.5 trillion. One of the things that I like most about our life insurance is the way that we enable the clients, empower the clients to choose how that cover will be used. And we allow them to choose between a lump sum payout, between a monthly income to your dependence to help them manage their monthly needs and then specifically, to be paid out into a trust, to take care of your children's education and their other needs. And what you can see up on that pie chart is the extent, the proportions which our clients are choosing to use those 3. So lump sum remains the biggest, but almost half go to that monthly income choice or children's needs. And that's very positive. Now I mentioned at the beginning that you need to normalize growth, so there's very strong growth in our financial statements, and that is the true result. However, to compare with last year, to compare like-for-like, you need to account for the fact that some of the business, some of the book is transferring out of the cell, and to Capitec's own license and all of the new businesses on own license. And as that's happening, there is a taxation effect. In the cell, the tax was netted off. And so now we gross up the income and we gross up the tax. We also do the same thing essentially with the investment income that comes out. It becomes more clear. And then there is the additional profit that we earn because prior to the first November, we were sharing 30% of the profit with Sanlam. And since the first of November, 100% of the profit accrues to us. When you take those three things into account, the adjusted result for insurance is a 20% growth, which is excellent. That was for the insurance team, not me. Moving on to Business banking. I am excited by everything at Capitec. I really am. But what excites me the most is Business banking. And the reason for that is not just because it's such a big opportunity for growth for us, and it is. It's because this is how we contribute to the growth in South Africa. So because of that, I'm really pleased that a number of our clients has grown so strongly. So our core business banking clients, GlobalBiz, they're up by 57% to 182,000 now. Now they've come to us for a couple of reasons. They come to us because of better service. They come to us for better credits, and they come to us for simpler, lower fees. So on the better credit side, our gross loans have gone up by 23%. That's a loan book now of ZAR 26 billion, catching up with the personal bank fast. And in terms of fees, we've simplified and aligned. So no business bank client pays different fees to a retail client. If you do a real-time transaction, they cost you exactly the same as they should. And because of that, ZAR 93 million of the fee giveback has gone to business bank clients in the year. One of the other changes that you'll see is we become much more efficient in credit across the board. Our intuitive processes are better. But in addition to that, our scored credit is getting stronger. So our scored credit is up 109%, and that enables us to serve our clients faster, give them an answer quicker so that they can carry on running their business. Very recently, we've just landed overdrafts on the app. So our clients can apply, conclude for an overdraft entirely by themselves, self-service on our app. And that's going to change things for them, saving them time. Looking ahead, one of the most important parts of our business going forward is enterprise payments. So we recognize that this is one of the key enablers for business because collection success is critical to business growth. So because of that, we took all of our businesses in which we help other businesses take a payment, debit order collections, merchant services, the e-commerce pieces, and we put to get them together into a single division called Enterprise payments. If you look at the debit order business, Capitec Payment Services, we grew by 19% in the year. And Capitec Pay e-com, that's grown by 36%. Moving on to payment taking via card machines. We're up 165% to 85,000 trading merchants. If you look at the turnover from August this year of ZAR 42.4 billion to ZAR 27.1 billion, you can see just how strong that growth is. And this is well spread. This is not a small number of merchants, 85,000 is a broad cross-section of all of the businesses in South Africa that need to take payment by this mechanism. And we're winning that business because we have a fantastic machine but also the lowest merchant commission rates in the country. ZAR 95 million of the reduced fees has gone in lower merchant commissions and a lower price for those point-of-sale devices. One of the things that you can expect us in the future to spend a lot more time on and invest a lot more in is our enterprise payments business. It's key to our success. Then AvaFin, I mentioned up-front that AvaFin has contributed really nicely, they have contributed ZAR 121 million to our group earnings in the first 6 months of this year. And they continue to focus on making the credit offer exceptional in the 5 markets in which we operate. So we're staying focused on those 5 markets, staying focused on online consumer lending but improving the credit offer and improving the processes to serve those clients. And because of that, we're now up to 250,000 clients and advance EUR 303 million worth of credit to those clients in Europe and Mexico. Group OpEx, our strong financial position allows us to accelerate investment in new technologies. So looking at the middle, our investment in technologies and the people required to implement those technologies has gone up by 30%. And we brought that forward. We can see all of the value that we create for ourselves and our clients in investing faster there. In addition to that, by tapping into the world's best, and I'm talking here of the world's best providers of cloud technology of all forms of AI, including Gen AI. We have partnered with the best, and we're able to benefit. Now because of that, there's a natural shift from CapEx to OpEx, and you see that in those result. If you look at the increase in salaries, that's gone up by 12% as we continue to invest in our people. And all of the other expenses are a pretty muted growth of only 9%. Our continued focus. So what are we looking forward to? Well, we're going to continue innovating. Some of those recent innovations include what you see up on screen here. So it's in-app calling. Now in-app calling is the ability from a client from within their app, when they're making the transaction, when they see the item that they need to ask a question on pressing a button and being connected with the human being. It is safer for the clients. The client knows for sure that they are talking to us, and we know for sure that they're talking to the client. But in addition to that, it saves them money. It saves them airtime. And just in the last 6 months, we've saved our clients ZAR 5 million worth in airtime, and it's also a better experience. Calls don't drop. The quality of the call is better. So we're able to serve our clients better. Our self-service terminals continue to take load off our service consultants in the branches. When clients come in and they only need a very quick transaction, they can do it at a self-service terminal, leaving more time for our very important people to serve our clients because that humanist, that's serving humans with humans is actually an advantage. It's a superpower. We're also saving them time with our branch chatbots. So we have put available all of the questions that a person normally asks through calling help desk. And the person in the branch can now ask those questions to have them answered by a branch chatbot. And what this does again is save some time. It saves some time they would have otherwise spent on the phone and that's the time that the client is with them. So in saving our clients' time, we're also serving our customers better. Then Generative AI, we have done so much here. Ahead of fantastic demonstration 2 days ago on [ Neo ], our fantastic new tool for faster first-time resolution of all client queries, anything that a client needs to ask, and we're enabling our -- we will be enabling our branch and our call center staff to use that tool to be able to answer those questions more thoroughly and more quickly. We also have a solution which we use to automate the verification of trustees. For those of you who watch Suits, it's called Mike Ross, and more and more. And through that and the huge uptake of Copilot, we've seen ZAR 95 million in savings. And we're saving our people's time. We're not saving our time so that we can reduce the number of people. We're reducing the time so that we can do even more with those people. One of those things is reducing the needs -- some of the need for automated testing. I said that wrongly. We still have a very strong need for automated testing. Some of the demand on a person to accomplish automated testing. So very roughly speaking, the time it would have taken to put a used test case together and to implement it, would have been 4.5 hours and now using our new home build tool that takes less than an hour, massive saving there, and allows us to focus on what human genius is better for. And one of the things that that's better for is protecting our clients. The most important application of all of the new technologies is always going to be protecting our clients. We have over 400 people now working in different parts of the bank in a task force to make sure we're doing everything that we can to protect our clients. And that includes implementing new technologies like graph database. And what this has done is, it has enabled us to identify more and more of the unreported fraud and make connections between the bad actors to shut them down more quickly and more thoroughly. Because of this, we've reduced client losses significantly faster than the rest of the industry, and that's according to SABRIC. We are contributing to the prosecution of many crime syndicates stealing from people in South Africa. We blocked more than 70,000 mule accounts and saved more than ZAR 200 million for clients that would otherwise have been lost. Some of the innovations include AI warnings that have stopped scan payments, where the client felt sure that they wanted to do that thing, but we help them understand that we're making a mistake. And Feature Locks, which stop people doing them -- stop people doing things they don't want to do. And we have been first in market with a variety of different innovations, including active call identification and real-time contextual warnings. So the specific client sees the message that's relevant to them to help them understand how to protect themselves. Looking forward to the future, what I'm going to show you on this slide is something you'll have seen before. And that's important because this is a reminder of the key focus areas that we shared with you in February. We will reinforce our culture. Our client-first, highly energized ownership taking culture because it's one of getting things done. All bank strategies, largely speaking, look the same. We win because we actually execute, because we get things done, and we do so by working together. And that is something that we're going to reinforce. We will continue with the virtuous cycle of developing the ecosystem, bringing the power of our 24 million Personal Banking clients together with our businesses and creating a virtuous cycle between them that helps both grow. We will become the leading payment provider in South Africa. And as I said earlier, you can expect to see a lot from us on that. We will grow Business banking and growing Business banking, we will grow the country around us and grow employment. In order to do that well, we need to be able to serve all of our clients everywhere. And that's why we have such a strong focus on our single service platform, which will enable a business client, retail client to move on to any app, any channel, move and walk into a branch, call any number and be served in the same way. We will continue to invest heavily in making sure that we have the most data but also that we're best using that data, actually implementing it for creating value for our clients. And then finally, AvaFin is fantastic, but it's a small step. We are just starting now to craft the strategy to take Capitec global. That is our future. Thank you very much, everybody. Thank you. Thank you to all the 17,000 people who made this happen. Thank you to our clients. Everything starts with you. And thank you to our excellent Board of Directors and all of the shareholders that they represent. I appreciate your support. Thank you, everyone. So now I'm going to ask Grant Hardy to come and join me on the stage, and we will take some questions from our investors. Grant Hardy: Thank you. Unknown Attendee: We've got a few questions. The first one is from Sean. He's asking, when will Capitec be launching VAS on its card machines? Grant Hardy: Okay. Thank you for the question, Sean. It's something we're actively working on and are progressing on. We haven't yet confirmed the exact date, but it is something that we are working very hard on delivering as soon as we possibly can. Graham Lee: Yes. Our clients can expect to see it early next year. Unknown Attendee: Then we've got 2 questions from Charles Russell. First one, can you elaborate on the lower capital adequacy ratio and more specifically the impact on ROE? Grant Hardy: Okay. So as we've communicated to the market, Basel IV became effective on the 1st of July, and that impacted our capital adequacy ratio. We expected the decrease to be between 3% and 5%, and it's come in within that range. Secondly, we also had to deconsolidate Capitec [ ins ]. This is also required by regulation. From an ROE impact, we still have more than sufficient capital, so it won't change the ultimate dividend policy. So it won't have an impact ultimately on ROE. The dividend payout ratio is as communicated to the market, 55% for the full year. Unknown Attendee: The second question from Charles Russell. Can you expand on the strategy to reduce interest expense which was down 8% despite an 11% increase in deposits? Grant Hardy: Thanks, Charles. It was an interesting one because when we actually made the call, we actually expected to pay clients more interest. We actually increased the interest rates across our anytime access accounts. So a client can open up to 10 of those and increased on the notice side. So we became market leaders in those areas. So the thinking behind it was to actually provide more value, let's say, drive more deliberate savings, but the migration from the main accounts into these savings pockets has been slower than what we expected. We are still paying 2% on the main accounts, which is 2% more than the market. But we'll continue trying to educate clients and really show them the extra interest and value that they can create by moving funds into the anytime access and notice savings deposits. Unknown Attendee: Two questions from Ross Krige from Investec. First one, do you expect to maintain a stable Personal banking credit loss ratio for the full year relative to H1? Grant Hardy: Yes. It's well within our range, and that's what we expect to see, let's say, going into the second half of the financial year. It does all depend on how the economy plays out, just given that the unsecured lending on the Personal Banking side is very much determined by what we see and how the economy performs. Unknown Attendee: Second question from Ross. With regards to client givebacks in the business banking, do you expect this pricing activity to be fully in the base now? Or will H2 '26 also be impacted relative to the prior year? Grant Hardy: This is now fully in the base in terms of the big part coming from the merchant commission rates. So those were changed from the 1st of September 2024. So it's now in the base from last year. So yes, it Is fully in. Unknown Attendee: Then a question from Harry Botha from Merrill Lynch. In Business banking, what has cross-selling been like to merchant customers that Capitec has acquired? Grant Hardy: Yes. So for a lot of clients from a Business bank perspective, your first entry into Business bank would be, let's say, a point-of-sale device. And from there, we deposit, let's say, the funds that you put through, the device, into a Capitec business bank account. And from there, they do start using other services. So it's a good entry point for us. They start seeing the value we can provide, the level of service, so it is a good cross-selling opportunity and something that we continue to grow and work on. Unknown Attendee: We've got 2 questions from [ Nitin Sehgal ] from Cora Management. First one, this is a question about your first love, Graham, credit? Grant, what is a good range of through-the-cycle credit loss ratio relative to where you are today? Grant Hardy: So I think you've got to look at it by business unit. So if we go look at retail, we've communicated that we expect retail to run 8% to 8.5%, we're coming in just below there. From a Business banking perspective, we're within where we expect to be at 2.1%. And AvaFin is much higher, but we price for that. So AvaFin is also where we expect to be, given the current loan mix. As we've started to fund AvaFin, what we do want to do is reduce the interest rates and extend the term, so you can expect over time that credit loss ratio to come down. Also important, on the AvaFin side, we have 6 months' worth of results in for this year versus 4 months last year. So that does increase the credit loss ratio because you have a 6-month charge as, let's say, opposed to a 4. Graham Lee: Can I just add to that? In addition, in business banking, you can expect that longer term, the unsecured lending to small businesses, the CLR will approach that of the personal bank. So as the mix changes, the Business bank overall will go up. But if you -- as Grant says, if you split it out in the different types of businesses, they will remain consistent. Unknown Attendee: Then one last question from Nitin. Congratulations on your return on equity. How do you think about this champagne problem? Are there any newer areas you are considering investing in? Or are you thinking about changing the payout policy in the future? Graham Lee: Okay. It gives us optionality. At this point in time, we're not looking at changing the payout policy. There is so many opportunities to still grow our business to deploy our capital and to grow. One of the ways that we will do back, we will do that is by using our economies of scale and sharing the benefits of that back to our clients, and that will bring the ROE down a little. Grant Hardy: Yes. Just to add on to that, I mean you already see some of the givebacks we've given to clients this year. We'll continue to challenge ourselves to make sure that we're providing true value to our clients. And as Graham says, we've always had the principle of giving back the benefit of scale, so we'll continue to focus on that, but it just gives us optionality to make sure we can continue to provide value to our clients. Unknown Attendee: Thank you, Graham. Thank you, Grant. No further questions. Grant Hardy: Thank you. Graham Lee: Thank you very much, everyone.
