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Operator: To all sites on hold, we appreciate your patience and ask that you please continue to stand by. Your program will begin in six minutes. To all sites on hold, we appreciate your patience and ask that you please continue to stand by. Your program will begin in four minutes. To all sites on hold, we appreciate your patience and ask that you please continue to stand by. The program will begin in just a moment. Please stand by. Your meeting is about to begin. Welcome to the M&T Bank Corporation First Quarter 2026 Earnings Conference Call. All lines have been placed on listen-only mode, and the floor will be open for your questions. Lastly, if you require operator assistance, please press 0. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Rajeev Ranjan, Head of Investor Relations and Corporate Development. Please go ahead. Rajeev Ranjan: Thank you, Angela, and good morning. I would like to thank everyone for participating in M&T Bank Corporation’s First Quarter 2026 Earnings Conference Call. If you have not read the earnings release we issued this morning, you may access it, along with the financial tables and schedules, by going to our investor relations website at ir.mtv.com. Also, before we start, I would like to mention that today’s presentation may contain forward-looking information. Cautionary statements about this information are included in today’s earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials. The presentation also includes non-GAAP financial measures, as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T Bank Corporation’s Senior Executive Vice President and CFO, Daryl Bible. I will now turn the call over to Daryl. Daryl Bible: Thank you, Rajeev, and good morning, everybody. Our purpose continues to define M&T Bank Corporation: to make a difference in people’s lives. We do this by helping our customers grow, enabling commerce, and supporting our communities. We value building long-term relationships and being a source of strength and stability to our stakeholders through various economic cycles. We are committed to investing in the places we serve. In this quarter alone, we launched a new Baltimore Ravens College Track Center, a state-of-the-art learning support space for local high school scholars. In New York City, we opened a new full-service branch in the Bronx. And just this week, we announced our work with the Boston Foundation on a multimillion-dollar program with the City of Boston to accelerate the city’s innovation ecosystem. Looking ahead to 2026, our priorities remain clear: operational excellence—building simpler, more consistent, and resilient operations—and teaming for growth, which is about working more seamlessly to deepen relationships and expand opportunity in our markets. We enter this season with the same relentless commitment to disciplined execution and long-term performance. To that end, before we get into the results this quarter, let me underscore some long-standing qualities that have come to characterize M&T Bank Corporation’s performance. We have always maintained a strong balance sheet, starting with a very high-quality loan portfolio, proven asset quality performance over the long term, strong levels and quality of capital, and ample liquidity. Regardless of the business environment, we remain steadfast in our disciplined approach to underwriting, pricing, and risk management. At times, that results in focused growth in some loan categories while remaining vigilant in others, as was the case last year and this quarter. I would rather say no to a transaction than compromise on structure and pricing. We chose to be selective to preserve the high quality and low volatility of our revenue and earnings stream. Those tenets serve us well. I am confident that we will see growth across all loan categories this year, but in a manner that delivers progress while protecting all of our constituents, including customers, communities, and investors. As the industry navigates some new uncertainties from current events, we have chosen to be cautious with our NIM expectations, but we remain confident in delivering the performance we expected when we started the year. Our pipelines remain strong, but we chose not to chase growth or yield if a transaction does not fit our underwriting and return standards. We have one of the highest-quality risk-adjusted NIMs in the peer group, and we will maintain that while delivering strong results driven by a well-diversified revenue stream. We are starting with strong year-over-year fee income momentum, and those fee income growth contributors are of high quality and low volatility. Asset quality has been improving notably. Our strong capital levels, as well as our consistent capital generation, give us flexibility for share repurchases. In combination, these factors will allow us to produce strong pre-tax pre-provision revenue and earnings, in line with and with a possibility of exceeding expectations. As we go through the presentation today, I will highlight the strength and diversification of M&T Bank Corporation’s balance sheet, capital, asset quality, and revenue, which enable us to outperform consistently across cycles. We continue to receive recognition for our performance, including the impact of our charitable team and our engagement with investors, reflecting the dedication of our teams across M&T Bank Corporation. Now let us turn to the results for the first quarter. Our results represent a strong start to the year with several successes to highlight. Net interest margin expanded 2 basis points, reflecting continued fixed-rate asset repricing and deposit cost discipline. C&I growth was strong, with average C&I loans growing $1.5 billion from the fourth quarter, including a pickup in middle market growth. Fee income remains a bright spot, growing 13% from 2025, with solid year-over-year growth in each of our fee categories. Credit continues to perform well, with more than $700 million reduction in criticized balances and net charge-offs of 31 basis points. We brought our capital levels within our operating range and executed $1.25 billion in share repurchases, representing over 3.5% of shares outstanding as of 2025. Diluted GAAP earnings per share were $4.13, down from $4.67 in the prior quarter. Net income was $664 million compared to $759 million in the linked quarter. M&T Bank Corporation’s first quarter results produced an ROA and ROCE of [inaudible], respectively. Supplemental reporting of our results on a net operating or tangible basis shows net operating income of $671 million compared to $767 million in the linked quarter. Diluted net operating earnings per share were $4.18, down from $4.72 in the prior quarter. Net operating income yielded an ROTA and an ROTCE of [inaudible] for the recent quarter. Next, we will look a little deeper