Operator: Good day, and thank you for standing by. Welcome to the Addex Therapeutics Half Year 2025 Financial Results, Corporate Update Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Tim Dyer, CEO. Please go ahead, sir. Timothy Dyer: Thank you. Hello, everyone. I would like to thank you all for attending our half year 2025 financial results conference call. I'm here with Mikhail Kalinichev, who will provide an update on our R&D programs. I draw your attention to the press release and the financial statements issued yesterday, which are available on the website. I also draw your attention to our disclaimer. 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 GABAB PAM preclinical program for cough. I will then review our financial results. Following that, we will open the call for questions. The first half of 2025 has seen several important achievements across our pipeline. We've made excellent progress in our GABAB PAM program with our partner, Indivior, successfully completing IND-enabling studies with their selective drug candidate for substance use disorders. As a reminder, 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 digit 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. We have selected a compound to advance our own independent GABAB PAM program for the treatment of chronic cough. We have substantially completed preclinical profiling of our selected drug candidate and recently published robust antitussive data in multiple preclinical models of cough. Misha will speak about this exciting data later in our presentation. We also regained rights to our mGlu2 positive allosteric modulator program, including the Phase II asset, ADX71149, from our partner, Johnson & Johnson. We are currently evaluating a number of therapeutic indications for the future development of this program. We have repositioned dipraglurant, our mGlu5 negative modulator, for brain injury recovery and recently 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. In June, we invested in Stalicla, a private clinical-stage neurodevelopmental disorder focused company. Stalicla has developed proprietary precision medicine patient stratification technology platform, which allows the company to select patients based on their underlying biological dysregulation rather than their behavioral phenotype. Proof of concept of the platform has been demonstrated by applying the technologies to identify and develop drugs in subpopulations of patients suffering from autism spectrum disorders. We believe that Stalicla's technology platform can be broadly applied to other disease areas where patients are defined based on behavioral phenotype or where there is significant heterogeneity within the patient population. Moving on to the financials. We completed the half year with CHF 2.3 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 spin-out transaction. However, current cash does not fund the 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 the drug for brain injury recovery. As mentioned, our partner, Indivior, has selected a GABAB PAM drug candidate for development in substance use disorders and successfully completed IND-enabling studies. We are advancing our independent GABAB PAM program for chronic cough and are ready to start IND-enabling studies subject to securing financing. Neurosterix has made excellent progress in advancing its pipeline, including completing IND-enabling studies for their M4 PAM program. The 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. Bob Pooler: Thank you, Tim. Let me start with GABAB allosteric modulator program which is partnered with Indivior. The aim of this collaboration is to deliver a better baclofen for substance use disorders. As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB allosteric agonist. Baclofen is FDA-approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including substance use disorders. However, baclofen has a short half-life and comes with significant side effects, hampering its wider use. Thus, there is a strong need for a better baclofen. We believe this can be achieved with positive allosteric modulators and their differentiated pharmacology, having the efficacy that is similar or better than that of baclofen but longer half-life and improved side effect profile. Our partner, Indivior, has selected a GABAB PAM drug candidate for development in substance use disorders and completed IND-enabling studies in H1 2025. As part of our agreement with Indivior, Addex has exercised its right to select a compound to advance its own independent GABAB PAM program for the treatment of chronic cough. I will now present this exciting opportunity. 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 infection, 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. On the next slide, we show that GABAB PAMs are likely to have a superior tolerability profile in comparison to the current standard of care and show no taste-related side effects, as seen with a newly approved P2X3 inhibitor, gefapixant. Support for using GABAB PAMs in treatment of chronic cough comes from the clinical evidence that baclofen, a 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. With pre-R&D 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 profile. 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 sub-chronic dosing and more than sixty-fold safety margin was demonstrated based on respiratory depression and sedation biomarker. The IND-enabling studies are planned to start this year. In the model of citric acid induced cough in guinea pigs, acutely administered compound A delivered a robust antitussive efficacy, reducing the cough number dose dependently and achieving 70% reduction at the maximal doses. The antitussive profile of compound A was similar to that of nalbuphine, [ olretitant ], baclofen and codeine. Compound A also increased the latency to first cough dose dependently, thus delaying the onset of cough. Its profile in delaying cough onset was similar or better than that of referenced 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, [ olretitant ], baclofen and codeine resulted in robust reductions of 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, [ olretitant ] baclofen and codeine in both cough number and cough latency measures. Reductions in body temperature, a rodent-specific biomarker of GABAB receptor occupancy in the brain, suggests that at 60 mg per kg of Addex compound, there are less than 50% GABAB receptors occupied in contrast to near 100% of occupancy at 3 mg per kg of baclofen. Increases in growth hormone release in plasma, a translational biomarker of GABAB receptor occupancy in the brain, confirmed less than 50% receptor occupancy at up to 60 mg per kg of compound A. Following sub-chronic administration for 7 days, compound A showed signs of improved efficacy and potency and no signs of tolerance in comparison to an acute treatment. No marked changes in respiratory rate, body temperature and growth hormones were seen in sub-chronic versus acute treatment conditions with compound A. In the model of ATP-potentiated citric acid cough in guinea pigs, 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, best-in-disease 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 study. This concludes our prepared remarks and the progress of our R&D program. Now I hand it back to Tim. Timothy Dyer: Thanks, Misha. Now for a review of our Q2 2025 financials. Starting with the income statement. Income decreased by CHF 0.1 million in Q2 2025 compared to 2024 and amounted to CHF 0.1 million. The decrease is primarily due to the completion of the funded research phase of our collaboration with Indivior. R&D expenses of CHF 0.2 million primarily related to our GABAB PAM program and decreased by CHF 0.1 million in Q2 2025 compared to Q2 2024, and again, mainly due to the completion of the research phase of our collaboration with Indivior. G&A expenses of CHF 0.5 million decreased by CHF 0.1 million in Q2 2025 compared to Q2 2024 primarily due to decreased legal fees. The share of net loss from the 20% participation in Neurosterix Group, accounted for using the equity method since April 2, 2024, increased by CHF 0.7 million and amounted to CHF 1.2 million for Q2 2025 compared to Q2 2024. Under IFRS, we are required to recognize our share of their results, which is a net loss. Now to the balance sheet. Our assets are primarily held in cash, and we completed H1 2025 with CHF 2.3 million of cash held in Swiss francs and U.S. dollars. Other current assets amounted to CHF 0.4 million, primarily related to prepaid R&D and G&A costs. Our noncurrent assets of CHF 5.8 million as of June 30 primarily related to the 20% equity interest in Neurosterix Group, recorded on the balance sheet under the equity method of accounting for associates, and our investment in Stalicla. Current liabilities of CHF 1.1 million at the end of June increased by CHF 0.3 million compared to December 2024, primarily due to increased payables. Noncurrent liabilities of CHF 0.1 million at the end of June decreased by CHF 0.1 million compared to the end of December, primarily due to the reduction in retirement benefit obligations following changes in financial assumptions. Now to summarize. We have made excellent progress in our GABAB PAM program with our partner, Indivior, successfully completing IND-enabling studies with their selected compound for development in substance use disorders. Neurosterix has made excellent progress with their lead M4 PAM drug candidate successfully completing IND-enabling studies. We have strengthened the IP in our mGlu5 NAM program and dipraglurant is ready to restart clinical development for brain injury recovery. Our GABAB PAM cough program has demonstrated excellent preclinical efficacy and tolerability with IND-enabled study ready to start. We are validating partnerships with industry supportive investors and a reasonably strong balance sheet, which puts us on a solid position to deliver on our strategic objectives. This concludes the presentation, and we will now open the call for questions. Operator: [Operator Instructions] We are now going to proceed with our first question, and the questions come from the line of Raghuram Selvaraju from H.C. Wainwright & Co. Raghuram Selvaraju: Congratulations on all the recent progress. I just wanted to ask if you could comment on recent developments in the neuropsychiatry space, both from a precedent M&A as well as a licensing standpoint, that might conceivably have implications for both Neurosterix and Stalicla. And also, if you could comment on Stalicla's future funding requirements as well as the possibility of public listing for that entity. Timothy Dyer: Okay. Thank you very much, Ram, for that question. It's very encouraging to see that there is continued renewed excitement within the neuropsychiatry CNS space. As you know very well, this all started at the back end of 2023 and continued through 2024, and now we see renewed interest with a number of recent transactions. So we are strong believers in CNS. And again, we've spun out Neurosterix with CHF 65 million in financing in a Series A in April last year really as a financing mechanism to get our portfolio of neuropsych assets moving. And they are moving very, very nicely. I really cannot speculate about the future of Neurosterix as we are a passive investor now, only holding 20%. With respect to Stalicla, Stalicla is currently pursuing a number of strategies around financing, as are most private biotechs that are looking for money. They are discussing actively with potential pharma partners both at the preclinical -- sorry, at the pipeline level but also at the platform level. As you know, one of the things that Stalicla has pioneered and potentially is a world leader in this ability to stratify patients based on their underlying biological dysregulation as opposed to just select them based on phenotypes. And they very much focused the platform on autism spectrum disorders, and they've developed a portfolio in-house. We're very excited about what we're doing. Now the financing need, they're pursuing a number of discussions with investors to do a Series C financing, and we will continue to be very supportive of what they are doing. So I hope that answers your question. Raghuram Selvaraju: Yes. No, very helpful. Two other very quick ones, if I may. Notwithstanding the inability to speculate on the future of Neurosterix, I was just wondering if you could give us some insights into whether or not the development of long-acting injectable formulations could conceivably be a part of Neurosterix' long-term strategy in targeting the neuropsych space. And also, if you could comment on the ideal or optimal target patient population for your chronic cough program, specifically as this pertains to those patients who have chronic cough of specific etiology, to what extent you've already determined what the ideal target patient population would be for future clinical development. Timothy Dyer: Okay. So there's two questions there. I'll leave Misha to answer the question on chronic cough. With regard to the muscarinic M4 space, we are all fully aware that Karuna has launched Cobenfy, this new class of antipsychotic. It's getting a lot of traction. There's a number of competitors out there both in the fixed dose combination area. But we are very focused -- well, Neurosterix is very focused on an absolutely selective M4 PAM. As you know, AbbVie have now moved -- moving their M4 PAM, emraclidine, back into clinical development, so this is very exciting news, despite them hitting a little bit of a bump in the road last year -- or earlier this year, I should say. We've also seen Neumora as well moving two compounds into Phase I. I think we and others are strongly believing in the M4 PAM space. We are moving forward a compound, which is a once-daily small molecule. Now we all know that in schizophrenia, compliance is an issue. So while at the moment, the development within Neurosterix is very focused on moving through Phase I and then into a Phase II study, I'm sure M4 PAM will be developed into longer-acting formulations, not because they need to be but just from a compliance point of view, That's the comments that I can make on the M4 PAM program within Neurosterix. And I'll hand over to Misha for comments on the GABAB. Mikhail Kalinichev: Yes. From the range of GABAB PAMs that we had, we intentionally selected a centrally acting compound in order to broaden and maximize the range of clinical patients that we can aim at. This has been discussed a number of times with KOLs. And the progress of nalbuphine nicely captures the potential of centrally acting antitussive drugs and their superiority over peripherally restricted antitussive drugs, such as gefapixant and other P2X3 inhibitors. We saw very robust effect of nalbuphine in IPF cough patients. And also in a recent data, they replicated this effect in refractory chronic cough patients. So that suggests that, indeed, the central approach, the central activity is essential for achieving maximal coverage of a variety of patients within chronic cough domain. Operator: [Operator Instructions] There are no further questions showing. Thank you, ladies and gentlemen. This brings the main part of our conference to be close. And I would like to hand back to Mr. Tim Dyer for the closing remarks. Timothy Dyer: Well, thank you, everyone, for attending our half year 2025 conference call. We look forward to speaking to you again soon, and wish you all a very pleasant rest of your day. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good morning and welcome to the Futura Medical plc Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to Interim CEO, Alex Duggan. Good morning. Alexander James Duggan: Good morning, and welcome to the Futura Medical 2025 Interims Presentation. Many of you will have seen Board changes announced over the last 3 months, and I'm the new face to the team. I'm Alex Duggan. I'm appointed as the Interim CEO since August of this year. I've got 25 years' experience working in consumer health care and pharma businesses, taking leadership roles in both small and midsized public and private businesses. My remit as Interim CEO is to conduct a full review of the performance and the strategy and put in place strategic and leadership plans that best benefit the shareholders and all other stakeholders of Futura. Before we start today, can I just draw your attention, please, to the disclaimers shown here. These, along with the presentation and the recording today will be available on our website for you to review. H1 has been a very active time for Futura on many fronts. So our agenda today is perhaps a little longer than normal for our interims as we'd like to update you as much as possible on where we are. First, Angela will provide us with an update on the first half financial update and trading update. Then I will follow giving some reflections on what I've seen in my first 60 days and an update on our market launches and a summary of our focus to improve business performance. Ken will then talk through our NPD pipeline and an update on the status of the patents. And after the summary, we will answer any questions that may have been received during the presentation. So just before I hand over to Angela to provide the financial update, these are the key outtakes for today. First, we've seen further market launches during H1 in 7 countries but we are seeing challenges around sustaining consumer uptake. What we see in all markets is the initial trial seems strong, which is very positive. But for various reasons, repeat underlying sales are not coming through as expected. This has had a direct impact on our supply volumes and our royalty streams. And so the full year 2025 performance is likely to be significantly below market expectations. As announced on my appointment, a strategic review has commenced with initial findings coming through now and some of these findings I can share with you today. As per the recent RNS on the 19th of September, the shift in performance versus prior expectations has put the company in a challenged position. However, the Board does remain confident that there is value in the group assets. And development plans for both the Intense and WSD4000 development products will continue to progress. Although there is always a risk in any R&D project, early indications for these 2 projects are quite positive. Evidently, my job and that of the Board is to ensure that we do all we reasonably can to protect our stakeholders and shareholders to derive as much value as possible from our current products and from our new development products. I will come back to this again. But first, I'd like to hand over to Angela to cover our H1 financial update. Angela Hildreth: Thanks, Alex. So let me take you through the results for the first half of 2025. We generated just over GBP 1 million in revenues during the period. Around half came from royalties in the U.S., nearly half from sales across the EU, including the U.K. and a small contribution from LatAm and the Middle East. The lower sales this year reflect the channel fill and the stocking that took place during 2024, which our commercial partners and customers are still working through. On those sales, we delivered an initial gross profit of GBP 0.7 million. However, given the continuing lower demand, we took the prudent step of providing for potential inventory obsolescence on stock that was manufactured last year to meet minimum order quantities when we transitioned to our new supplier. This provision was GBP 0.49 million. R&D spend remained broadly in line with last year and that was focused on progressing Intense and WSD4000. And our core G&A costs were GBP 2.6 million. This is down from GBP 3.4 million last year, showing the benefit of some cost reductions we've put in place. But that said, with lower demand expected in the U.S., we reviewed our manufacturing assets and identified indicators for impairment. As a result, we have impaired the U.S. plant and equipment and provided for the final installment due later this year and this has resulted in an exceptional charge of GBP 3.6 million. After these items, the loss after tax for the period was GBP 6.6 million. On a preexceptional basis, that loss was GBP 2.6 million. If you strip out the GBP 0.64 million of noncash share-based payment charge, the adjusted loss after tax comes to around GBP 1.9 million. Cash at the end of the period was GBP 3.69 million. If we then move on to the trading update released in recent weeks, this provided further clarity on revenue expectations for the full year, which we have confirmed will fall short of market expectations. Alex will talk in more detail about market specifics later in the presentation. But in summary, we continue to see slower in-market sales of Eroxon than both Futura and our commercial partners have anticipated ahead of launch. Based on initial partner forecasts, 2025 sales were expected to reach around GBP 5 million. This included a $2.5 million milestone payment, approximately GBP 1.9 million, linked to the granting of the U.S. patent. We now expect that to be received in 2026 and Ken will cover off the U.S. patent point in more detail as well. In our recent announcement, we guided that the full year sales for 2025 are now expected to be between GBP 1.3 million and GBP 1.4 million. As part of that same update, we also disclosed that cash at the end of August stood at GBP 2.7 million. Under current plans and taking into account the cost reductions we've implemented as well as the cost of implementing those measures, this provides runway into January 2026. We are actively exploring a number of commercial and financing options to extend this runway and we will update the market when we're able to. I'll now hand you back over to Alex. Alexander James Duggan: Angela, thank you very much. I'm going to share my view now of my first 60 days at Futura and to give an update on the business as it is today. As announced on my appointment, the Board and I have initiated a strategic review, which is now in progress, covering sales and marketing strategies, product performance and efficacy, the costs associated with running the business and other potential strategies and strategic options open to the company. It's now clear to me what the key issues are, which face the company and its products and our commercial partners. The key challenge to the company today is that previous forecasts, which themselves were based on our commercial partners' forecasts are no longer realistic based on current data. Launch forecasts, of course, are notoriously hard to get right, especially for a product in a new subsector like Eroxon. Futura is a small and concentrated business. Its commercial performance is strongly geared to the in-market performance of a single product currently via our 4 current commercial partners. The downturn we've seen in forecasts versus our partners' launch expectations has had a significant impact on our business and it is this impact we are urgently navigating now. Our partners have continued to launch Eroxon into the new markets. And as you can see in the time line below, Eroxon now is present in 25 markets with 7 new markets launched in H1 of this year, 6 in Europe through Cooper and 1 in the Middle East by Labatec. Despite a shared recognition that in-market performance has not been as expected initially, we do continue to have an open dialogue with each of our commercial partners. We are currently in early-stage discussions around the launch in Brazil with our existing partner, Labatec and with new potential partners in markets, including Taiwan and China. Once there is any material certainty around new launches, of course, an announcement will be made in the usual way. Whilst we're limited in the level of information we can share for reasons of both commercial and partner confidentiality, the table here shows a summary of progress through each of our current 4 Eroxon commercial partners. First, in Europe, we've seen a decline in in-market performance driven by a comparison with a strong H2 in 2024, which itself was driven by heavy investment, particularly in France, Spain and Portugal by Cooper leading to quite a high selling in market. And although it's too early to assess true like-for-like trends, the drop is steeper than had been expected and consumer repeat sales are not yet coming through at the level required by Cooper. Cooper do, they remain engaged and expect to meet all contractual obligations. In the Middle East, selling across the region has declined compared with the previous 6 months, where high sell-in activity from the local sales force in Saudi Arabia drove strong volumes. Labatec has expanded distribution of Eroxon into Kuwait this year in May and we await initial results from that launch. In the U.S., following a high-impact launch in October '24, as previously announced, in H1 of this year, we've seen slower-than-anticipated repeat sales. While distribution levels remain strong, both in e-commerce and brick-and-mortar, market performance has not yet met initial Haleon or company forecasts due to lower repeat sales. And to minimize theft risk, which is a growing U.S. trend, brick-and-mortar stockists are increasingly using locked displays in around 1/3 of Eroxon