into the underlying trends that generated our first quarter results. Taxable-equivalent net interest income was $1.76 billion, a decrease of $27 million, or 2%, from the linked quarter. Net interest margin was 3.71%, an increase of 2 basis points from the prior quarter. This improvement was driven by a positive 8 basis points from the higher spread driven by fixed asset repricing, remixing of cash to securities, deposit pricing discipline, and a favorable impact on our swap portfolio. That was partially offset by a negative 6 basis points from a lower contribution of free funds driven by share repurchases and the impact of lower rates on the value of free funds. Average loans and leases increased $800 million to $138.4 billion. Higher commercial loans were partially offset by lower CRE and consumer balances. Commercial loans increased $1.5 billion to $63.8 billion, aided by growth in middle market, business banking, and several of our specialty businesses. Higher middle market loans reflect an uptick in utilization in the first quarter. CRE loans declined 3% to $23.5 billion, reflecting somewhat moderating paydowns but softer volume, particularly in January and February. However, we saw strong CRE origination activity in March. Residential mortgage loans were largely unchanged at $24.8 billion. Consumer loans declined 1% to $26.3 billion from lower recreational finance and auto loans due to poor weather early in the year. Loan yields decreased 14 basis points to 5.86%, reflecting lower rates on variable-rate loans, partially offset by fixed-rate loan repricing and eliminating the negative carry on our swaps. Our liquidity remains strong. At the end of the first quarter, securities and cash held at the Fed totaled $53.1 billion, representing 25% of total assets. Average investment securities increased $1.1 billion to $37.8 billion. The yield on investment securities increased 9 basis points to 4.26%. The duration of the investment portfolio at the end of the quarter was 3.8 years, and the unrealized pre-tax gain on the available-for-sale portfolio was $9 million. While subject to the LCR requirements, M&T Bank Corporation estimates that its LCR at quarter end was 107%, exceeding the regulatory minimum standards that would be applicable if we were a Category 3 institution. Average total deposits declined $800 million to $164.3 billion. Noninterest-bearing deposits increased $400 million to $44.6 billion, aided by institutional services. Interest-bearing deposits declined $1.2 billion to $119.7 billion, driven by lower brokered deposits. Interest-bearing deposit costs decreased 21 basis points to 1.96%, with lower deposit costs across each of our segments. We have been able to grow customer deposits and maintain deposit cost discipline. Since 2025, we have more than funded our loan growth, with average customer deposits outpacing loan growth by more than $1 billion. We grew customer deposits while maintaining deposit cost discipline, reflected in a 56% interest-bearing deposit beta since the start of the cutting cycle in 2024. Noninterest income was $689 million compared to $696 million in the linked quarter. Mortgage banking revenues were $127 million, down from $155 million in the fourth quarter. Residential mortgage revenues decreased $16 million to $89 million, mostly related to the MSR time decay now being recognized as a contra-fee item rather than an expense. Commercial mortgage banking decreased $12 million to $38 million, driven by lower volumes compared to the fourth quarter. Other revenues from operations increased $24 million to $187 million from a $33 million Bayview distribution, partially offset by lower merchant discount. Noninterest expense for the quarter was $1.44 billion, an increase of $59 million from the prior quarter. Salary and benefits increased $105 million to $914 million, reflecting approximately $115 million in seasonal compensation. Professional services decreased $12 million to $93 million, reflecting lower legal and review costs. FDIC expense increased $31 million, primarily related to a $29 million reduction of estimated special assessment expense in the fourth quarter. Other costs of operations decreased $50 million to $101 million from the previously mentioned changes related to the accounting for the MSR portfolio and a $50 million charitable contribution in the prior quarter. The efficiency ratio was 58.3% compared to 55.1% in the linked quarter. Turning to credit, asset quality was strong, with lower net charge-offs and continued improvement in nonaccruals and criticized loans. The level of criticized loans was $6.6 billion compared to $7.3 billion at December. The improvement from the linked quarter was driven by a $400 million decline in CRE and a $300 million-plus decline in C&I criticized. Nonaccrual loans decreased slightly to $1.2 billion; the nonaccrual ratio decreased 1 basis point to 89 basis points. Net charge-offs for the quarter totaled $105 million, or 31 basis points, decreasing from 54 basis points in the linked quarter. Net charge-offs were granular, with no single net charge-off greater than $10 million. In the first quarter, we reported a provision for credit losses of $140 million compared to charge-offs of $105 million. The allowance for loan losses as a percent of total loans was unchanged at 1.53%. Our NDFI portfolio remains a smaller percentage of total loans compared to our peer group. Three portfolios—fund banking (subscription lines), residential mortgage warehouse lending, and institutional CRE (primarily lending to REITs)—comprise over two-thirds of the NDFI loans and are long-standing and relatively well understood by the market. Business credit intermediaries consist of approximately $700 million of wholesale lender finance, $600 million of business leasing, and $400 million of loans to BDCs. Across the NDFI portfolio, advance rates vary but are calibrated to asset quality, historical recovery data, and collateral performance. Visibility into collateral is strong, with frequent reporting, borrowing bases, independent valuations, and field exams. Diversification is a key mitigant both within structures and across the broader NDFI portfolio. For example, software exposure within our BDC portfolio is less than 15%. Turning to capital, M&T Bank Corporation’s CET1 ratio was an estimated 10.33%, a decline of 51 basis points from the fourth quarter. The lower CET1 ratio reflects $1.25 billion of share repurchases and increased risk-weighted assets, partially offset by continued strong capital generation. In March, the Federal Reserve issued regulatory capital framework proposals. Based on our initial estimate, we see an approximate 90 basis point benefit to our CET1 related to lower risk-weighted assets under the standardized approach. If we were to opt in to the expanded risk-based approach, we estimate an incremental 10 to 20 basis