distribution points. Haleon also remains committed to meet their contractual obligations. And lastly, in LatAm, following the August '24 launch in Mexico, H1 saw continued growth in retail distribution and a significant expansion of M8 digital campaign, albeit with consumer sales below the partner's forecast. Discussions are currently underway around a potential launch in Brazil and we expect feedback within H2 regarding their appetite to launch Eroxon in LatAm's #1 consumer market and what those time lines would look like. As I've said, global demand for Eroxon and topical treatments for mild to moderate erectile dysfunction clearly exists. So how do we access it? Data from all of our market launches is clear. Initial sales are strong. Clearly, there's an appetite for a nondrug topical product for those who do not wish to take PDE5 inhibitors due to their side effects or for other reasons. Our learnings show that the low level of repeat consumer purchases showing in the initial data is due to 4 key factors, the positioning gap with potential consumer overexpectation of Eroxon's benefits, consumers thinking it will act like a PDE5 inhibitor, usage, imperfect consumer understanding of when or how to use the product correctly and why it's important to use the product in full flow. A binary efficacy perception exists. So for many men, Eroxon either works, you get an erection or it doesn't, which is unlike many consumer health care products where usually a modest improvement would be considered a successful outcome. And fourthly, the accessibility advantage where no prescription or HCP is required in the transaction means the product is widely available. However, this does mean that Eroxon is open access to all consumers, which could lead to either misuse or unrealistic expectations. So what are we doing and what are our partners doing with these learnings? We are reviewing our product positioning so that we have a clear positioning that will set realistic expectations versus PDE5 inhibitors. We are reviewing consumer targeting strategies to focus on audiences where Eroxon is most effective, where possible, trying to filter out consumers with severe ED, where Eroxon may be less likely to help. We are enhancing consumer education through HCP engagement, either in pharmacy or other settings. A health care professional can advise both on product suitability and usage. E-com communication improvements will inform consumers better and potentially filter users and improved usage instructions to ensure proper integration into foreplay and to advise on using 3 or 4 times for longer-term successful outcomes. As you can see, we are now working on several areas to improve the underlying product performance in market. In addition, the Futura team is busy with R&D projects in 2 specific areas and Ken will now provide an update for you on our latest progress. Kenneth James: Thank you, Alex. In the field of consumer health care, it's important to fuel the categories in which you operate with innovation. And as we previously disclosed, we've got 2 exciting developments that we're working on. The first one, if you could move to the next slide, is what we -- a new variant, which we call Project Intense because it's designed to provide a more intense sensorial effect than the existing product. And the reason for this is that whilst a number of men like the sensorial effect that they get from the existing product, there are a group of men who would prefer a stronger sensorial effect from the product. And we've conducted a couple of studies already to support the concept. The first one was a fairly small study, which is depicted in the slide and the graph here. And it showed that there was a stronger sensorial effect at 15 seconds through to 10 minutes with the new variant. And that's an important period of time, obviously, because that's usually the period by which intercourse occurs. If you move on to the next slide, you can see a time line of progress that's been made. The study that I've just referred to was reported in early part of this year, 2025 in April. And we are currently in the field to conduct a larger study in 200 subjects. And that basically will support the premise that we have a really exciting product that improves the overall sensorial effect and therefore, the impressions of efficacy of the formulation in those group of men who want such an effect. We are well on the road to achieving regulatory approval for the development in both the key territories of the EU and the U.S. and we anticipate getting such approval by the end of this year. If I can move on to the other development, which is we feel very exciting, has a tremendous amount of potential and it's for the treatment of sexual response and sexual function in women who have impaired function. And the reason that we're excited about it is that no such product currently exists in the OTC category, certainly with regulatory approval and strong claims supported with clinical data and strong IP protection. So when we look at the market opportunity for WSD4000, you can see that it's a really exciting opportunity. We know that between 40% and 50% of women suffer from the problem that we're trying to treat here and at least 60% have suffered from at least one symptom of impaired sexual response and function in the last 12 months. But only 1 in 4 of the women seek professional help. And very few women experience an improvement in their symptoms. And in fact, the opposite happens that 37% say that their symptoms get worse over time. And importantly, as I've mentioned, there is currently no regulatory approved topical treatment for impaired sexual response and function in women available over the counter. So the progress that's been made, we have conducted a successful home user study and we showed that there was a significant improvement in most of the 6 symptoms affecting women, which is very encouraging data, early data. We are in the process of designing a larger study to support that premise by way of proof -- further proof of concept. Meanwhile, it's important that we bring the key regulators with us on the journey that we're undertaking. We've had 2 meetings already with the U.S. FDA who have been very supportive and given us good guidance on how to design our program to bring the product successfully to market in the key geography of the United States. We have, in the fourth quarter, a third meeting arranged with the FDA, which will hopefully guide us to the exact design of our clinical study, which we will plan to kick off from 2026 onwards. And we also, under the previous guidance of the FDA, have been encouraged to conduct an early feasibility study really to test the overall functionality of the product to make sure it does what it says on the tin but also to check out our clinical trial endpoints to make sure that they're both valid and going to give us the information that we need. So that study has now been initiated and it's due to report in the early part of next year. So exciting progress with the early feasibility study as well. If I can move now on to our patent update. And with a small company, it's important that we protect our assets with key intellectual property. And I've highlighted a number of key areas here. You can see that overall, there's a lot of activity going on in the patent area but particularly in China, we expect to get notice of allowance quite shortly for our patent in China. We already have a granted patent in Hong Kong. In Europe, we already have a granted patent covering Eroxon and Intense. And last but not least, the United States, we've received an initial patent of fairly narrow scope but we have a continuation patent where -- which we expect to be granted in the first, second quarter of next year. And as Angela has referred to, that should trigger a milestone payment from one of our key partners in the United States. So if you move on to the patent coverage of WSD, you can see that we have filed internationally with the PCT. So with our new asset coming forward, the female product, we plan to have robust patent protection for that as well. So I'll now hand you back to Alex for a summary. Alexander James Duggan: Thank you very much, Ken. As you can see, although R&D projects can never be fully guaranteed, there is genuine excitement in the company about these new developments and we're taking all the necessary steps to bring to market new efficacious products, which will resonate with consumers in this growing category of consumer sexual health. In summary, I'm clear about the issues facing the company and its products and we're working with our key partners where possible to improve underlying in-market product performance. The company is in a challenged position currently, as you have seen. And as previously announced, we initiated a cost-cutting exercise and we are exploring a number of different avenues to extend our cash runway further, including considering commercial options such as licensing or divestments and/or opportunities for financing. The Board does believe that there is significant long-term value in the group's assets and so development plans for both Eroxon Intense and WSD4000 will continue to progress. We continue to undertake a thorough review of our business and its operations to deliver a clear view on how best to take the Futura business forward and you can expect a full update by the end of quarter 1, 2026. Now I fully appreciate that some of the messages today are difficult to hear for our long-standing, supportive and patient shareholders. It's regrettable that this patience is going to be further tested. But I can assure you that the company will do all it can do to get the best value from both our current and our new products. Clearly, there is an appetite for products like Futura's and the data all supports this. We will continue to press for a return from these innovative products. As and when there are any further updates, we will, of course, announce in the usual way. But for now, I'd like to thank you all for your time today and thank you for your continuing support. Operator: [Operator Instructions] Alex, Angela, Ken, we have received a lot of questions throughout today's meeting. And if I may just get started with the first one, which reads as follows. Are you reviewing the relationships with all partners? Alexander James Duggan: Good morning, everybody. So we -- as part of our review, obviously, we are considering all options. My view in life is very much that any business relationship has to benefit both parties. And it's evident that some of the results are not as expected so far by our partners or by us and we're doing all we can to remedy that with the strategies that we've talked about a few minutes ago. So as part of a wider review, then yes, we are considering all options right now. But we remain confident in our current partners. And obviously, all of our partners are committing to their contractual obligations. Operator: The next question is, what marketing is Haleon currently doing? Alexander James Duggan: So I can take that. They -- so Haleon has done, as you would imagine, from a company like Haleon, they have had an excellent launch. They put a lot of pressure, particularly in the early phase of the launch at the end of 2024. And they've had a fully integrated campaign using TV, social media, digital influencers, HCP support and they've invested heavily into the product. So -- and that's continued through into 2025. So we are hopeful, obviously, that, that will continue and they have certainly done a great job so far in the initial launch phase. Operator: How much stock do partners have? How long will this last at current sell-through rates? Alexander James Duggan: So I think that is an area that we can't go into too much detail on. But we, as part of the ongoing review, it's one of the areas we need to consider because obviously, we need to provide at some point some guidance for next year. But the -- it's under review very much at the moment. Operator: Moving on to the next one. What launches are planned for the second half? Alexander James Duggan: So we don't have any -- our partners don't have any launches in H2 of this year. As we alluded to earlier, we are in discussion in LatAm for a potential launch in Brazil. That does require some regulatory agreement and a suitable commercial plan agreed with our partner there. Beyond that, we are in discussion, in early stage discussion in a number of markets, Taiwan and China, for example. And that's where my focus will be going forward on the larger markets, which can move the needle. Operator: Outside the U.S., which territories are the next in importance for scale of opportunity? Alexander James Duggan: I think as I just mentioned, I mean, obviously, the U.S. is the #1 consumer health care market in the world. So it's important that we get that market right. And the second largest consumer health care market globally is China. And I'm confident that if we can get through the regulatory hurdles in China and we can find a partner that is suitable and we launch in the right way, then this has a -- the Eroxon and potentially the WSD4000 products going forward would have great opportunity in that market. Operator: Next question with 2 parts. What are the next steps for each of the new products? How quickly can you launch them and generate revenue? Alexander James Duggan: Ken, would you like to pick up on that? Kenneth James: Good morning, everyone. So if I start with Project Intense, as I showed on the slide, regulatory approval in the EU and the U.S. is scheduled to occur by the end of this year. That's an important and necessary step on the journey. But you will appreciate that post approval, there are a couple of areas where we have to get things in place before we can consider launching. The first of that is to ensure that we've got an adequate shelf life. And the minimum, generally speaking, for a consumer health care product is a 24-month shelf life. And the data for that will be available towards the middle, third quarter of next year. The second area is manufacturing logistics. You have to ensure that you have the supply chain all geared up and a critical part of that is ensuring that you've got labeling, which is consistent with the regulatory approval. So you can't initiate the construct of that labeling until after you've got regulatory approval. So the manufacturing supply chain is another critical factor. So we anticipate the earliest that we could launch the Project Intense would be third, fourth quarter of next year. Insofar as WSD4000 is concerned, it's a longer time frame. The reason for that, as I explained, is we think the only viable way to success with the product is to have very strong claims, which are clinically supported with strong IP and regulatory approval. Any potential shortcuts to market would compromise any of those 3 things and the company decided that we won't do that because it will lead to failure. So when you look at the critical path there, the clinical study is definitely on that critical path, as is regulatory approval. And therefore, we anticipate launch of WSD4000 being in the latter half of 2028. Operator: Next one here. Will the cost cutting extend your cash runway past January 2026? Angela Hildreth: So it is unlikely that the cost reduction plans that have been implemented already and are underway to further implement will materially extend the runway beyond January '26. Some of them have already been factored into that runway and some of them we won't receive the benefit from until beyond January. There's also a balance in terms of the cost reductions that we are making versus retaining value in the business. So the runway is likely to -- the extension of runway is likely to come more from commercial or from financing options, which we're currently exploring. Operator: And the next one for Alex. Will you not be staying as CEO? Alexander James Duggan: Thank you. So I've watched Futura's development from the sidelines for a number of years and I've always been impressed by the R&D capability of the team. And I do genuinely believe that there is a terrific market for products like those of Futura and despite the first challenging results from the market, I do believe there is a strong future. I stepped in as the Interim CEO in August to help with an urgent short-term leadership gap. And the basis for me joining was to conduct an immediate review and assessment of the strategic plan for the company. So as you might imagine, part of that review and that strategic plan will be to put in place a leadership team that is appropriate for the company going forward, however we deem that should look. So I don't want to avoid the question but actually, between the Board and myself, we need to determine who is the best person to lead the company forward and that absolutely forms part of that review. Operator: And next one here. I note that you are in discussions with M8 regarding a H2 launch. Can you please confirm whether you have now received approval from ANVISA or the expected approval? Alexander James Duggan: Ken, would you take that up? Kenneth James: Yes. We're making good progress with ANVISA. They've conducted inspection of contracted manufacturing plant. That audit has gone very well. And it's our belief that we will be getting approval from ANVISA in the not-too-distant future. Operator: Have you considered -- explored a partial percentage sale of the company? Alexander James Duggan: So I think we can't really get drawn into too much detail on questions like that but I appreciate where the question is coming from. What we've said and we have announced is that we will consider all options as part of our review. So there's nothing off the table. But at all times, first and foremost in our minds is how do we deliver best value to all stakeholders and to our shareholders. Operator: Can the company survive long enough to gain potential benefits from the new products? Alexander James Duggan: That is absolutely our ambition. Operator: Should you have launched Eroxon Intense and not Eroxon given its issues and the adverse impact this will have on Eroxon launch with commercial partners and customers? Alexander James Duggan: So I think in a launch like this, hindsight is wonderful. What we've shown clearly is that there's absolutely an appetite for this type of product. We have seen in the market that the real-world performance does differ slightly from the clinical results that we achieved and our partners achieved prior to launch. So our expectation -- but it is obviously tests are underway at the moment. Our expectation and hope is that the Intense product will be slightly better in terms of sensorial effect than our original first Eroxon product but that is yet to be determined. So we've listened to the market. We have developed the Intense formulation and strategy on the basis of feedback from the market. In consumer health care, continual development is essential. And so we will continue to do that. And no doubt there will be other products beyond the Intense as well. So I think -- watch this space. We've said that we're expecting results during quarter 4 for that Intense product. And when there's any material information to release and update the market, we will do that. Operator: Another question on partners. Are your partners asserting that Futura has failed to meet any of its obligations? Alexander James Duggan: So that's not the case, no. And obviously, I can't divulge confidential information between us and our partners. But evidently and clearly, Futura will meet its contractual obligations. Operator: Moving on, has Futura considered adding a QR code that links to a detailed instructional video on how to use it? Alexander James Duggan: Interesting idea. One of the areas that we have picked up on is that we need to provide clearer guidance, I think, to consumers to try to help them get best effect from the current products and we will take that forward to our -- those learnings forward to how we apply to our new products as well. So whether tactically we use a QR code or other means, the intent very much is there to ensure that consumers have got best knowledge and understanding of how to use the product to get best outcomes from it. Operator: A couple more questions here. The next one on U.S. tariffs. Are you impacted by the new U.S. tariffs? And if so, how are you adjusting to the situation? Alexander James Duggan: So at the moment, the production for the U.S. market is done in the U.S. but it's done under license and so Haleon manufacture that themselves and pay us a royalty. And we're not importing products from the U.S. Operator: Are your partners revising their marketing campaigns to convey the proper ways to use Eroxon and to have realistic expectations for results? Are you working with them on this? Alexander James Duggan: So I think we've covered that off. We are -- we continue to have a very open dialogue with all of our partners. And I have seen over the last few months, the messaging through our partners have adapted a little bit, as you would expect in a launch phase with learnings from the market. And I expect that will continue. Operator: And will you increase the dosage per volume of Eroxon Intense? Alexander James Duggan: Again, the clinical data supports very much the doses that we currently use. Ken, you might have a view on this from a technical point of view. Kenneth James: Yes, I do. The short answer is no because you then would run into potential safety issues. It's a very fine balance between achieving high consumer acceptability in terms of safety and achieving efficacy. And we think we've got the dose right. As we've explained with Project Intense, we think the way forward is with a new variant, which creates a stronger sensorial effect through the same dose as previous. Operator: And perhaps one last question here. What do Futura believe went wrong with the U.S. launch to downgrade expectation significantly within 5 months? How will launch of Eroxon Intense, WSD4000 be different? Alexander James Duggan: So that's quite an involved question. I think that in the U.S., what we've seen is a large company, Haleon going out and doing a great job of launching the product in a high-intensity way. They've managed to achieve terrific distribution across the U.S., across all brick-and-mortar accounts and very strong on Amazon. And they have pressed hard on the launch to make it as effective as possible. The mismatch that we see between the clinical results -- the studies done by Futura but also prelaunch studies done by our partners, including in the U.S., we believe that's really down to a number of factors. It could be the product itself a little bit but it's also down to the positioning and the usage, which we've touched on. And so we continue to work with Haleon in the U.S. as with our other partners to try to make sure that, that positioning is adapted and the usage is adapted so that we can get best results in the market. Operator: Fantastic. Well, look, Alex, Angela, Ken, thank you for addressing all those questions from investors today. And of course, the company can view all questions submitted today and we'll publish those responses on the Investor Meet Company platform. But Alex, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I just please ask you for a few closing comments to wrap up? Alexander James Duggan: Thank you. I think I just want to just repeat my thanks to you all for joining today and for your interesting questions. I hope that we've been able to clarify at least some of the questions and the points that you may have. I appreciate that they are quite uncertain terms -- uncertain times. But I do want you to be assured that the Board and the company is doing all it possibly can to get the best return possible for all of our stakeholders, including our shareholders who have -- many of you who have been very patient for many years and we do appreciate that. So we're looking at a number of angles in our review, our strategic review. And as soon as we have an update, we will announce that to the market in the usual way. So thank you again for your continued support and I hope you have a good rest of your day. Operator: Thank you very much, Alex, Angela, Ken, for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Futura Medical plc, we would like to thank you for attending today's presentation and good morning to you.