point benefit. The proposal also has a phase-in and inclusion of AFS securities and pension-related AOCI in regulatory capital. At the end of the year, this would be a 4 basis point benefit to the CET1 ratio on a fully phased-in basis. We are well positioned for these proposals given our current capital levels, AOCI, loan mix, disciplined credit underwriting, and relatively straightforward business model. Now turning to the outlook. First, the economic backdrop: the economy continues to hold up well despite ongoing concerns and uncertainty regarding tariffs and other policies. The situation in Iran poses new risks to the U.S. and global economies through energy prices and uncertainty. Consumer spending has slowed but continues to grow in aggregate; however, there is a growing divide between higher- and lower-income households—the “K-shaped” economy. The higher-end consumer continues to be stronger in spending, while the lower-end consumer has maintained but is vulnerable to risks in the environment. U.S. GDP growth has slowed, reflecting slower consumer spending among the impacts. Encouragingly, underlying details for the first quarter show continued strength in equipment investment by firms. The weak labor market in 2025 is showing possible signs of bottoming out, but we remain attuned to risks from geopolitical conflict. We remain well positioned for a dynamic economic environment. Our full-year expectations are unchanged from the ranges we discussed in January’s earnings call, but I will discuss some current trends. We expect NII of approximately $7.2 billion to $7.35 billion, which translates into a NIM in the high 3.60s. We started the year with slower CRE and consumer growth than our initial expectations, though this has been partially offset by strength in C&I. We saw stronger CRE origination volume in March. NII will continue to be dependent on the shape of the curve and loan and deposit balances. We expect both fee income and expenses to trend toward the top of their respective ranges. This reflects strength in both fee income categories and additional subservicing balances, which I expect to bring in during the second half of the year. We will continue to manage PPNR well within the range implied by our January guidance. Our taxable-equivalent tax rate is expected to be approximately 24%, compared to the prior outlook of 24% to 24.5%. We are also moving to the bottom end of the CET1 ratio range of 10%, given continued asset quality improvement and our strong performance. Overall performance remains on track with our initial expectations. To conclude, our results underscore an optimistic investment thesis. M&T Bank Corporation has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperformance through all economic cycles, while growing within the markets we serve. We remain focused on shareholder returns and consistent dividend growth. And finally, we are a disciplined acquirer and prudent steward of shareholder capital. As we close, I want to thank my M&T Bank Corporation colleagues who work tirelessly each day to make a difference in people’s lives. Because of you, M&T Bank Corporation is able to support all of our communities. Thank you. We will now open the call for questions. Operator: Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. Operator: Our first question today comes from Manan Gosalia with Morgan Stanley. Your line is open. Please go ahead. Manan Gosalia: Good morning. I really appreciate all the detail on the capital side, so maybe I will start there. First, you are saying ERBA is a positive. I just wanted to clarify that you were saying that you will be adopting that, or is it still something you are deciding on? And is there a higher expense impact from opting in or anything else that we might not be considering? And second, on the ERBA, what is driving that benefit? How are you thinking about credit risk and op risk? Daryl Bible: Thank you for the question. The proposal just came out. It has to go through the comment process and then the approval process. I cannot commit that we will adopt the ERBA, but what I can tell you is, if there is an advantage that we see today that does not change, it is up to us to make good decisions for our shareholders. That would mean we would probably opt in. We will see how things play out, but if you are going to get that much of an advantage, we can put processes in place that should more than pay for it. Manan Gosalia: Got it. And then you did a pretty significant buyback this quarter, and you are bringing down the CET1 guide. Now that we have the new capital proposals, assuming they go through as written, what would the right normalized CET1 level be for M&T Bank Corporation over the longer term after the RWA benefit? And what will determine how quickly you get there? Daryl Bible: It is a proposal, so let us use round numbers. If we adopt it and CET1 goes up roughly 100 basis points, we would need to see what other constituencies—primarily the rating agencies—think about that, because there is actually capital coming out of the system, but they also use RWA in many of their calculations. We need more measurement there. My guess is, whether you get the full benefit or not, you probably will trend down lower, and you will probably see that easily in the tangible equity ratio. Analyst: Got it. Thank you. Operator: Thank you. Our next question comes from Scott Siefers with Piper Sandler. Your line is now open. Scott Siefers: Thanks for taking the question. Daryl, I was hoping you could expand on what caused the margin to come in a little below your prior expectations. I think you mentioned in your prepared remarks that you are choosing to be a little cautious on the guide. Has anything changed, or are you just approaching with an abundance of caution? Daryl Bible: It is a combination of two things. We did not come out of the blocks really strong in consumer indirect. That is an important portfolio to us because it has higher yields, and it was more of a weather event. We believe we are going to catch that up and make progress, but until that happens, we are being cautious. From a CRE perspective, seasonally it always drops off in the first quarter, but we had over $1 billion in originations in March. We are off to a great start in the second quarter, so we should have a lot of confidence that CRE is going to get on track and grow this year and do really well. It is just a matter of when that happens, and that would be a benefit. The only other thing I would weigh in is, with higher rates it is harder to get growth in our DDA accounts. We were hoping to grow those a little more. We will see if rates stay flat or go down. We are just being cautious based on what we are seeing; we do not want to overcommit. Scott Siefers: Perfect. Thank you. And one tick-tock one: maybe discuss the overall level of borrowings. As I look at end-of-period short-term borrowings, it is about as high as I can remember for some time, and it did not look seasonality related. Anything going on there we should be aware of? Daryl Bible: We were managing to our short-term ratios, and we also have a lot of volatility in deposits within our ICS business. We have it for a while, then it goes away, and it replaces it. We are good at keeping our lines open in multiple places so we always have access. I am a big believer in leaving lines in place, and if we need to draw upon them and increase them, we can do it immediately, same day. It is how we manage our balance sheet to minimize size. We do not want it too large. We want to operate at an optimal balance sheet size. Scott Siefers: Got it. Perfect. Thank you very much. Daryl Bible: You are welcome. Operator: Thank you. Our next question comes from Gerard Cassidy with RBC Capital Markets. Your line is now open. Gerard Cassidy: Hi, Daryl. Daryl Bible: Hey, Gerard. Gerard Cassidy: Circling back to the NDFI portfolio, which you give us very good detail on. Based upon M&T Bank Corporation’s history as being one of the better credit underwriters, your institution—similar to your peers—has grown these portfolios quite rapidly over the last five years. What has driven such material growth in this category versus other categories? Are there one or two reasons, whether better capital treatment or something else, that drove the growth? Daryl Bible: The bulk of our NDFI portfolio is three primary businesses. Mortgage warehouse lending is a core business for us. It is a really safe credit business if you run strong operations and perfection of collateral. We run it efficiently and profitably. Lending to REITs is something we have done for a long period; it is another sound way of growing, and that portfolio has been growing nicely. Fund banking and capital call lines is a business we acquired from Webster. We like the business from a credit perspective and believe it is a good fit. We have been growing it to right-size for M&T Bank Corporation rather than the size it was when we acquired it. Those three are really our core ones; everything else is relatively small. We feel very comfortable growing what we have. Gerard Cassidy: Speaking of growth, you touched on CRE mortgages picking up in March. Can you expand on what you are seeing in CRE lending versus C&I? What is the outlook? Daryl Bible: Our CRE business platform is one of the best in the industry. We have five distinct business lines. First is our regional portfolio—core to us—which had been shrinking, but we are now very active in those regions and generating more production. We believe our regional businesses will continue to grow. Several years ago, we got into the originate-and-sell business with RCC. RCC is another way of serving clients. We do business on and off balance sheet. Last year, RCC originations were about the same as on-balance-sheet originations; we get paid fee income even when it is off balance sheet. That business had record performance last year and continues to perform very well. We also have the institutional CRE business with REITs, which has been growing nicely and will continue to grow. We formed a dedicated affordable housing business line—more complicated underwriting, but by pulling it together we will generate more consistent volume and build relationships. Lastly, we have the warehouse business, which is also attractive. Net, we feel really positive that CRE will continue to grow and you will see loan growth and fee income; it is bigger than just the balance sheet. Gerard Cassidy: You have done a very good job bringing down criticized loans in CRE from a year ago. What were the drivers—paydowns, improved cash flows? Daryl Bible: It is broad-based. We have seen improvement in operating performance, and some borrowers are paying off and going elsewhere. It is a combination. The improvement in credit quality gives us confidence to continue bringing down capital levels, and you see that in our share repurchases. Operator: Thank you. Our next question comes from Analyst with Deutsche Bank. Analyst: Hey, everyone. This is Nate Stein on behalf of Matt O'Connor. I wanted to drill down on the CRE comments. You said originations picked up in March, but is it fair to say that CRE loan balances can grow in 2Q and beyond? Daryl Bible: I have been saying that for a couple of quarters, so you probably do not believe me anymore. I will not commit to that. What I will tell you is we have a lot of momentum. We are growing and getting more customers. Whether we grow average or point-to-point in the second quarter, I am not concerned. I know it is going to grow this year. Our teams are working hard and having fun working with customers and projects. We will have a very successful business with positive revenue from both fees and balances. Analyst: Thank you. And then a quick question on the use of excess capital. First-quarter buybacks were really strong—more than double the quarterly pace. How do you think about the CET1 range 10.5% to 10% and pacing, given the backdrop? Daryl Bible: The reason we widened the range is continued improvement in asset quality. We feel comfortable that our long-term CET1 ratio, approved by the Board, is 10%. We feel comfortable going there. We left 10.5% out there because there is a lot of geopolitical risk. If we see signs of stress, we will stop buybacks and accrete capital. In any quarter without share repurchases, net of dividend, we accrete about 25 basis points, so we can accrete back quickly. Right now, we feel very good and will continue to move ratios down, but if we see something we do not like, we will pause and accrete capital. Operator: Thank you. We will go next to Chris McGratty with KBW. Your line is now open. Chris McGratty: Good morning. Interested in your comments on deposit competition. Any specific geographies or markets given the industry is putting up a little better loan growth? Daryl Bible: We have a lot of ability to grow customer deposits and have been doing so consistently for many years. We pay competitive rates; we are not the highest or the lowest, but we get our fair share. Competition is always present, but I would not view it as worse than other environments. We had nice growth this past quarter, and I think that continues through the year. Net-net, as in my prepared remarks, we have grown customer deposits more than loans the last couple of years and will continue, shrinking non-core funding if needed. Importantly, across M&T Bank Corporation our businesses are incented to get the operating account first. Once we get that, it opens the door and increases wallet share. In business banking, we have a ratio of three times more deposits than loans, and 80% of deposits are operating—really strong. They are growing deposits and have huge loan pipelines. Business banking is performing as