Operator: Good morning. Thank you for listening to our prepared remarks for the Conagra Brands First Quarter Fiscal 2026Q1 Earnings. At 09:30 Eastern this morning, we'll hold a live separate question and answer session on today's results, which you can access via webcast on our Investor Relations website. Our press release, presentation materials, and a transcript of these prepared remarks are also available there. I'm joined this morning by Sean Connolly, our CEO, and Dave Marberger, our CFO. Operator: We'll be making some forward-looking statements today. While we're making those statements in good faith based on current information, we don't have any guarantee about the results we'll achieve. Descriptions of our risk factors are included in our filings with the SEC. We will also be discussing some non-GAAP financial measures. Please see the earnings release and presentation materials for GAAP to non-GAAP reconciliations and information on our comparability items, both of which can be found in the Investor Relations section of our website. Operator: I'll now turn the call over to Sean Connolly. Sean Connolly: Thanks, Matthew, and good morning, everyone. Thank you for joining us today for our first quarter fiscal 2026Q1 earnings call. Let's begin on Slide four. Our first quarter performance demonstrated that we're on track with our priorities across our portfolio. Our strengthened top line and improved market share reflect the resilience of our brands and the work we've done to restore service levels. We executed well against our frozen, snacking, and staple strategies. Our supply chain delivered on key objectives and we successfully completed our Chef Boyardee and frozen seafood divestitures using those proceeds to reduce net debt. As we look to the balance of the year, we expect inflationary pressure and weak consumer sentiment to persist. We remain focused on strong execution and operating with agility to drive sustainable success, including maintaining a disciplined approach to capital allocation. Amidst this evolving landscape, we are reaffirming our fiscal 2026 full-year guidance. Sean Connolly: Today, I'll walk you through our Q1 performance and provide an update on our outlook for the remainder of fiscal 2026 as we continue navigating a dynamic operating environment. Let me start by unpacking our Q1 consumption performance. As you've heard us discuss in prior quarters, we've been strategically investing behind our brands to drive volume recovery in the face of a challenging consumer environment. This slide demonstrates the continued effectiveness of our investment playbook. Q1 consumption trends in both volume and dollars improved meaningfully over Q4 fiscal 2025 levels as we recovered from supply chain issues impacting our frozen meals containing chicken and frozen vegetable businesses. The service recovery efforts we've been focused on are clearly translating into improved in-market performance. On Slide eight, you'll see 44% of our portfolio held or gained volume share in Q1, an improvement relative to Q4 fiscal 2025. We're getting products back on shelves, and consumers are responding. Turning to our frozen domain on Slide nine. Our frozen portfolio delivered solid progress. Volumes improved 3.2 points in Q1 compared to our Q4 fiscal 2025 growth rate aided by our service recovery. We're particularly pleased with our share gains across key categories with frozen vegetables, frozen meals, and frozen prepared chicken all up in the quarter. Part of what's enabled this frozen performance is our restoration of quality merchandising activity. Last quarter in Q4, our volume sold on promotion was down 25% compared to the prior year. However, we made significant progress closing that gap this quarter in Q1, trailing the prior year by only 10%. With our supply issues now behind us, there is still some room to go as we approach more normal levels of brand support. Encouragingly, we continue to see a rational environment in terms of depth of discount, which has remained consistent for Conagra Brands since fiscal 2024. Sean Connolly: Moving to our snacking domain on Slide 11. Our snacks business performed in line with expectations. We saw strong volume in our strategic protein snacks categories with meat snacks up 4% and seeds up 2%. And as expected, we experienced discrete impacts from merchandising timing shifts in salty snacks and pricing related elasticity in sweet treats. Specifically, Angie's Boom Chicka Pop declined 19% due to a shift in promotional timing to Q2 and Duncan Hines saw a volume decline of 8% due to elasticities following our inflation-driven cocoa pricing actions. When you look at the total Snacks picture on Slide 12, even with our pricing actions and promotional timing shifts, our volume performance slightly exceeded the categories in which we participate. In addition, our dollar growth was strong at plus 2.2% versus plus 0.5% for our categories, reflecting the benefit of our strategic pricing actions and favorable mix. Turning to Slide 13. In our Staples portfolio, Hebrew National had a strong recovery as we lapped our out-of-stocks in the year-ago period. Additionally, we are gaining volume share in categories such as chili, tomatoes, and refrigerated whip toppings. We continue to see value-seeking behavior from consumers that has impacted this domain, but we remain focused on managing our margin levers, including the steel inflation-driven pricing that we expect to implement late in Q2. Moving to Slide 14. Our supply chain performance was a key success story in Q1. We were highly focused on our service metrics and we're extremely pleased with the results. We achieved 98% service levels, ensuring our products are on shelves and available for our consumers. In addition, we delivered strong productivity gains in excess of 5% of cost of goods sold. We've made good progress in both our core productivity programs as well as our ability to navigate the volatile tariff environment, which Dave will discuss shortly. Last, we remain on track with our supply chain modernization efforts, including the Baked Chicken project that will be completed in Q2. Sean Connolly: Turning to Slide 15. We successfully completed our Chef Boyardee, Van de Camps, and Mrs. Paul's divestitures in Q1. We used the proceeds to reduce net debt by more than $400 million in the quarter. Now let me shift to our outlook for the remainder of the year. Looking ahead, we continue to navigate a challenging environment as we're still dealing with persistent inflation and tariffs, both of which have drifted higher than our original expectations. Our previous outlook for core inflation was approximately 4%, but that has moved slightly higher primarily due to increased costs in animal proteins such as beef, pork, and turkey. On tariffs, while we still expect our gross exposure to be approximately 3% of cost of goods sold, changes to country-specific tariff rates have nudged our estimate higher. Our larger exposures to steel, aluminum, and China-related tariffs are unchanged. Combined, our total inflation was previously approximately 7%, but has now nudged higher to be in the low 7% range. Against that backdrop, consumer sentiment remains weak and we still see value-seeking behavior. We continue to focus on a balanced approach to capital allocation. Slide 18 shows we're investing in the business with approximately $450 million in CapEx planned for this year, in line with our initial expectations. We're also returning capital to shareholders as we expect to maintain our $1.4 annual dividend rate. As always, we continue to look for ways to sharpen and strengthen our portfolio as proven by our recent divestitures. As I mentioned, we reduced net debt, a key focus area, by over $400 million in Q1. Turning to Slide 19. Our strategic priorities for the year remain unchanged. We're focused on growing frozen and snacks. We're increasing investment in supply chain resiliency. We're implementing targeted pricing largely in our can products, but also on select sweet treats within our snacks portfolio where we're dealing with sustained cocoa inflation. We're highly focused on delivering strong productivity and cash flow. Overall, we're encouraged by our performance in Q1 and the improvement we've seen in our top line. Today, we're reaffirming our fiscal 2026 guidance outlined here on Slide 20. For fiscal 2026, we continue to expect organic net sales growth of negative 1% to positive 1%, adjusted operating margin of approximately 11% to 11.5% and adjusted EPS of 1.7 to 1.85. With that, let me turn it over to Dave for more financial details. Dave Marberger: Thanks, Sean, and good morning, everyone. Slide 22 shows our financial results for key metrics in the quarter. Conagra Brands's organic net sales were $2.6 billion, a 0.6% decline versus the prior year. Adjusted gross margin of 24.4% and adjusted operating margin of 11.8% were both down versus the prior year, but slightly better than our initial expectations, which I'll unpack shortly. Adjusted earnings per share were $0.39, down $0.14 versus the year ago. Slide 23 shows our first quarter net sales bridge. Total Conagra Brands organic net sales decreased 0.6% over the previous year with volumes down 1.2% and price mix up 0.6%, partially driven by trade expense favorability that we expect to reverse in Q2 and favorable product mix. Foreign exchange was a 10 basis point headwind and the divestitures of our India joint venture, Chef Boyardee, and frozen seafood businesses together had a five ten basis point impact. Slide 24 shows the composition of net sales by segment. In Grocery and Snacks, we delivered net sales of $1.1 billion representing a 1% decline in organic net sales versus the prior year with lower volumes being partially offset by higher price mix. Our Refrigerated and Frozen segment also delivered $1.1 billion in net sales with organic net sales up 0.2% versus the prior year as higher volumes were partially offset by lower price mix. We saw strong volume improvement following a return to normalized supply as well as a benefit from lapping the prior year's constraints on our Hebrew National business. In our International segment, organic net sales declined 3.5% versus the prior year as elasticity-related volume declines more than offset price increases in each of our regions. Organic net sales in our Foodservice segment returned to growth in the first quarter, increasing 0.2% over the prior year. Volumes improved versus Q4 benefiting from stabilizing commercial traffic trends in addition to favorable price mix. Dave Marberger: Slide 25 shows that adjusted operating margin declined two forty-four basis points over the previous year to 11.8%. Price mix was a 20 basis point headwind driven by unfavorable product mix partially offset by select price increases across our segments and the favorable trade expense timing that I previously mentioned. Inflation remained elevated in Q1 at approximately 7% inclusive of both core inflation and gross tariff costs. Proteins remain the largest headwind as we continue to see double-digit inflation in areas such as beef, pork, chicken, turkey, and eggs. Our productivity was strong in Q1 as Sean highlighted earlier. The combination of core productivity and tariff mitigation came in at over 5%. Tariff mitigation was favorable to expectations, with inventory positions allowing us to offset more tariff costs than projected. Partially offsetting this was unfavorable operating leverage from lower internal production volumes. We remain on track to complete our baked chicken facility modernization in Q2 with the benefits of in-sourcing production being realized largely in the second half. Adjusted SG&A, which includes advertising and promotion expense, was fifty basis points unfavorable to a year ago, primarily due to higher incentive compensation expense and slightly higher A&P spend in line with our expectations. Dave Marberger: Our segment adjusted operating profit and margin results are summarized on Slide 26. Grocery and Snacks adjusted operating margin declined 97 basis points as favorable price mix was more than offset by higher inflation and adjusted SG&A inclusive of A&P. Refrigerated and Frozen adjusted operating margin declined four zero two basis points, primarily driven by elevated protein inflation as well as by transitory sourcing and absorption headwinds related to our supply chain modernization projects. Despite the elevated input cost pressure we're facing, our priority of investing margin to drive volume in frozen remains unchanged. International adjusted operating margin improved three ninety-four basis points driven by price increases and favorable FX comparisons to a year ago. Finally, Foodservice adjusted operating margin declined two sixty-nine basis points as price increases and productivity were more than offset by higher inflation and unfavorable mix. The adjusted EPS bridge for the first quarter is shown on Slide 27. Adjusted EPS was $0.39 in the quarter compared to $0.53 a year ago, driven by lower adjusted operating profit, a higher adjusted tax rate, and reduced profit from divested businesses, which more than offset higher pension income, lower interest expense, and favorable foreign exchange rates. Key balance sheet and cash flow metrics are shown on Slide 28. During the first quarter, we utilized our divestiture proceeds to reduce net debt. Compared to the year-ago period, we've reduced net debt by nearly $1.1 billion and ended the quarter with net leverage at 3.55 times, a slight improvement versus both year ago and last quarter. We remain committed to a balanced capital allocation as we target long-term leverage of three times. Capital expenditures totaled $147 million and dividends paid were $167 million for the quarter, both largely in line with the prior year. As expected in Q1, free cash flow was impacted by our seasonal working capital build, in addition to rebuilding inventory from our recent supply constraints. We also repurchased $15 million of shares during the quarter to offset dilution from our share-based incentive compensation plans. Dave Marberger: As Sean mentioned, we are reaffirming our fiscal 2026 guidance for key metrics shown here on Slide 29. We continue to expect organic net sales growth in the range of minus 1% to plus 1%, adjusted operating margin of approximately 11% to 11.5%, and adjusted EPS in the range of $1.7 to $1.85 per share. Slide 30 provides a bit more color on our expectations for the second quarter and the full year. For the second quarter, we expect organic net sales to decline low single digits driven by recent consumption trends and a shift in trade expense to Q2, which was formerly expected to impact Q1. From a profit perspective, we were able to mitigate a larger portion of our tariff costs in Q1 than we initially projected. However, in Q2, we expect our net tariff costs to be higher than Q1 as we have largely utilized pre-tariff inventory. This, in addition to the trade timing mentioned earlier, is expected to result in Q2 operating margin moderately below our full year range. For the full year, we continue to expect organic net sales growth in the second half as we wrap supply constraints in our frozen business from last year, and our pricing actions take hold, partially offset by pricing elasticity impacts. As discussed, we now expect full year inflation in the low 7% range. This is slightly higher than our original projection of approximately 7%, with the modest increase to be largely offset by higher productivity and tariff mitigation, inclusive of the amount mitigated in Q1. We continue to expect A&P at approximately 2.5% of sales and adjusted SG&A excluding A&P at approximately 10% of sales for the year, both unchanged versus our prior expectations. And last, we expect our fiscal 2026Q1 cash tax payments to be favorable to our prior estimates by approximately $75 million due to recently passed legislation. Finally, turning to Slide 31, you can see our additional fiscal 2026Q1 guidance metrics. We now expect our full-year tax rate to be approximately 24%, up from 23% due to the higher rate we saw in Q1, and interest expense to be approximately $390 million, down from our prior estimate of $400 million following the $1 billion of new bonds issued in July. Our expectations for each of the other line items shown remain unchanged. Dave Marberger: That concludes our prepared remarks for today's call. Thank you for your interest in Conagra Brands.
Operator: Thank you for standing by. This is the conference operator. Welcome to the NovaGold 2025 Third Quarter Report and Donlin Gold Update Conference Call and Webcast. After the presentation, there will be an opportunity to ask questions. Webcast viewers may submit questions through the text box in the lower right corner of the webcast frame. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie Hennessey: Thank you, Ashiya. Good morning, everyone. We are pleased that you have joined us for NovaGold's 2025 Third Quarter Webcast and Conference Call and for an update on the Donlin Gold project. On today's call, we have NovaGold's chairman, Dr. Thomas Kaplan, President and CEO, Greg Lang, and Peter Adamek, NovaGold's Vice President and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by email. I would like to remind you of, as stated on slide three, any statements made today may contain forward-looking information, such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings, and forward-looking disclaimers included in this presentation. With that, I will now turn the presentation over to Dr. Thomas Kaplan. Thomas Kaplan: Thank you very much, Melanie, and thank you to all of those who are joining our call today. Obviously, we have quite a bit to discuss with you, but I'm happy to say that it's really all very, very good news and what I expect will be the beginning of a consistent pattern of progress that is going to amply reward our stakeholders. As you can see, we are building the path to what will be quite literally the largest single gold mine in the United States. This comes at a time when we're not only in the foothills of a historic gold bull market, but also comes at a time when both the concept of money as well as jurisdictional safety are more important than ever before. Many years ago, when I spoke about jurisdictional safety, people thought I was being a little bit alarmist. But they couldn't avoid the fact that I had standing in South Africa, in Zimbabwe, and Congo, so I knew whereof I spoke before I went into the energy business in the United States and ultimately went back into gold and silver mining. Building what will be America's largest gold mine makes it a strategic asset with potential sources of funding from nations that is really the best that we've ever seen in our lifetimes. Let me take you now to slide five. We refer to this as the catalytic transaction. And the reason for that is, as many of you know, since 2021, when we announced to the world with our partner Barrick, that we were going to feasibility. To put it simply, we were held back. If we had managed to proceed as pledged, we'd already be through the feasibility, through financing, and very possibly breaking ground on construction. So we have some time to catch up. But very importantly, we also have the opportunity to catch up with our share price. Earlier this year, we touched a low of $2 and change. We are now close to double digits. And when I said that I do believe that the stock would go from $3 or 3 and a half dollars, back to the $12 to $15 area, just as our first stop. In fact, essentially, going back to where we were before we were paused in our progress, it may have come across as rather bold. Well, what you can see here in this chart is clearly out of date because it should extend up on the right-hand side considerably more over the last few days. What you see is that a fire was ignited. When we swapped a partner with whom we were not aligned with a partner with whom we are perfectly aligned. So essentially, what you are seeing is a revaluation of NovaGold. For those of you who have been with us for a very long time, all I can say is I wish this had happened earlier, but it really was outside of our control. But I can assure you, the first opportunity that we had to put it back into our control, we took it, and as we can see from this price chart, our investors haven't really had to look back. And as far as we can see, this is just the beginning. On slide number six, you see just putting where we were in '21 takes us to the $12 to $15 area. And I believe that from there we double again. Historically, we outperformed the GDXJ. In fact, we've always been, until the last few years, one of the go-to stocks in the gold development space. Because when an investor, if there were investors interested in that space, would ask the question of a broker where can we get access to a great asset that's well managed, responsibly managed, but also in a jurisdiction where we might actually want to visit, we were able to get some of that flow. I think that that flow, which is now turning into a torrent, is going to benefit NovaGold as much as, if not more, than any other large-scale development story for reasons which I will be explaining. But with this chart, you see two things. Number one, our historic outperformance versus the GDXJ, but also, I don't want to be distortive, if you look at where we went from peak to trough earlier this year, that was entirely the product of not having the right partner with us in this story. And the reversal, the beginning of the reversal, phase one to take us back to the $12 to $15 area is because we have a perfectly aligned partner with gold at our backs. Slide number seven. When we talk about that Phase two which takes us from 12 to 15 to 30, which in full transparency is the target price that both John Paulson and I have set for where the stock really should be now, and would have been if we weren't set back over the last few years. This is classic. We are now on the path to rerating across the development phases of our progress to America's largest gold mine. This isn't actually rocket science, and if anything, the gold price and the revaluation and reappreciation of gold as a monetary asset that you want to own and if it's in the ground, you want to own it in a place where the rule of law is not a novelty, has only grown in our favor. This advance has been aided, as you can see on Slide eight, by having the Paulson team with us. John is someone that I've known, worked with, and loved as a partner and as a friend, for well over fifteen years. He is the archetype, a paradigm of a mensch, of somebody whose word is their bond and we've had nothing but a great business experience. And in fact, the negotiation of this deal reflected that. He always put himself into the other side's shoes in order to be able to make a deal a true win-win. I don't have to say much about John Paulson other than if there's anyone who is famous for identifying the big trade and finding the vehicle with which he that trade to multiply his and his shareholders' money, it's John Paulson. He did so very famously during the subprime crisis, but he's also done that in a way that is maybe even unique among big generalist investors in the gold space, with specific stocks that he has served as a catalyst for being able to recharge them and remultiply their value. If you look at slide nine, you have a great case study with the turnaround of Detour Gold, where it was, the nomination and the putting in of John's director slate that led to the optimization of the mine plan and ultimately Detour acquiring Kirkland Lake, and Agnico acquiring Detour, and anybody who has stayed in over that time is probably up about 500%. During a period that we know is not characterized by such outsized winds. If you look at slide 10, more recently, you have a case study of what the Paulson team has done to be able to take Perpetua from what was a year or so ago a $3 stock now well into the twenties on the back of its gold and its being a critical mineral provider for The United States. When you look at the different tranches along the way, you can clearly see a thoughtful as well as a successfully impactful value creation model for both Detour and Perpetua. Now for something a little bit different, if we go to slide 11, this is not as egotistical as it seems. It's in order to be able to underscore certain points which I would like to make to shareholders of NovaGold. Many of whom over the years have become very close personal friends. And there are a few things that really aren't spoken about, as much at this time as I think perhaps should be. Fortunately, they are, for better or worse, all pointing to NovaGold as being the holy grail in the gold space. For many, many years, and this is just simply to validate the statement I have argued, going back to $550 gold, that the first equilibrium price for gold would be between 3,000 and $5,000. Why 3,000 to $5,000 I was asked, and I said because I easily see it when it breaks out. Going to $5,000 and as things get more volatile, perhaps correcting to 3, before it goes to another area. In some of the interviews I gave to David Rubenstein, some in writing, I made mention of my view that 3 to $5,000 was a first equilibrium level based on the fundamentals that I saw at the time. And I must pause to say that this is before the global financial crisis. I knew when this happened that that forecast would be superseded by another one, but as gold was staying in a trading range I saw no reason to ruin whatever credibility I'd lost by saying publicly when gold was $550 that I saw it multiplying tenfold, to just basically keep my mouth shut and maybe allude to it. Well, I'd like to take you to slide 12, and revisit some of the important fundamentals for gold. Gold is in a major, major, major bull market. And for years, I have said, when asked what can go wrong, in my thesis, the one thing that has made me nervous is that I couldn't find a reason. This goes back now to 02/2007, 02/2008. And if anything, everything that has transpired since then has only affirmed in my mind that there's a reason why the prudent man rule was devised in order to measure the risk of all against what was viewed as the safest asset gold. Now, gold is definitely money, people have definitions of what money is, what a currency is, but the reality is that nothing has had a longer pedigree as a historic safe haven. Certainly those who've said that that no longer exists have missed out on the early stages, the early innings of what I see is gold being in a much bigger bull market than what we've seen. It's proven to be a fabulous asset diversifier, it's been a protection against deflation, it's been a protection against inflation, the emerging market demand has been exquisite, I've said for so many years, whenever you see the Indians and the Chinese, competing over who can be the biggest buyer of a scarce asset, you just want to own some of it. Every Indian every Chinese, since the dawn of mankind who has placed faith in gold, is making a killing. We call that in psychology positive reinforcement. More importantly, every investment banker who had the guts to say we shouldn't sell our gold, or even was willing to bet a body part that they should be buying gold. Has probably been issued the order of the fatherland for their prescience. They have seen the revaluation of gold which is so critical for central banks. Meanwhile, on the demand side you've got all of these tailwinds. But look at what you have on the supply side. Discoveries in bold, are so few and far between. Anything of size is rarer than a hen's tooth. And the fact is, to be able to take a mine well, to be able to take a prospect to what ultimately is a producing mine has been variously estimated at between 1,000 to 10,000 to one against the explorer. Meanwhile, if you are lucky enough, on average, it takes twenty years plus to be able to take that project from a discovery through to a mine. In other words, in terms of supply, coming out into the market from gold companies, number one, the horse has already left the barn. Number two, we won't have to see the, the results of that for twenty years. And unlike hydrocarbons, you have no large trapped spaces where you have the hydrocarbons but you have to figure out how to get it out. It just doesn't exist in gold. In other words, depending on your point of view, it's either the perfect alignment of stars or it's the perfect storm. One way or the other, I have no doubt that every portfolio manager is going to end up having an allocation to gold. Do I think they're going to go back to 10% to 15%? As was the norm through the 1970s? Well, if we even approached a few percent gold will already probably be five digits. So let's discuss what a real bull market looks like and why someone who does have standing can explain his view could be completely wrong. It's a forward-looking statement. Probably should say, you know, don't listen to what I'm saying but let's look at the next slide. Let's look at slide 13. Slide 13 is the Dow Jones since the nineteen seventies. And what you see in that bull market is almost imperceptibly the Dow breaking out of was a thirty-year trading range between 800 and a thousand. Breaking above a thousand. Now the old timers who knew that you go short when that happens were blown away by the young people with red braces or suspenders, who thought, this time is different. And here's the thing about this time is different. You know? A lot of us, you know, will say, yeah. When you hear that, you know, you you think of people drinking Kool Aid except for one simple fact. Every reversal is characterized by that time indeed being different. And that's what happened to the Dow in the nineteen eighties. As a curiosity, want you to go back and look towards the mid nineteen eighties and maybe you need glasses, but look at that blip. That blip which barely is noticeable, that is the crash of nineteen eighty seven. That a lot of us thought was going to be the harbinger of the four horsemen of the apocalypse. That's you can't even see it as the Tao marched from a thousand to a 45 plus leap in value over the decades. Now I don't think this is a spoiler alert, it's entirely possible that we will see something similar happening in gold. Think it was announced yesterday that for the first time, the gold in Fort Knox is worth over a trillion dollars. That's interesting. But what's fascinating is that gold has now surpassed the euro as the second largest global reserve. Asset. Now many of you will say, well, that's because of the price appreciation. And my answer to that would be, yeah. No kidding. However, we really do have to understand that this is a major, major statement about the reappraisal of gold as a monetary asset at a time when we are in the world in unchartered waters, not just in terms of the financial markets and debt, trade, and, of course, geopolitical trends which are unlike anything that we've seen since the end of the second world war. But I'd like to quote Ray Dalio, who I think is really probably the best applied historian. Of those who are in the financial world. Gold is now the second largest reserve currency behind the US dollar. To understand why, you need to look at the history of fiat currencies like the dollar and hard currencies like gold. The way I see it, we're currently facing a classic currency devaluation similar to what we saw in the nineteen seventies or in the nineteen thirties. In both of those cases, fiat currencies around the world all went down together and also went down in relationship to hard currencies like gold. Now what does that mean? Years ago, when gold still sported a 1,000 handle, Ray Dalio said that anyone who doesn't own gold either doesn't understand economics or the history of gold. And not wanting to be cast as a gold bug, he put it in a very sober way and just said, you should own some gold. Which of course was echoing things that I said, and of course other great proponents of gold as well. We were hardly unique, but you know, we probably could have fit into a relatively small restaurant or a dining table. But in any event, what we're seeing now is an epic epic reversal. In the same way as the dao going to 3,000, and having a correction, that took it down and anyone who held and just basically said that's a correction. Some had the perspicacity to say I'm going to buy more. But those who understood that this is the natural cycle, and held it have had one of the great generational trades in world history. I believe that the same is taking place in gold. Itself now. I don't believe that we're in nosebleed territory. Of course, we can have a correction. We will, at some point along the continuum, and I would argue people should keep some powder dry, and when that correction comes, have the guts. You know, don't don't freak out. Have the guts to add to that position because the next wave up is going to be very very sweet. This is going to be a very, very long wave in gold. Didn't want it. I've been thought about that for years, alluded to it, say it until I thought at least I have the credibility for my first phase. To be in place. Now, what does that mean for NovaGold shareholders? Well, the great news is that it has the potential to give NovaGold and the very, very few large scale, well managed high grade, high volume assets to be able to get by far the premium rating. In this space. I do believe that we will see, US assets be valued if they have exploration potential for sure, with 0% discount rates. Because of jurisdictional safety. The flip side of that as one who did really well in Latin America and Africa, is that I do believe that in most countries, certainly those where the rule of law is more of a novelty, like in West Africa, we're seeing, but it's also happening in other places. Gold mines are going to be nationalized. And this would be extremely sad. There's nothing worse than all of you who are bullish on gold may even have bought into a great asset, I'm not saying that there aren't really excellent assets, in unsafe jurisdictions. But then have it taken away from you because they were great assets, in places where governments basically said, wait a minute, you're minting money. You're really minting money. It's not a slogan. We want that. It's force majeure. A choice between your shareholders and our shareholders which is our population. And I tell you, there won't be any governments which will have any sway with these governments when they pull off that trick. We've seen it and no matter what your relationships are in that country, it won't mean anything. Mark Bristow did more to put Malley on the map than any other human. They rewarded him with his fidelity, and his charisma, by basically stealing the asset. Mongolia tried to do the same with Bob Friedland, we saw what's happened to you know, companies with assets in Panama, in Guatemala, this is a contagion, it's a disease because when governments, whether they're autocrats or democracies, see someone else being able to get a better deal, they have to be able to respond by giving at least as good a deal to their own shareholders or have the risk of being accused of being in the mining company's pocket, or simply not attending to the needs of their people. So again, this is a public service announcement from someone who's been there and seen what these countries are like and managed to get out with 100 x returns in silver in Latin America, in platinum in palladium in in Africa, and gold. I sold Kibali to Mark Bristow. Wonderful mine. I hope and wish for the best for Barrick in Congo. Also in Pakistan, these are different philosophies, but my attitude is I have adopted Woody Allen's famous line, I'm not afraid of death, I just don't wanna be there when it happens. And why would I want to when for all the reasons that Greg Lang is going to be laying out, you have everything that you could possibly want for a high octane high volume, high grade, low cost producer in the safest jurisdiction in the world. Or as we'll see on the next slide, slide 14, what we call maximum leverage. To gold but in a jurisdiction that will allow you to keep the fruits of that leverage. Now what you see here is with gold at $3,500, you have at 0% discount rate $50,000,000,000, and that makes no allowance for the extraordinary inevitable exploration upside that we have at Donlin, so much so that I contend that it's entirely possible, forward looking statement, disregard everything I'm about to say, that the next Donlin will be found at Donlin. Only 5% of that district has been explored. Only three kilometers of eight kilometer mineralized belt, the 5% has the 40 plus million ounces. Of gold that we already believe can add tens of millions of. So when you think that 95% is unexplored, now you understand between that and being based in The United States in one of the safest jurisdictions you can see why I do believe a 0% discount rate will be justified. But even so, we're nearly $20,000,000,000 at an NPV five. For Donlin, the $12 to $15 target that we've set as phase one for the doubling of NovaGold is not is not unreasonable by any stretch. I hope it will prove to be cautious. One thing that I would say is for us as investors in this space for over thirty years, you want to seek great assets in great places with management that knows how to build things and shareholders, I must say, who are aligned. And you have all of that in NovaGold. So before Greg goes more granular, this is why you're going to see what we hope to be, a steady stream of good news that will more than make up for lost time but take us on the path to building America's largest gold mine. We are already working with top tier firms to be able to position us for the bankable feasibility study. Bankable feasibility study will be coinciding with advanced engineering. We hope to begin construction in 2027, 2030 being our target. For production. I also have to point out that the first ten years we'll be producing roughly 1,400,000 ounces a year. That's why we'll be the largest, in the country. But it's entirely possible that, we would be able to sustain that production. Start with a twenty-eight year mine life. So for all of the reasons that you see, we are very, very comfortable that this project will be able to be financed sovereign wealth funds, it's entirely possible. That governments closer to home may take a very great interest in this strategic asset. They are off take providers, and, of course, we believe that the equity, will be a multiple of where it is today when we have the construction decision and that we will be comfortably positioned to be able to pull the trigger and, really enjoy the fruits of what we and our native corporation partners and Alaska have been waiting for so long. And with that, I will pass the baton to my brother in arms, Greg Lang. Greg Lang: Alright. Thank you, Tom. Next, I'd like to introduce Peter Adamek, our Chief Financial Officer, to cover the third quarter highlights. Peter Adamek: Thank you, Greg. Turning to our operating performance on Slide 17. NovaGold reported a net loss of $15,600,000 in 2025. This represents an increase of $4,900,000 from the comparable prior year period, primarily due to higher field expense at Donlin Gold and higher general and administrative expenses. NovaGold's third quarter results reflect the company's 60% interest in Donlin Gold, following the closing of the acquisition of an additional 10% of Donlin Gold at the beginning of the quarter on 06/03/2025. Donlin Gold expenses in the third quarter and the first nine months of 2025 were higher with increased site activity in 2025 compared to the prior year when field activities were minimal. General and administrative expenses increased in the third quarter from the comparable prior year primarily due to higher share-based compensation partially offset by lower professional fees. Turning to slide 18. Our treasury decreased, excuse me, our treasury decreased by $193,500,000 to $125,200,000 at the end of the third quarter primarily due to the closing of the acquisition of an additional 10% of Donlin Gold. This was partially offset by the exercise of an over-allotment option from our May equity offering, providing an additional $25,500,000 to the company in the third quarter. Consideration paid and transaction costs incurred totaling $210,100,000 for the 10% acquisition of Donlin Gold were capitalized to the company's investment in Donlin Gold. Excluding the Donlin acquisition, and over-allotment exercise, corporate G and A costs during the third quarter declined by $300,000 and our share of Donlin Gold funding increased by CAD 5,200,000 due to the company's increased Donlin Gold funding obligation and increased site activity in 2025. Moving to slide 19, as discussed on the previous slide, our treasury decreased to $125,000,000 at the end of the third quarter. Following the acquisition of an additional 10% of Donlin Gold on June 3, a reexamination of the Donlin Gold budget was completed by the current owners of the project. Some activities that were originally planned for 2025 were redirected to support work on the bankable feasibility study. With no material impact expected on Donlin Gold's previously announced $43,000,000 budget for 2025. As such, NovaGold's pro rata share of Donlin Gold's $43,000,000 budget has increased to $24,000,000 in light of the company's incremental 10% funding obligation starting in the third quarter. Our share of funding for Donlin Gold in the first nine months of 2025 was $18,500,000, which is in line with the revised 2025 guidance. Also, as a result of the closing of the Donlin Gold transaction, we expect to incur higher professional fees for the year resulting in an increase of NovaGold's 2025 corporate G and A costs to $18,000,000 from our previous guidance of $16,000,000. I will now turn the presentation over to Greg to discuss third quarter highlights. Greg Lang: Yeah. It was a very active quarter for NovaGold in Donlin. In September, we completed the 18,000 plus meter drill program. This program employed over 80 people, including locals from 22 villages in the region that supported the drilling, logistics, environmental monitoring, and other site activities. We hosted numerous visits during the quarter. We had five separate visits. These included tours with investors and analysts, had an owner's tour with our