well as I have ever seen it. Chris McGratty: Thank you. And on credit spreads across asset classes—any comments about incremental spreads, whether CRE with increased originations or C&I? Daryl Bible: Spreads have moved around a bit; with the conflict in Iran, they probably widened a touch. It is also very competitive, so sometimes a little wider, sometimes narrower—net about the same. We try to be competitive and make sure we get paid for the risk we take. Operator: Our next question comes from Ken Usdin with Autonomous Research. Your line is now open. Ken Usdin: Thanks. Hey, Daryl. As you talk about fee growth and the high end for the year—I know the first quarter had the Bayview distribution benefit—can you flesh out more about the magnitude of the mortgage subservicing books you think you can bring on and how big of an opportunity that is? And more color on where you expect fees to grow? Daryl Bible: We have tremendous momentum in our fee businesses. We have a specialized subservicing business focused more on FHA; it pays a little more because it is higher-touch to service. We think additional subservicing will start to come on at a run rate in the second half of the year—annual revenue run rate in the $30 million to $40 million range, operating at about a 50% margin. We are also seeing really good growth in our trust businesses—both wealth and corporate trust. Corporate trust also brings in nice deposits. Treasury management in commercial is performing really well—high single-digit growth. Capital markets fees, from a low base, are continuing to increase. Now that we have our general ledger converted over this past weekend, our accounting and finance teams will work on breaking that out so you will see it in the next quarter or two. I feel our fees will continue to outperform; we may actually exceed our range. Ken Usdin: Got it. And given your avenues for deposit growth, your decision tree between leaving money in cash versus putting it into the securities book—looks like you are biased toward securities. Where do you want that to live and how do you expect it to go? Daryl Bible: It was fine-tuning. We thought we could hold a little less cash at the Fed and put a bit more into the securities portfolio. It means we will do a little less hedging because we have more fixed-rate assets, but we remain roughly neutral on interest-rate risk. We are positioned well for rates moving in either direction and will continue to manage accordingly. Operator: Our next question comes from John Pancari with Evercore ISI. Your line is now open. John Pancari: Morning, Daryl. Daryl Bible: Morning. John Pancari: You indicated some selectivity in underwriting. What are you seeing that is making you say that? Is it pricing, terms? What areas are seeing returns pressured where you decided to be more selective? Daryl Bible: It is really competitive in lending—commercial, consumer, CRE. As we talk to leaders and teams, I probably lean a little more to structure than pricing—maybe a 60/40 tilt to structure. Structure is not something you want to give on. For good customers, you might stretch a bit on pricing. We are not in a hurry to put a lot of loans on; we will do it the right way and make sure we get paid back and have good earnings streams. We are performing well, generating a lot of capital, and returning a lot to investors. We are not under pressure; we are doing the right things for the long term, which is what you would expect from M&T Bank Corporation. John Pancari: Got it. Thank you. And on M&A, can you update thoughts—both bank and nonbank—given the backdrop? Daryl Bible: M&T Bank Corporation is very consistent with a long history and track record on M&A and shareholder returns. We have always been very selective. Anything we consider must meet both our strategic criteria—primarily in-footprint—as well as our financial criteria. We will continue to focus on running the company well. If something fits, we will consider it, but we are not going to stretch. Operator: We will go next to Ebrahim Poonawala with Bank of America Securities. Your line is now open. Ebrahim Poonawala: Good morning, Daryl. You talked about the GL update—I think it gets completed this year. Give us a sense of tech spend and what projects are upcoming over the next year or two as we think about infrastructure upgrades? Daryl Bible: We went live on our general ledger this past weekend. It is performing really well, and that is behind us. Hats off to the team—hundreds of people across technology, business, and finance—and our partner EY over three years. As for tech spend, it gets reallocated to other priority projects. Priorities now: teaming for growth—deeper wallet from customers and in regions—and operational excellence—simplify and automate operations using AI and other tools. We are off to a good start. This will be a multiyear effort. As projects like the GL roll off, others fill in. We have a strong planning process to allocate spend, balancing strong investor returns with getting a lot done across the company. Ebrahim Poonawala: On capital, the roughly 100 bps benefit you could get from the proposals—if rules go effective in January 2027 or January 2028—how do you think about deploying that if your CET1 target remains the same? Do you get more active on buybacks? Daryl Bible: We have to wait to see final rules after the comment period and what gets passed. It is directionally right. With LTVs, we are a conservative lender and have a huge lift because of our LTVs; that will continue to be core. It is too early to say how we will deploy the capital. We want to serve all constituencies and will decide as we know more. Ebrahim Poonawala: Anything you would advocate for in the comment period—technical items that may not reflect your balance sheet’s risk? Daryl Bible: I think it is a fair, data-driven assessment. Standardized RWAs are directionally right. Under the enhanced approach, there is a good advantage for us because of our LTVs. Also, if fee businesses remain favored, our Wilmington Trust businesses benefit. Our business mix appears well positioned under what we are seeing. Operator: We will go next to Analyst with Jefferies. Your line is now open. Analyst: Hey, guys. This is Brooks Dutton on for Dave today. On deposit betas going forward, you reported a 56% beta through the cycle so far. How much additional beta do you expect if rates stay higher for longer? And if you could touch on a modest curve steepening or lower short-term rates and how that would translate through NIM and NII given your current balance sheet positioning? Daryl Bible: Simplifying it: rates were going up—our deposit beta was in the low-to-mid 50s. Rates are coming down—right now we are in the mid-50s coming down, and we will probably stay low-to-mid 50s coming down. At some point—maybe 50 to 100 basis points more—the consumer portfolio hits floors and then that beta starts to shrink, but we are still a ways away. It is not rocket science; it should go up as much as it goes down if you are disciplined on deposit pricing. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to our presenters for any additional or closing remarks. Rajeev Ranjan: Again, thank you all for participating today. As always, if any clarification is needed, please contact our Investor Relations department at 716-842-2518. Thank you all. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
Samuel Skott: A warm welcome to the presentation of our second quarter results. My name is Samuel Skott. I'm the group CEO here at Dustin. And with me today, I have our CFO, Julia Lagerqvist. And if we get into the Q2 report, I'm glad to report yet another quarter with organic growth, strong cash flow and reduced leverage, while we continue to streamline and improve the efficiency of our operations. Net sales development was positive in the quarter with organic growth of 4.4%. Growth was driven by strong performance in the public sector and should partly be seen in the light of a strong comparable quarter. The gross margin decreased to 13.2% compared with 13.9% last year, but indicated a sequential improvement compared to the first quarter's margin of 13.1%. The lower margin is mainly explained by mix effects arising from strong public sector growth and continued price pressure in the Netherlands, also a weak performance within nonstandard services that had a negative impact. Adjusted EBITDA was relatively stable at SEK 103 million compared to SEK 110 million a year earlier, where implemented efficiency measures nearly compensated for a lower gross profit. Cash flow from operating activities increased to SEK 258 million compared to SEK 180 million last year, and this is primarily driven by improved net working capital. Leverage measured as net debt to EBITDA, dropped to 2.7x compared to 5.7x last year and is now within our target range of 2 to 3x. And if we then turn into some operational highlights for the quarter, we have taken important steps to further sharpen our business. And the discontinuation of the consumer offering is now completed in all markets, which means that we are now fully focused on our business customers. We have also initiated a new sales organization dividing relation sales between the Nordics and Benelux. By appointing a responsible for relation sales in Benelux, we get more attention and come closer to the customers in the Netherlands, the country where we've had the biggest challenge during the past years. This new organization will also create a stronger local focus in both our regions with better ability to capture local opportunities. To support our continued transformation within services and in the company in general, we have appointed a CTO with a clear mandate to drive both the transformation and efficiency improvements. We have also been reawarded EcoVadis Platinum rating, which further strengthens our position with our customers that have high demands on sustainability. Following weak performance and to accelerate our transformation, we have executed cost-saving initiatives within nonstandard services to better align the cost base with lower volumes, with savings materializing from the third quarter. And with this, I hand over to our CFO, Julia Lagerqvist, to give you some more details on our financials. Julia Lagerqvist: Moving then to Page 4, we look at our top line development. And as Samuel just presented, we saw 4% organic growth in the quarter, and I will now break this down somewhat. If you remember, we talked last time about how we, in the last year, shifted sales from Q1 to Q2 is related to the implementation of the new ERP system in Benelux will lead to delayed invoicing. This effect corresponds to around 6 percentage points in growth headwind in Q2. As we have said, we have fully exited our B2C business this quarter, and that drove roughly 2% decline in total sales. and that explains most of the negative impact coming from the decline in the SMB segment. On the opposite, we saw strong underlying growth in LCP, mainly related to the public sector and driven by two factors: One, the continued upgrade in the wake of the Windows 11 shift; and two, we saw some customer orders that were brought forward to mitigate expected price increases or more limited availability related to the global components outage. All in all, this explains the 4% organic growth in the quarter. We now move to Page 5 to look more closely at the LCP segment. And the sales in LCP was SEK 4.1 billion in the quarter or 5% higher than last year. The organic growth was 10%. So we continue to see a large negative ForEx impact from the strengthened SEC in the quarter. This growth was then on top of a strong Q last year, as just explained. And the growth was mainly driven then by the demand in public sector and related mainly to continued PC upgrades and customer orders brought forward. From a geographic perspective, we saw strong growth in Sweden, Norway and Belgium. We also saw positive development in our life cycle services, where a strong offering have contributed to a new contract as Sykehuspartner in Norway and the Swedish municipality region in Kalmar. I said before, we can see large volatility in sales between quarters in LCP. The gross margin decreased versus previous year but did improve a little bit versus previous quarter. The growing public business contributed to a negative customer mix effect with a large share of public customers that normally has lower average margins. In addition, the continued price pressure in Netherlands was a key driver for lower margins. Increase in take-back had a positive impact on both margin and EBITDA, and we also saw some positive development in our private label business versus last year. We also saw continued improvement in our cost structure, mainly thanks to the restructuring programs. This had a positive effect on the bottom line. And overall, this led to a segment result of SEK 105 million versus SEK 99 million last year and also improvement versus Q1 results. The segment margin ended at 2.5%, in line with last year. Then we move to the review of the SMB segment on Page 6. where our sales landed at SEK 1.3 billion or 14% below last year. Also here, we saw a negative ForEx effect. And excluding this, the decline was 11%. We see some signs of stabilization, but customers remain cautious due to the ongoing economic uncertainty. And we, in the quarter, exited the B2C business in all our markets, which explains more than half of the decline for the SMB segment. Excluding this effect, the organic sales decline was just above 4%. As explained earlier, this is a strategic move to a better focus on our core business, but we always expected some sales headwind coming from this. Looking at the product mix, we saw that the share of software