partners, Chelista and TKC. And we've met with people that can provide infrastructure support to advance the project. In addition, Donlin welcomed the Crooked Creek traditional tribal council to visit the site. This is the closest community to the project. Other tours included representatives from the state of Alaska, the congressional delegation, as well as representatives from Senator Murkowski, Sullivan, and Senator Begich offices. Additionally, we finalized more shared value statements with communities in the region, increasing this total to 19. We continued to build on the progress of our aquatic habitat restoration project and improved access for the local resident fish areas impacted by historic placer mining. And lastly, Donlin continued to be active in a variety of community events that celebrated cultural preservation, strengthened stakeholder relationships, and promoted the economic, and social well-being of the people in the region. Turning to slide 22, the completion of the drill program which was expanded to support the new resource model and advancement of the bankable feasibility study reinforces our project's long-term development strategy. This year's program with initial results confirming consistent mineralization across multiple zones including the top five intervals with grades ranging from about four grams up to 23 grams per ton. The drilling focused on three principal activities, grid drilling, to further assist the mine planning efforts, in-pit exploration drilling focused on enhancing the geologic modeling and supporting resource conversion. And finally, geotechnical drilling for pit wall stability and mine design material sites for the access road from the port to the Donlin Gold site. Reclamation of all of the excavations from this program have been completed. Turning to permitting and litigation-related activities. We have submitted the preliminary design package to the state agencies, and the process is underway. This will complete the submission for the tailings dam and related water retention structures. In the state litigation, we continued to support the agencies in defending their issue of the Donlin water rights pipeline in the four zero one certification. The case is challenging these aspects of the project have been fully briefed. And argued before the Alaska Supreme Court with decisions anticipated in 2026. In the federal litigation, the district court issued an order on remedy denying the to vacate the permits and remanding the case to the agencies to supplement the NEPA analysis. The court retained jurisdiction over the case during this remand and ordered the agencies to file updates within the court. We understand the regulatory aspect. Donlin and Gold and its partners are committed to supporting the state and federal agencies in the defense of our permits. My next few slides really touch on the highlights of Donlin Gold and its key attributes that make the project unique. Turning to slide 25, Donlin will be a big mine. It will average over a million ounces a year throughout its twenty-seven-year mine life. With cash costs well below industry averages. Not only is it big, but it's great grade at and a quarter grams. It's one of the highest grade undeveloped open pit deposits in the industry. As our chairman articulated, we have tremendous exploration potential both at depth a long strike, and within a district is substantially underexplored. Alaska is a great place to do business. It's a state that understands and supports a well-established tradition of responsible mining. Our project is on private land owned by two Alaska native corporations. We have life of mine agreements in place with both of them. Our federal permits are in hand. And state permitting what little remains, is well on track. We're committed to environmental stewardship, and the well-being of our people our communities. We've long enjoyed strong support from our dedicated long-term institutional investors. Donlin's a strategic asset. As envisioned today, it would be America's largest gold mine. Of all the developing projects out in the industry, none have a production profile approaching that of Donlin. Its first ten years will average 1,400,000 ounces a year, followed by many decades over a million ounces per year. Turning to the next slide. Grade really separates Donlin. From the other development gold projects. At grades of two and a quarter grams, it's better than double the global industry average grade. Which is just barely over one gram. So this high grade that contributes to the low cash cost. This slide depicts the mineralized trend at Donlin. The 40,000,000 ounces are contained in and around the ECMA and Lewis ore bodies. The remaining five kilometers of the eight-kilometer trend has goal bearing intercepts. Already in place. When the time is right, we will resume drilling a long trend and we will continue to explore the remaining areas of the property. Yeah. Alaska is a great place to do business. We were up in Alaska with the new owners, the Paulson team, we met with the governor, and he reiterated the importance of Donlin to the state of Alaska. You know, Alaska is already the second largest gold producing state in The US. With a well-supported and well-served mining industry. It's one of the top jurisdictions globally. Where it ranks third out of over 80 jurisdictions. The Donlin project is on private land is owned by two Alaska native corporations. Chelista owns mineral rights and TKC owns the surface rights. This land was transferred to the native corporations for their economic self-determination and it was designated for mining-related activities. In essence, they have a treaty with the US government that permits mining to occur. On what is now their land. Permitting is an arduous process in The United States. One we know very well. Our key federal permits are in hand. And the final state permits related to the Tailings Dam and water retention structures are well advanced and we anticipate receiving these remaining permits well in advance of completing the bankable feasibility study. Our environmental, social, and governance track record is impeccable. We have a well-diversified board. The Donlin site has worked over a decade without a lost time accident. We value our people, we value the environment. And that's reflected in all of our activities. NovaGold has always enjoyed strong institutional shareholder support. And this is true to this day. Over 60% of our shares are held within the top 10. And you can see on the list very well informed, well-seasoned gold investors who understand the depth of the opportunity that NovaGold brings. To our shareholders. You know, upcoming catalysts for the company now that we have the new owner's trip strip ship structure in place. The project's future in is in focus. We are building on this momentum. As we enter the next phase of development. To maximize the value proposition of Donlin Gold and the exceptional leverage we bring. Our near-term catalysts include awarding a contract for the bankable feasibility study by year-end. The selection process for this is well advanced. We also anticipate releasing the drill results that remain from the program we completed in September. We are gearing up discussions to evaluate potential financing sources. To support these activities, we are building out the project team for Donlin. And finally, we continue to support the state and federal agencies as they defend the permits they issued following a very rigorous process. We continue to engage with stakeholders throughout the state of Alaska and we remain committed to being transparent and addressing the issues that are important to them. Thank you. We'll now open the lines for questions. Operator: Thank you. To join the question queue, you may press. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star then 2. Webcast viewers may submit questions to the text box in the lower right corner of the webcast frame. We will pause the moment as callers join the queue. The first question comes from Saundaria Iyer with B. Riley Securities. Please go ahead. Saundaria Iyer: Hi, team. Congratulations on the quarter. I'm Saundaria on behalf of Nick Giles from B. Riley Securities. Just touching on the exploration drill results. So I mean, all of the top five drill results are, like, impressive and above the current resource grade. With high-grade intervals up to 23 grams a ton. Could you provide more color on how these results compare to your resource model expectations? And the continuity of the ore body? Greg Lang: Sure. Well, yeah, thank you for joining the call this morning. We were very pleased with the results. You know, we need a couple things to point out with them. You know, we were drilling under-explored areas of the pit. And we encountered mineralization in areas that were previously modeled as waste. So it demonstrates the potential that still exists in and around known ore bodies. You know, the best place to look for gold is at a gold mine, and we're certainly demonstrating that. The other important aspect to point out about the drilling is one of the analysts took all of the intercepts and added them up and averaged them. And they came out just under four grams. And I think when you look at that random sampling of four grams over, you know, 18,000 meters, you compare that to the average grade of Donlin at two and a quarter grams, just, you know, random drill results really demonstrate that there is still upside potential at the Donlin ore bodies and that with further drilling, which we anticipate doing over time, and we expect to continue to increase and enhance our knowledge of the ore body. Thank you. Saundaria Iyer: Thank you for that. Just to follow on on that one. So are we planning to update the resource and incorporate these results before we put out a bank feasibility study? Greg Lang: Well, we are you know, we've released the results of about half of the assays from this year's drill program and probably within the next month as the assays come in, we will release the balance of them. You know, the results from this year's drill program will be incorporated into the geologic model that we use to support the bankable feasibility study. Saundaria Iyer: Got it. I appreciate the color. I'll hand it back. Thank you. Greg Lang: Thank you. Operator: The next question comes from David Lebensky with Accurate. Please go ahead. David Lebensky: Yes. My question is to Tom Kaplan. To me, it seems like common sense that if I was a royalty company that I would approach NovaGold prematurely to get the best deal. So I guess my question is, can you elaborate on the interest in royalty companies as far as financing the project? Thomas Kaplan: Well, first of all, thank you for the question. And typically speaking, I would cite Voltaire who said that common sense is not so common. However, the royalty companies do possess common sense, and I think it's very fair to say that, should we wish to enter into a royalty or a stream or any other instrument of that kind, we are pretty assured that that would be forthcoming. The royalty companies do exhibit common sense. It's part of the business model. David Lebensky: And the second question is, have you contemplated these mini nuclear reactors instead of natural gas for power for Donlin? Have you explored that? Greg Lang: Sure. You know, when we've looked at powering the Donlin project site, you know, we've considered all options. And, you know, nuclear reactors, you know, that's curiosity. But I think it's still many, many years out into the future. And natural gas remains really the best way of powering the Donlin site. There's a development that we're following with great interest up in Alaska. And that's the president has, you know, keen interest in seeing a pipeline built to deliver natural gas from the North Slope into the Cook Inlet. And the Cook Inlet is where Donlin plans to import their natural gas. So, you know, this pipeline, if built, could certainly be very beneficial to the project to have a cheap Alaska-based source of natural gas. So we're following that very closely, and, you know, we will continue to monitor development with the small-scale reactors. But, you know, like I said, I think that's many, many years away. David Lebensky: Okay. Thank you, and congratulations on all the work you guys have been doing, and I really appreciate it. Greg Lang: Thank you. Great. We have some questions. Alright. Go ahead, Emily. Emily: Mhmm. Yeah. We have some questions coming in from the line, from the webcast. The first coming in from Matt Kovacs, I am so happy that John Paulson has joined. I know that this will accelerate the process. Is there any new projected date for construction to take place? Greg Lang: I think as outlined in our presentation today, our immediate focus is getting the bankable feasibility study contract awarded. And taking that work off in 2026. And we will complete that work in about eighteen to twenty-four months, you know, positioning us to make a construction decision. Once that decision is made, it would take about four years construction to build the site. So that puts commercial somewhere around the year 2031. Emily: We have a few questions coming in from Chris Gates. Any updates on the Tailings Dam permit? Do you expect any opposition? Greg Lang: The Tailings Dam permit, you know, just for background, you know, that's the last remaining state permit. You know, the federal permit authorizes us to disturb land, and that includes the Tailings Dam. But in Alaska, structures like that are administered by the state and require final engineered drawings before the state will issue the permits for operation. So we always knew it was an expensive permit to obtain because of the geotechnical drilling and the engineering to support the design. So we waited until that was, you know, later in the project line. Several years ago, we completed the geotechnical drilling, and, you know, we've submitted the preliminary design packages to the state, and they're under review. So we anticipate we will have these permits in hand well the bankable feasibility study is done. And you know, the state is, you know, very familiar with large-scale mining operations. And we expect these permits will be in hand in the normal course of the process. Emily: And then the final question also from the line of Chris Gates. Any updates on the Alaska Supreme Court decision? Greg Lang: No. The cases before the Supreme Court are fully briefed and we are awaiting decisions. And we are optimistic that we will continue to prevail in the courts as we have every step of the way. But we are awaiting the decisions that could come at any time or could be six, eight months into the future. So we're just anxiously awaiting that. I think that concludes our webcast for the third quarter. Thank you for taking the time to join us. Thomas Kaplan: Thank you, everyone. Take care. Thank you. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Good day, and welcome to the RPM International 2026 First Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matthew E. Schlarb, Vice President of Investor Relations and Sustainability. Please go ahead. Matthew E. Schlarb: Thank you, Chloe, and welcome to RPM International's conference call for the fiscal 2026 first quarter. Today's call is being recorded. Joining us today are Frank C. Sullivan, RPM's Chair and CEO, Russell L. Gordon, Vice President and Chief Financial Officer, and Michael J. Laroche, Vice President, Controller, and Chief Accounting Officer. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com. Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties, which could cause actual results to be materially different. For more information on these risks and uncertainties, please review RPM's reports filed with the SEC. During this conference call, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website. Also, please note that our comments will be on an as-adjusted basis and all comparisons are to 2025 unless otherwise indicated. We have provided a supplemental slide presentation to support our comments on this call. They can be accessed in the Presentations and Webcast section of the RPM website. As a reminder, certain businesses that were previously part of the Specialty Products Group have been reallocated to other segments effective June 1, 2025. As a result, all references today reflect the updated structure and prior year figures have been recast accordingly. This change has no impact on consolidated results. With that, I would like to turn the call over to Frank. Frank C. Sullivan: Thank you, Matt, and good morning. I will start the call with a high-level overview of our first quarter results, followed by Michael J. Laroche, who will cover the financials in more detail. Matt will then provide an update on cash flow and the balance sheet, and provide some details on our Industrial Coatings Group. Russell L. Gordon will then conclude our prepared remarks with our outlook for the second quarter and fiscal year 2026. As always, we will be happy to answer your questions after our prepared remarks. Looking at Slide three, the pivot to growth I discussed over the last few quarters was on full display with organic revenue growth complemented by the successful integration of strategic acquisitions. All segments achieved record quarterly sales and generated 6% growth or better in what continues to be a challenging macro environment. All three segments increased adjusted EBIT to achieve another record quarter for RPM, thanks to the sales growth and MAP 2025 benefits, which offset several other profitability headwinds. The first quarter represents the fourteenth time in the last fifteen quarters we have achieved record adjusted EBIT. This is a credit to our associates who are focused on realizing the power of RPM by leveraging our entrepreneurial spirit to grow sales while continuing to work to find new ways to operate more efficiently. Next on slide four are examples of the key factors that allowed us to achieve record results in the first quarter despite the challenging demand backdrop. These include turnkey offerings in roofing and flooring, where we both supply and apply the product, a competitive advantage in a labor-constrained construction market. Customer-focused new product introductions, strategic M&A in core categories as well as new adjacent categories, engineered solutions that meet and exceed the demanding specifications of building projects in areas such as infrastructure, data centers, schools, hospitals, and pharmaceutical manufacturing. System selling that offers comprehensive solutions for all six sides of the building envelope, a focus on repair and maintenance, which offers a compelling value proposition and where demand is less volatile than new construction, hiring additional sales and sales support staff across our Construction Products Group and Performance Coatings Group segments in contrast with many of our competitors, and continuously implementing efficiency initiatives built on the legacy of our MAP to Growth and MAP 2025 achievements. These include the consolidation of six facilities currently in process. Over the last six to nine months, we have been talking about a pivot to growth in a frustratingly no-growth environment. To make a pivot to growth, we recognize that we would have to do some things differently. Today, we are doing many things differently, while most of our competitors are responding to the no-growth environment by cutting costs, reducing headcount, and suspending benefits. We are expanding sales associates and support staff with $5.3 million in additional spending in Q1 over the prior year of new employees in this area. We are increasing advertising, especially in our continuing to be challenged consumer business with year-over-year advertising up $3.2 million, and we are rebuilding our M&A pipeline with $2.1 million of higher acquisition-related costs in Q1, while we are maintaining all of our benefit programs, including our 401(k) match, which is roughly the equivalent of $0.06 per share per quarter. These growth investments are having the desired outcome with unit volume growth in our Construction Products Group up 4% despite negative construction market dynamics, and unit volume growth up 8% in our Performance Coatings Group, pretty remarkable in any environment. These self-help measures have been drivers of our recent results and remain critical elements of our coming success. I'll now turn the call over to Michael J. Laroche to cover the financials in more detail. Michael J. Laroche: Thank you, Frank. On Slide five, consolidated sales increased 7.4% to a record with a nice balance between organic and M&A growth. Key drivers included items Frank just mentioned, led by systems and turnkey solutions for high-performance buildings, and a focus on maintenance and repair. Q1 adjusted EBIT increased 2.9% to a record as volume growth allowed us to leverage MAP 2025 initiatives and overcome headwinds from higher raw material costs and temporary cost inefficiencies from plant consolidations. SG&A as a percentage of sales increased, and was due to higher healthcare costs, which was up $8.8 million over the prior year, higher M&A expense, as well as investment in growth initiatives. First quarter adjusted EPS was a record $1.88 driven by adjusted EPS improvement or adjusted EBIT improvement partially offset by an increase in interest expense resulting from higher debt levels from acquisition financing. Moving to our geographic results on Slide six. Growth was led by Europe, which benefited from acquisitions and favorable FX. North America grew 5.9%, driven by systems, and turnkey solutions for high-performance buildings. Performance in emerging markets was mixed, with strength in Africa and the Middle East driven by infrastructure and other projects with pending specifications. Segment results begin on slide seven. Construction Products Group sales increased to a record driven by systems and turnkey roofing solutions serving high-performance buildings and infrastructure projects. This was partially offset by softness in Europe and the disaster restoration business as increased demand last year related to hurricane activity did not repeat. MAP 2025 and higher sales drove the record adjusted EBIT, which