and services sales increased to 13.3% versus 11.6% last year, which was more than effectively declining overall sales than an uptick in software and services. We saw continued decline in our nonstandard services as in previous quarters. The gross margin was stable versus previous year. We saw positive improvement in our base hardware business in both Nordic and Benelux, thanks to continued price discipline. But this was offset by lower margins on services driven by the lower volumes on nonstandard services with fixed costs. We have implemented cost-saving actions to mitigate these lower margins that will have effect in Q3. The improved cost base and previous cost-saving programs partly protected the segment result, but could not offset the lower volumes and the lower margins in nonstandard services. And the segment results landed at SEK 31 million versus SEK 46 million last year. This corresponds to a segment margin of 2.3% versus last year at 3%. Moving then to Page 7, you have an overview of the FTE development over time. we have constantly worked with our operational efficiency and optimizing of our stores a bit by bit. In the last year, in Q2, we did a major reorganization with a focus to improve our go-to-market capabilities, but also to cut costs to match our current market situation, and we removed over 200 of those. Since then, we have continued to reduce our workforce. And as you can see in Q2, we have reduced our total workforce with 226 FTEs or 10% versus the last quarter -- last year. If we prolong the period and look over 2 years, we have taken up more than 300 FTEs or a total of 14% of the total FTEs. Looking ahead, we have, as we have said, done additional costs in our nonstandard services to offset the declining sales, which was executed at the end of Q2. And we have also initiated further reductions with the aim of saving SEK 80 million yearly, with full effect from Q4. So our cost optimization journey continues in line with our strategic focus. On Page 8, we look at our leverage development. Leverage landed at 2.7x compared to 5.7x last year and 3.1 in Q1. So we've seen a continuous improvement, driven both by improved results and improved cash purchase as well as a positive ForEx effect. In addition, we also apply an updated definition of net debt, as described in the previous report, which drives 0.2x a positive effect versus last year. Overall, we are, of course, happy to see this improvement in leverage after a period of higher levels and that we are now in line with our target range to be between 2 to 3x. Moving then to cash flow and CapEx on Page 9, we see that the cash flow for the period was plus SEK 172 million versus SEK 89 million last year. So a good improvement, also on top of the improvement we saw in the first quarter. Looking at the details, we see that the cash flow from operativities before the change in capital was flat versus last year, and the cash flow from change in net capital was positive SEK 169 million despite an increase in inventory. We will look more at the net working capital on the next slide. But in total, the operating cash flow was plus SEK 258 million in the quarter. Cash flow from financing activities is mainly repayment of leasing debt and at a similar level as previous quarters. Looking at CapEx, we see that the total investment was SEK 92 million, of which SEK 39 million affected the cash flow. This is mainly linked to IT development investment and slightly lower than last year. Coming then to Page 9 and looking looking at the net working capital development, we see that net working capital landed at minus SEK 46 million. This is an improvement versus last year SEK 60 million and also an improvement versus the previous quarter at SEK [ 139 ] million. Accounts receivables declined supported by active actions to settle receivables, and this was the main driver of the improvement in net working capital. Inventory increased versus the previous quarter as expected, partly due to that the previous quarter was quite low due to timing effects, but also as a result of the shortage in memory components, putting pressure on inventory levels to secure delivery. But compared to last year, the inventory levels were actually declining. We do expect inventory levels to vary in the coming quarters, depending on opportunities to drive sales and margin as well as the need to secure deliveries in the current market environment with the impact from component shortage. As said before, we always have some timing effects between individual quarters, but our long-term target for net working capital remains to be around minus SEK 100 million. And with that, I would hand back over to Samuel. Samuel Skott: Thank you, Julia. To summarize the quarter, we report continued organic growth, supported by strong development within the public sector and despite meeting a strong comparable quarter and the discontinued consumer business. Gross margin decreased mainly due to the mix effect from strong public sector growth and continued price pressure in the Netherlands. The adjusted EBITDA margin was stable since executed efficiency measures compensated for lower gross profit. Cash flow from operations was strong, and our leverage decreased and is now within our target range. Moving on to the market outlook. During this quarter, we have seen stabilization in the market. But looking ahead, uncertainty definitely continues due to the current geopolitical and economical climate and also the expected continuation of volatility driven by component shortages, where we expect prices to continue to increase and a potential limited availability on lower- and mid-end products. But building on this and looking forward, our focus going forward is very clear. we are driving a set of initiatives aimed at delivering a stronger Dustin and profitable growth. We are accelerating the execution of our strategy with a full emphasis on our position as the preferred IT partner for B2B customers. This means working closer with our customers and leverage on our full service offering. At the same time, we're strengthening our local go-to-market execution and performance through the new sales organization. It will increase our ability to capture local market opportunities and being faster at meeting local customer demands. We also continued to accelerate the transformation towards our standardized and scalable service offering, which is key to improving both efficiency and margins over time. In parallel to this, we are taking decisive actions on costs. We're implementing efficiency measures to deliver an annual savings of around SEK 80 million with full effect from the fourth quarter. And in addition, we are now conducting a full review of our indirect spend to further optimize our cost base. And finally, in this current market environment, we remain focused on managing risks but also capturing