was in addition to strong growth in the prior year. This was partially offset by temporary inefficiencies from plant consolidations and SG&A growth investments. Performance Coating Group is on Slide eight. The segment achieved record sales with broad-based strength in turnkey flooring, protective coatings, and specialty OEM. Acquisitions also contributed to the sales increase. Adjusted EBIT was a record driven by higher sales and MAP 2025 benefits partially offset by growth investments and unfavorable mix. These record results were in addition to strong growth in the prior year. On Slide nine, the Consumer Group sales increased to a record as a result of the successful integration of the Pink Stuff and Ready Seal acquisitions. DIY demand remained soft, and product rationalization also had a negative impact on sales. Adjusted EBIT increased driven by acquired businesses with accretive margins and MAP 2025 benefits, which were partially offset by cost inflation, reduced fixed cost utilization from lower volumes, temporary inefficiencies from plant consolidation, and increased marketing expenses. I'll turn the call over to Matt, who will cover the balance sheet, cash flow, and the Industrial Coatings Group. Matthew E. Schlarb: Thank you, Mike. Two key hallmarks of our MAP 2025 program have been improved profitability and working capital efficiency. These have enabled us to enter fiscal year 2026 with a strong balance sheet even after having the largest year of acquisitions in the company's history in fiscal 2025. We utilized this strong financial position in the first quarter to acquire Ready Seal, a leader in exterior wood stains. This easy-to-use product strengthens our offerings in this category and demonstrates our focus on expanding in core and adjacent markets. Although we have increased our M&A activity, our balance sheet remains healthy with low leverage ratios and liquidity of $933 million at the end of the first quarter, which positions us to take advantage of future strategic opportunities. During the first quarter, we also returned $82 million to shareholders through dividends and share repurchases. CapEx increased $11.7 million from the prior year driven by growth investments including the purchase of RPM's recently constructed Malaysia plant. Inventory increases were driven by strategic purchases to mitigate the impact of future tariffs and ensure high service levels during plant consolidations, partially offset by MAP improvements. Now, on slide 11, I would like to provide some background on a business that has benefited from increased collaboration and growth investments. Industrial Coatings Group or ICG. This business recently joined our Performance Coatings Group and sells a variety of products to multiple markets, including powder and liquid coatings for metal, high-end wood finishes, protective coatings for pleasure, marine, and recreation, and wood preservation. Several of the markets they serve have been under pressure for the past several quarters, particularly those tied to housing. ICG organically grew revenues high single digits in the first quarter, despite these challenging markets. This was achieved through investments in new salespeople and improved collaboration among its businesses, which has allowed it to build on its legacy of high technical service levels and customer support. Additionally, customer-focused innovation is accelerated thanks to investments in collaboration at RPM's Innovation Center of Excellence, which opened in 2023. The Innovation Center also allows us to better demonstrate the high performance of ICG's products to customers. Going forward, ICG has additional collaboration opportunities with other high-performance coatings companies within RPM in PCG in areas like R&D and shared service facilities. They also continue to invest in training and development of salespeople and new products to grow share in existing markets and expand into adjacent areas. Now I'd like to turn the call over to Rusty to cover the outlook. Russell L. Gordon: Our second quarter outlook can be found on Slide 12. We expect another quarter of record sales and adjusted EBIT led by systems and turnkey solutions serving construction projects with demanding specifications as well as a focus on repair and maintenance. Acquisitions will also benefit growth in the quarter. We have also taken actions to address two of the larger profitability headwinds we experienced in the first quarter. First, we have taken SG&A streamlining actions including those enabled by the structural shift from four segments to three. Secondly, we have implemented pricing actions to recover the impact of inflation including significant increases in metal packaging and niche products produced primarily in Asia, which we expect will continue to rise in the coming quarters. Overall, we expect consolidated sales and adjusted EBIT to both increase by mid-single digits in the quarter. By segment, consumer is expected to grow sales moderately more than PCG and CPG, due to acquisitions. Moving to our full-year outlook on slide 13. We expect sales to be at the high end of our previously announced low single to mid-single-digit growth range. As we benefit from previous growth investments and acquired businesses. As Frank mentioned, we are continuing these investments and in some cases, increasing them to accelerate our pivot to growth. These investments will add to SG&A for the full year and include reallocating existing SG&A spend to the highest growth opportunities. We also expect to continue benefiting from several of the self-help measures Frank discussed. From a macro perspective, many of the trends we experienced in the first quarter, particularly those related to economic uncertainty, are expected to persist through the fiscal year. Taking all this into account, we anticipate adjusted EBIT will grow toward the lower end of our previously announced outlook of high single-digit to low double-digit growth. That concludes our prepared remarks, and we are now happy to answer your questions. Operator: We will now begin the question and answer session. Michael Joseph Sison: The first question comes from Michael Sison with Wells Fargo. Please go ahead. Michael Joseph Sison: Good morning, Mike. Hey, guys. Great start to the year. Hope your investments have been as good as the Guardians. But Frank, just when you think about the outlook for this year, and being at the lower end, how much of that was due to your investments for growth and how much of that was maybe due to weaker demand? Frank C. Sullivan: So in our case, I think the investments to growth are delivering the desired outcome, which is higher levels of organic growth than is really being exhibited in the marketplace. I outlined in my prepared remarks about $10 million of higher year-over-year quarterly spend: $5.3 million on new hires in sales and sales associate areas, particularly companies like Tremco Sealants, Tremco Roofing, Stonehard, the ICG businesses that Matt talked about. $2.1 million in higher M&A expense, we've got a bigger pipeline. We're starting to see some better opportunities exhibited by the recent acquisitions we've completed versus what was a pretty quiet acquisition period during our MAP initiatives and $3.2 million of higher advertising, mostly in consumer, despite what continues to be a challenging environment there. And then the last area that Mike highlighted on, which was disappointing, was an $8 million higher expense for healthcare costs in the quarter versus the prior year. So those were the primary drivers of the lack of leverage to our bottom line. $10 million of it aside from healthcare costs, are very deliberate, and they're having the desired outcome. And you'll see that continue. The spending that we've been doing and are doing now should serve us well in the coming quarters. Michael Joseph Sison: Got it. And a quick follow-up for the consumer group, the organic growth was down 3%. It feels like the industry is weaker. Do you have any thoughts on where you think industry demand is for the consumer group? Is it down a little bit worse? And are you picking up share? Maybe minus 3% is some evidence that your business is a little bit more stable than wall paint or the small projects. And any thoughts for kind of industry growth for the consumer group for the rest of the year? Frank C. Sullivan: Sure. I do think that our consumer group is outperforming the broader industry. It's a challenging environment and has been that way for more than a year and a half. And those challenges continue. We're picking up share in some new categories. We've introduced a low odor, water-based, spray paint, which is getting new shelf space. We're picking up share in some different accounts. And we're adding meaningfully in the cleaner category. The pink stuff very importantly, puts our consumer group into the consumer products categories of cleaners where historically our cleaners have been all Rust-Oleum based and really hardware store paint aisle type of cleaners. So we're very excited about that. It opens up new channels that we haven't served before, grocery, dollar stores, things like that. And it opens up new geographies. It's a global brand. And so notwithstanding the challenges in the North American consumer markets, we are leaning into finding opportunities for growth in other areas. Michael Joseph Sison: Great. Thank you. Operator: The next question comes from Michael Joseph Harrison with Seaport Research Partners. Please go ahead. Michael Joseph Harrison: Good morning, Mike. Hi, good morning. I was hoping that maybe you could give us a little bit more detail on the increased marketing spend in the consumer segment. It sounds like most of that is advertising, but is there some additional promotional spend or other maybe other categories of marketing? And can you also get into any specific product lines that have been a focus of that additional advertising or promotional spend? Frank C. Sullivan: Sure. So it's been higher advertising, versus the past disproportionately more social media e-commerce as opposed to TV advertising. We have focused a larger share, as you would imagine, in the cleaners category. And part of it is the pink stuff spend as well. And so those are the principal areas where you're seeing higher spend in the consumer area and advertising. Michael Joseph Harrison: Right. And just to clarify there, the additional spend associated with pink stuff, is that just an acquisition contribution, or are you expanding advertising beyond what Pinkstuff brought just as an acquisition? Frank C. Sullivan: It is both. Michael Joseph Harrison: Got it. Okay. And then my second question is was hoping that you could help in understanding the impact of manufacturing inefficiencies. I don't know if there's a way to quantify that impact from plant consolidation in Q1. But I believe you called that out in Q4 as well. And I'm just curious, can you help us understand if that's increased versus Q4? And as we look at Q2, should the inefficiencies impact decline a little bit or could it worsen? Just helping us understand that trend, I think would be very helpful. Thank you. Russell L. Gordon: Hi, Mike. It's Rusty here. To answer your question, yes, we do have six plant consolidations in process. So there is some duplicative costs as we transition from one facility to another. So during the first quarter, there was about $10 million of unfavorable year-over-year conversion cost and unfavorable absorption that occurred. And we would continue to experience those, we believe, in the second quarter as consolidations continue. Frank C. Sullivan: I'll just add a little color to that. One example, Tremco's previously largest North American manufacturer facility was in Toronto. Thirty years ago, we were in the sticks. But as Toronto grew up, we became surrounded by residential. And so really, forced out of there, sold that building with a five-year window to get out. And so we are in the process of transferring that manufacturing from the Toronto facility to other parts of the U.S. And it's increasing inventory investment as we shift from Toronto to three other sites actually in North America. And also, as Rusty mentioned, some duplicative costs. There's a couple of other plants like that, but that's the biggest example. Michael Joseph Harrison: Very helpful. Thank you. Operator: The next question comes from John Patrick McNulty with BMO Capital Markets. Please go ahead. John Patrick McNulty: Yes, thanks for taking my question. Good morning, Frank. So question on the top line, the organic growth in construction and performance was really kind of standout. And you gave a little bit of color on it, but can you drill down into some of the subsectors or end markets that are really driving that? And then how does the backlog look going forward for those respective businesses? Because it does seem like maybe on the guide, you're a little bit more conservative than the numbers that you just put up in those businesses. Frank C. Sullivan: Sure. As I mentioned, we are leaning forward very aggressively in terms of expanding sales forces and sales associates. In construction products, some of it's along some of the product lines we've added. In Tremco roofing, we continue to see a solid backlog in terms of their reroofing, institutional roofing projects. But we acquired Pureira a couple years ago. It took us quite a while to get certified in every state. And really train up our sales force on that refurbishment of big, industrial and commercial HVAC units. We're starting to see sales take off in that category. WTI, which is our contracting both repair and maintenance, then actually doing the whole supply and apply of major reroofing projects has grown actually faster than our material sales. It's a negative to our gross profit mix. But a positive to overall profitability and growth. So those are the areas there. In our Tremco sealants business, our lasers and construction products are driving a one Tremco approach. So we are starting to see sales reps both in sealants and roofing benefit each other with referrals. And then lastly, in Tremco sealants, we are pursuing a much more aggressive approach to the entire wall. If you go back fifteen years ago, we were selling gaskets and wet sealants into windows and door openings. Today, we're selling much a bigger portion of the sidewall building envelope panelization, panelized eaves, ICF, Nudura, and so that is helping our sales as well as we are getting a bigger share of wallet of a wall system versus those higher-end niche sealant products that were the tradition. I'll tell you one great example of that. Ten years ago, Tremco sealants was about 40% project-based, in other words, project specifications and about 60% traditional distribution. So, basically, our sealants, Vulcan, and other things being sold into commercial and industrial and some residential markets through distribution. Today, we are 60% project-based. And only 40% distribution. That distribution is where the impact of pretty punky construction markets dynamics is being felt. And it's being more than overcome by project specifications that driving today and are and really a flip of that project versus distribution model. John Patrick McNulty: Got it. Okay. No. That's, that's helpful. And the Performance Coatings Group, I guess, same question because it does seem like that one the organic growth really really kind of spiked up there. Frank C. Sullivan: Sure. So our Stoneheart business has been very aggressive in both efficiencies and hiring salespeople to drive greater sales. It's been effective and that's been the purest play ad sales reps effectively modeled within RPM over the last couple of years. Our Industrial Coatings Group is really outperforming. Part of it is a couple of years of underperformance because of how much they do that touches housing. So windows, doors, cabinets, things like that. But, traditionally, whether in powder coatings, metal coatings, we have played in the small to medium-sized, low volume, high service areas. And we have been adding salespeople and capabilities to start competing and winning. Larger accounts. For instance, this past year is the first time we have ever sold a project to John Deere. So we are starting to move upstream in competing effectively in some of the larger accounts, and you can see that in our numbers as well. John Patrick McNulty: Got it. Thanks very much for the color. Thanks. Operator: The next question comes from David L. Begleiter with Deutsche Bank. Please go ahead. David L. Begleiter: Thank you. Good morning. Good morning, David. Frank, just looking at the guidance back in July versus today, the full year, what's changed to cause you to go to the lower end of that range? Versus your assumptions back in July? Frank C. Sullivan: So a couple of things. One, we continue to see challenging dynamics in the gross profit margin. We've held up our gross profit margin in Q1 but some of that's mix. In consumer, we got a higher gross margin mix out of the pink stuff, for instance. And so the uncertainty around tariffs remains. We knew we were gonna be making and have been making these investments in growth. I think the biggest surprise to us in the quarter was the healthcare costs increase. That's driven by a couple of particular, high-cost cases. And also the fact in the first six months, we've had about a $6 million, this is six months now, not quarter, over the last six months, a $6 million hire increase for coverage in a lot of these weight loss drugs. And so I would say a third of that $8 million, in the quarter is more permanent with these higher weight loss drug costs, and two-thirds was hopefully one-time related to some extraordinary expense. So that was the biggest challenge that we saw in the quarter. David L. Begleiter: Very helpful. Thank you. And just on pricing, not the critical here, but could you raise prices earlier to account for the tariff cost increases? Are you satisfied with timing these price increases? Thank you. Frank C. Sullivan: It would have been nice to raise prices earlier. The challenge with this tariff regime is it's on again off again. And so we had reached agreement for instance, in consumer with some of our larger accounts on price increases. If and when the tariff impacts occurred. And so, sorting through the impact of tariffs is a challenge for everybody. As we sit here today, and it's subject to change from one week to the next, the total unmitigated impact of tariffs on RPM is about $90 million or $95 million. We have effectively offset about half of that both through production shifts and pricing. And agreements with suppliers, for instance, that might share costs. Our biggest tariff-related impact remains in our consumer group. It's disproportionately in packaging and frustratingly, in metal packaging where it's really not the tariff impact directly. It's the domestic steel producers that have raised their price in line with the tariff regimen. So those are the big challenges. Price in the quarter was about $0.05 on a consolidated basis. It should be somewhat higher in Q2. But inflation is likely to be higher in Q2 because we'll start to see the full impact of the tariff regime in Q2 versus where we were in Q4, Q1. David L. Begleiter: That's great. Thank you very much. Frank C. Sullivan: Thank you. Operator: The next question comes from Patrick David Cunningham with Citi. Please go ahead. Patrick David Cunningham: Good morning. Hi, good morning. Thanks. Good morning. I think you guys have had a pretty strong focus on pulling some working capital out of this business, but you noted some offsets this quarter from strategic inventories purchases. What did you stock up on and why? Frank C. Sullivan: So we've stocked up on some of our construction products and in particular, Tremco sealant products as we make the transition from what was previously the largest sealants plant in North America and Toronto to three other plants in the U.S. We have stocked up in the consumer space in some areas of new products. And in some raw material categories, and this has been true both to our benefit and to our detriment. We stocked up on some key raw materials like epoxy in front of some tariff pricing increases. Patrick David Cunningham: Understood. And then maybe just related on the price increases, how should we think about the shape of realization consumer? And is there more sort of regular structural price that you're getting across the other two businesses at this point? Frank C. Sullivan: So again, in the quarter was less than 1%. And in Q2, we would expect it to be in the 2% range. We're getting price finally in some of our consumer groups, again, are appropriately related to packaging costs, which continue to increase. And we will monitor it as this tariff regime continues to be modified. Patrick David Cunningham: Very helpful. Thank you so much. Frank C. Sullivan: Thank you. Operator: The next question comes from Joshua David Spector with UBS. Please go ahead. Joshua David Spector: Morning, Josh. Good morning. This is Lucas Bowman on for Josh. So I guess just kinda coming in the view was that RPM had sort of already scaled up from a cost perspective. So that as you kinda could get to much higher sales that would drive high incremental margin uplift on those with, like, less cost growth on the SG&A side. So I'm just wondering if you kinda think that view is sort of incorrect or just sort of where are the cost investments going now that's different? And then how should we think about the volume leverage sort of coming through as we move forward from here? Thanks. Frank C. Sullivan: Sure. So first of all, historically, that's not correct. During the MAP initiatives, we were able to reduce our SG&A on a consolidated basis over the cycle probably by 150 basis points. It was actually lower than that during COVID, but it was unsustainably low relative to no travel, and, you know, a lot of cut-back expenses during that time. So it's back up some, but improved from where it was when we started the MAP initiative. Had commented about $15 million of personnel-related, expense reductions across three different areas. Part of it was the consolidation of our Specialty Products Group into the Performance Coatings Group. And then also in consumer, we have reallocated probably half of that into sales and marketing. And so as Rusty mentioned, we have a very deliberate focus on private, trying to drive efficiencies continuing the efficiency drives from our MAP initiatives particularly in G&A, as we have shrunk the number of ERPs and shrunk the number of places where we close the books from an accounting perspective every month. We have offshored some of those expenses to a shared service center in India. But we are not putting all of those dollars on our bottom line. We are reallocating those to more salespeople, more advertising, really trying to drive best practices in e-commerce across our businesses. We tend to have our strongest teams in consumer and we need to drive those disciplines into our industrial businesses. So there is a real pivot to growth here, which is challenging our businesses in an area of capital allocation. This is not high-level balance sheet capital allocation. This is how are you spending your dollars in SG&A to drive growth? Joshua David Spector: Right. Thanks. And then I guess just on the raw material side, I guess, what's your sort of updated outlook there? For inflation over the balance of the year? And between that, and, I guess, the investment in the higher costs on the SG&A side, if you could kinda just put it all together for us and tell us how you're thinking about net gross costs as the year progresses? Thanks. Russell L. Gordon: Sure. For the quarter, material inflation was about 1% on a consolidated basis. We anticipate it being up to about 2% to 3% in Q2. And it's disproportionately in consumer. Joshua David Spector: Thank you. Operator: The next question comes from John Roberts with Mizuho. Please go ahead. John Roberts: Thanks, John. Good morning. Will there be a public new three-year plan? And should we think about an aggregate it being similar earnings impact to the MAP two point zero plan? Frank C. Sullivan: So the answer to that is yes. We will probably be coming out with something public in the spring or summer of next year. As you know, we reorganized from four group structure to three groups. We announced that in July. We have some leadership changes that'll be forthcoming in the next couple of months. So in conjunction with those changes and quite candidly, to wait out what's been a crazy environment of uncertainty around these tariff regimes. And the certainty around, where broadly things are going, difficult. We'll be in a better position to put out publicly a new three-year plan next year. We are working internally on what we call MAP three point o. But it's not ready for public primetime yet. John Roberts: Okay. And I think you had a consumer initiative to enter the dollar stores and supermarkets. How's that going? Frank C. Sullivan: Yeah. No. It's going well. And like Frank talked about, there's a real push to go into these adjacent categories and go into stores where we historically have not had a big presence. With dollar stores, there's such a large footprint. So some of our companies have actually modified the packaging of their products so that they can get into those stores. So we're seeing nice traction there. Russell L. Gordon: So DAP, in particular, has come out with some smaller size caulk sealant adhesive and repair products. Have a really nice program there. And we're also seeing with the pink stuff, opportunities to have discussions with retailers for instance, in grocery and or big drugstore chains, that traditionally, we didn't have much of a relationship with. John Roberts: Thank you. Operator: The next question comes from Frank Joseph Mitsch with Fermium Research. Please go ahead. Frank Joseph Mitsch: Good morning, Hey, good morning, Frank to you as well. Just want to come back to DIY. Suggesting that the softness and it's been an extended two-year plus period of softness there. And you're spending some money on advertising. What are your thoughts on a, you know, at least a flattening out or a rebound to take place in terms of DIY takeaway? Frank C. Sullivan: I appreciate the question. This pivot to growth is in anticipation of what we feel like will be some improved financial numbers as we get into the spring and summer of next year. If for no other reason, then we are annualizing two years of negative consumer takeaway in this space. And so you're getting, down to, levels whether it's in architectural paint, which we don't play in, or some of the spaces that we do that are unit volumes that are pre-COVID. And that some smart new products, and I think some improvement in the housing market, will happen with further interest rate cuts. Remember, housing turnover is a big driver for our consumer group. Typically people fix up their homes before they sell it. And then the new buyer turns around and redecorates it. We are in a forty-year low for housing turnover. And so both the easier comps and an improving interest rate environment, we anticipate will finally result in better dynamics in the spring and summer of next year, and we are doing what we can to lean into it. Frank Joseph Mitsch: Very helpful. And, and just speaking more near term, you know, we've got the month of September under our belt. How would you compare the typical August to some September, this year relative to what you've typically seen historically? Frank C. Sullivan: For the company, relative to growth, sure. In the pivot to growth, we are accomplishing what we set out to do. And the numbers are really solid. And, except for the extraordinary healthcare expense, I would expect our second quarter to look like our first quarter. Frank Joseph Mitsch: Terrific. Thank you so much. Operator: The next question comes from Kevin William McCarthy with Vertical Research Partners. Please go ahead. Kevin William McCarthy: Good morning, Kevin. Yes. Good morning, everyone. Frank, would you elaborate on the expansion of your sales force? From my side, a few of the things I'm curious about is where in the company you're adding if it's concentrated in any particular businesses, how many people do you plan to add? Is the $5.3 million pace of expense that you alluded to likely to be steady or increase or decrease? And finally, you know, I imagine on day one, it's not profitable, right, to add a sales but over time, productivity increases and they cross through and become profitable. What is that amount of time? Do you have a rule of thumb there to think about? Appreciate it. Frank C. Sullivan: Sure. I appreciate the question. So as an example, our Tremco roofing business, we have new hires in their sales training program. They are essentially apprentices for year one. They work under the tutelage of an experienced rep in year two. And in year three, they're on their own. By year five, we have about a 30% turnover. And so that's the dynamic there. So we're expanding those training classes. So that's a payoff that will come, but that's been going on for the last couple of years. And so you're starting to see some benefits there. In both our Stoneheart businesses and in Tremco roofing. We are starting to add. That's why I made it clear. It's not just salespeople, but sales support staff. We are adding support staff to better manage the contracts that we're taking where we apply or where we have the supply and apply model. And, you know, some of our sales reps were being tied up with the dynamics of overseeing projects. And to the extent that we've been adding experienced people in project management, it frees up our good sales reps to go out and sell more. And so those are examples of the areas where we've been adding people. Lastly, the effort starting under Ronnie Coleman's leadership, Johnny Green, who runs our ICG, the Industrial Coatings Group was pulled together of a bunch of different relatively independent RPM businesses that did industrial or OEM metal coatings. And, wood finishes or wood repair products or wood preservative products. And under the ICG, they have been pulled together and are cooperating and in some cases being coordinated more as a unit. So we can go to large accounts and deliver powder and liquid coatings in a more thoughtful, straightforward approach as opposed to having different approaches from different operating companies. So it's really been the integration of the sales approach in the ICG that's helping us. And it's well designed, it's being well executed, and you can see it in our numbers. Kevin William McCarthy: Appreciate all the color there. And as a follow-up, if we take into account these new investments as well as the other ones, that you alluded to on the call, how would you characterize the likely increase in total company SG&A expense this year? Frank C. Sullivan: Well, I don't the $10 million that I referred to in terms of higher advertising, higher selling, and higher M&A costs. Probably extend quarter by quarter. The healthcare costs and the we'll see. And we need to get to the point where we can leverage this big investment into higher sales growth. Quite honestly, with a few exceptions, we're accomplishing what we need to do on the top line and bottom line. Our Performance Coatings Group and Construction Products Group, and you'll see that. We need consumer after two challenging two years to start generating positive organic growth in the top line and bottom line. It's not unique to us, I think we're outperforming the dynamics in the marketplace. But nobody, you know, nobody here is happy with another quarter of negative organic growth in consumer. Kevin William McCarthy: Thank you very much. Operator: The next question comes from Jeffrey John Zekauskas with JPMorgan. Please go ahead. Jeffrey John Zekauskas: Good morning, Jeff. Hi, good morning. Can you talk about how the pink stuff did on a pro forma basis? And is your roofing business is demand for roofing accelerating or decelerating in the current environment? Frank C. Sullivan: So I'll let Matt address the pink stuff question, but on the roofing business, we're seeing high revenue growth in roofing. Again, some of it's ancillary product areas like Pureira, which is the refurbishment of big HVAC units. The disruption and costs of getting cranes to get big air handling units off of hospitals or high rises in downtown settings are very disruptive, very costly to put in a new unit. And, you know, we acquired this business. We've developed it out over the last two and a half years. And at 25% or 30% of the cost of new can refurbish something that dramatically improves air quality, dramatically improves operating efficiency, and extends a use of useful life anywhere from five to ten years. And we are starting to see those revenues pick up. And so they're reflected in our roofing division. Matthew E. Schlarb: That's just one example. And then with the pink stuff, you know, we've had it for a little over a quarter as part of RPM. And the integration's going as expected. We mentioned that it's been accretive to margins or M&A has been, and certainly the pink stuff is a contributing factor. And like Frank talked about, we're taking the advertising that they did and inherited that. And then we're increasing our marketing in that area to grow the sales there. And then also leveraging their presence in these different categories and sales channels where we traditionally haven't been as large. So organizationally, we're doing one more thing, which is in the early stages. We had about a $5,060,000,000 dollar cleaning collection of cleaning products within Rust-Oleum. And within our consumer group now, we have a cleaning group which includes the pink stuff and those previously driven by Rust-Oleum cleaning product categories. Including Mean Green and the new patented two-container packaging that we put out. And so we're taking a more comprehensive approach to cleaning than what we had done in the past. And in terms of growth, it's the right way to go. The broad cleaners category is $12 billion to $15 billion in the United States. It's probably larger than the serviceable addressable market in the U.S. than exists for small project paint and catch repair products, which has been our core for a long time. So we're really excited about it. But we're reorganizing internally to better, be focused on that cleaning category area. Jeffrey John Zekauskas: And then to go back to SG&A expense, you know, even if your healthcare costs for the quarter increased zero, you know, your SG&A would have been up 10%. So, you know, is it an accumulation of acquisitions, spending, infrastructure? Like, last year, your SG&A expense was basically flat. Why has there been such a jump? And maybe to repeat Kevin's question, like where should that grow to in 2026? Frank C. Sullivan: So broadly speaking, there are three areas that are driving SG&A higher. One is acquisitions in both the pink stuff and Ready Seal. We have higher gross margins and higher SG&A spend, so different P&L. So that's just a mix effect. And the healthcare costs we talked about and then $10 million in growth investments in the quarter which, I think is in pretty sharp contrast to peers are cutting costs and suspending payments. And we believe it's the right thing to do to trigger organic growth in what's been a very frustrating no-growth environment for most of manufacturing for almost two years. So far, it's working. And we will continue to push those levers if it keeps driving, an outperformance organic growth. Jeffrey John Zekauskas: Thank you. Frank C. Sullivan: Thank you. Operator: The next question comes from Aleksey V. Yefremov with KeyBanc Capital Markets. Please go ahead. Aleksey V. Yefremov: Thanks. Good morning, Just wanted to go back to your sort of growth algorithm. So let's say this year, they're guiding to mid-single-digit sales growth. And then high single-digit EBIT. Should we look at this as a normal year or is this a year where you have these temporary challenges, investments, etcetera, such that in a more normal growth year, you can maybe help? Higher incremental margins and your EBIT would grow more than high single digit. Sure. Frank C. Sullivan: So I do not think of this as a normal year. I talked about the uncertainty of the tariff regime and what it's done to the costs and raw materials. And its stall broadly on big capital investment decisions of our customer base. And you know, the inflation element, it's still in the SG&A areas. You're looking at underlying inflation of compensation in the 2.5% to 3% range. So it's challenging. In a normal environment, and I'm not sure when we'll see that, 7% revenue growth should be spitting out mid-teens earnings growth. And so is the lack of leverage to the bottom line somewhat disappointing? Yes. But I think time will tell. Some of our peers are gonna be putting up flat or no growth, and you're gonna see flat or declining EBIT margins. When the worm turns, we want to be in a position to outperform and it's not just strategic thinking today. I can tell you in some of our industrial businesses going back to the early two thousands, we overcooked expense cuts coming out of the February, 2001, recession. And took twelve or eighteen months to catch up when the markets turned positive. And we want to be in a better position today, and that's how we're thinking. Obviously, if we wake up in 2026 and the world is a worse place than it is today, we can take appropriate action if necessary. Aleksey V. Yefremov: Thanks, Frank. And then in consumer, are you still intending to raise prices to sort of reflect current raw materials environment or are you fully caught up after when you? Frank C. Sullivan: We have a level of price increases that we're in planning to do in Q2, which will benefit Q2 in consumer. At the end of Q1. Aleksey V. Yefremov: Okay. Thanks. Operator: Our next question comes from Arun Shankar Viswanathan with RBC Capital Markets. Please go ahead. Arun Shankar Viswanathan: Good morning, Arun. Arun Shankar Viswanathan: Good morning, Frank. Thanks for taking my question. Hope you're well. So I guess two questions for me. So first off, I think you mentioned a $90 million to $95 million unmitigated impact from tariffs. Could you just walk through that? Is that, maybe 10% or 20% of your raw materials bucket that you source elsewhere that's, say, up 30 to 50% or something, and that's how you calculate that. And then the actions you've taken, are you resourcing from other locations? Is that correct on the tariff question? Frank C. Sullivan: So, Sree, I don't know. Top of my head. Somebody will have to do the math, for me in terms of the percent. But I can tell you that the three areas that we've had success in mitigating, in some cases, with certain suppliers we have, you know, we have worked to understand the true cost. And then we have agreed to split it. And so essentially sharing the pain. In certain cases, we have passed on price, to our customers. And in other cases, we have shifted production. So an example of production shift, most of the pink stuff paste, which is their iconic cleaning product that they really were founded with, was produced in the UK. We have taken action to shift production of that to one of our US consumer plants to serve the consumer market. Unrelated but helping us is the shift, from Toronto, the Tremco sealant plant into the U.S. Although some of the USMCA is helping us between business in Canada and the U.S. and Mexico. Again, it's complicated to figure out how that works. And then we have not fully offset all of the tariff impacts as I indicated. About half of it has been mitigated, and we are working on the other half. Arun Shankar Viswanathan: Okay. Thanks for that. And then just on the M&A front, I think you may have noted that fiscal 2025 was one of your most active years, not the most active year on that front. So I guess what are you seeing there? What your kind of appetite to take leverage higher, for the right property? And, would that be mostly in, PCG and CPG, or where are you finding or maybe consumer in cleaning? Or where are you finding opportunities? Thanks. Frank C. Sullivan: So we've spent $600 million in the last five months in solving a consumer between Ready Seal and Pink Stuff. And, again, it's been a thoughtful approach to saying, alright. Where are new categories where we can drive new growth? We have done a number of smaller product lines in our Construction Products Group. They've been very strategic as it relates to the building envelope and looking at different product categories that they would like to be in that they're not. So we have grown our market share in expansion joints for heavy industry and or commercial. We've expanded market share in certain fireproofing and fire stopping product lines. And they've been small acquisitions, but the opportunity to take a $5 million product line and turn it into a 15 or $20 million product line with our distribution and our sales force is pretty exciting for us. I will tell you that one of the benefits of the MAP to Growth initiative that I hope people appreciate. For a long time, we operated, I'm talking twenty plus years, with a debt to EBITDA ratio of 2.5% to 3%. And because of the stability of RPM, still maintained an investment-grade rating. We just completed $600 million of debt-funded acquisitions. And our debt is about 1.8%. And so the benefits of the MAP initiative in terms of cash flow and profitability improvement. I'm sorry, 1.8 times, not 1.8%. And so the benefits of the MAP initiatives are really part of our cash flow and our credit metrics as well. And so we got plenty of dry powder to do acquisitions. The last comment I'll make is PE seems to be not as active. They seem to be more on the sell side and the trying to raise new fund side as opposed to being as aggressive in the acquisition market. So we're seeing deal flow at two or three multiple turns below where it was at the peak. Arun Shankar Viswanathan: Thanks. Operator: This concludes our question and answer session. I would like to turn the conference back over to RPM's Chairman and CEO, Frank C. Sullivan, for any closing remarks. Frank C. Sullivan: Thank you. I want to conclude with a comment about what's happening societally today and in relationship to my reference to 401(k)s. To a certain extent, there is a battle for the soul of what drives the economy in the US. With a younger generation that starts to think maybe socialism is better than capitalism. And that could not be further from the truth. In fact, the American form of capitalism over the last two hundred years has brought more people out of poverty in our country and the world, has generated more wealth across generations, across ethnic groups, gender, you name it. And has done more to spur innovation in technology, medicine, entertainment, despite all its flaws in any other system. I mentioned that because business has to be smart. When companies defer benefit payments that are long-term investments in the stability and security of our associates' retirement. To meet near-term earnings per share pressure that we all have, you're feeding that narrative. Private equity right now is working to open up $2 trillion worth of 401(k) assets. To an asset class that because of its past success and its growth has average returns now that are not much better than what the broader market provides, but with a dramatically higher fee structure, and a liquidity neither of which will work well in retirement plans like 401(k)s. And so I say that because the CEOs that matter, the Brian Moynihans, Jamie Dimons, Jeff Bezos, Mark Zuckerberg, Doug McMillan, need to be pounding the table in support of American capitalism. The alternative will not be good for anybody. And need to provide examples of how American capitalism can create value for everybody and we have to not feed the narrative out there that socialism might be a better model. And I appreciate the opportunity to provide that perspective. Our second quarter will look much like our first quarter. Couldn't be more proud of the RPM associates that have effectively executed on a pivot to growth in a continuing no-growth environment. We appreciate your time on the call today. And look forward to welcoming any and all of you to the RPM Annual Meeting of Stockholders tomorrow at 11:30 Eastern time. Thank you, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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