opportunities and do that supported with our strong customer relations strong and wide supplier base and relationship as well as our high delivery capabilities. And with that, we open up for Q&A. Operator: [Operator Instructions] The next question comes from Jesper Stugemo from Handelsbanken. Jesper Stugemo: Yes. Okay. Great. So I have a follow-up on the memory prices topic, supply shares et cetera. How has that impacted the volumes here in Q2, LCP versus SMB? I guess, LCP customers a bit more less price sensitive. But what do you see here? Samuel Skott: If we look to the quarter, I think we clearly see an impact in the market of this shortage definitely affecting price levels. It has meant a lot of work for our organization, both in terms of working with our vendors, supply chain with our customers. But I think in the end, the net financial result, the impact of that has been very, very limited. What we have seen is that we have seen some volumes being brought forward into this quarter by some of our largest customers, who wants to safeguard availability for the rest of the year. So that has been, in some cases, in LCP. In SMB, we haven't seen that much impact at all, to be honest. We do see that kind of demand has flattened out but on a low level, of course, but at least flattened out, but no major impact from the component shortage yet. Jesper Stugemo: All right. And do you see any risk as a vendor for your being squeezed when prices increases, i.e., that you have pieces in your inventory already sold, not yet delivered, but then we have this retro price increases from Dell or HP or how are these contracts settled? Samuel Skott: I think we have both risks and opportunities, which we are managing on a daily basis. Risk lies with some of the larger contracts where we have a limited possibility to change prices on a frequent basis. But that's a risk we're managing by close collaboration with our customers, and of course, close revelation with the vendors and the partners. But we also have an opportunity in our transactional business towards the SMB market where we buy in put, especially, PCs on stock which increase in value over time and where we can add -- get some more margin when we sell it later on. And if we look into how this played out during this quarter, I would say that the effect has been neutral. We've seen some additional volumes in LCP, but other than that, I think the net has been neutral. But that's the way our business is positioned in this. And it's a lot of work, but we're doing it and we're doing it daily. And in the quarter, the net effect of it was limited. Jesper Stugemo: Okay. Perfect. And one last question from me on Netherlands. If you could provide us with an update around the competitive market. Do you see any signs of stabilization or anything? And if it's possible to answer how much better would the gross margin have been if you exclude Netherlands and these price-pressured contracts? Samuel Skott: Well, I can start -- if we start with the last question, that's not a number we're going to disclose. And if I go to the first question, I think, and I said it already in the Q1 call, I think the level we are at now is, from a market and price pressure point of view, the level we will have to learn to live with. I don't expect it to get worse, but I think this is the level it will continue to be, given the change in market dynamics, we're going from a larger share of single-supplier frame agreements to more a multi-supplier frame agreements, and that adds price pressure. But I think the level of that will probably stay as it is now. So I don't expect it to get worse. And the way for us over time to work with this is, one, the thing we're doing now with a stronger local management and local-focused sales organization. But then it's also about growing in the private sector and growing with our services, such as take back and life cycle services. But that's a journey that will take some time, but that's a journey we have started. Operator: The next question comes from Mikael Laseen from DNB Carnegie. Mikael Laséen: Okay. Thanks. I have a question on the cost savings that you have initiated, SEK 80 million. Could you break down how much of this is headcount versus procurement and other efficiencies? And how much is already realized versus still to come? Samuel Skott: So the SEK 80 million we announced, that is headcount, 100% coming from headcount, and we expected to be materializing during the fourth quarter. And on top of that, we have also now are performing a review of indirect costs but that is something for the future. The SEK 80 million now is headcount. Mikael Laséen: Okay. And should we expect any reinvestment of these savings into sales capacity or services or other things? Or will we see this flow through to margins? Samuel Skott: I would expect some reinvestment of this into initiatives that we need to do to especially strengthen our go-to-market capabilities. but it will be done always with an eye keeping a balance of the bottom line result, of course. But I would expect a small part of this to be reinvested. Mikael Laséen: Okay. Got it. And you were talking about the nonstandard services here a bit at -- that part is weak or underperforming. Could you explain -- so how much of your services revenue with nonstandardized and standardized and the different profitability levels maybe on the revenue trajectory and what you're doing in these different areas? Samuel Skott: No, I think we can say it like this. From a revenue point of view, the nonstandard part is the minority of our full managed services portfolio. But the area in itself is weak and an area where we're not making money in this quarter. And therefore, we need to take actions. Over time, as we've said, this is an area where we're transforming our customers and the portfolio into the standard portfolio which we have and where we have the majority of our business, and that's where our future lies. So what we're doing now is step-by-step, taking down cost, but in parallel, also looking if we can accelerate that transformation journey to eventually completely get out of the nonstandard business. Julia Lagerqvist: If I can add. I mean, we're also seeing that some of these customers are churning, right? So there is also going to be a continued loss of sales that we basically mitigated them with cost cuts. Mikael Laséen: Okay. Got it. And the final one on the LCP side. Just wondering if you can comment on the maturity profile of your current LCP contract portfolio? So are we seeing more renewals ahead or extensions or new wins that could impact top line or margins that we should be aware of? Samuel Skott: This is not something that we disclose. But we always have a mix of incoming and outgoing and rewins of contracts. So this is something that -- this is a reality we live with every quarter Mikael Laséen: Okay. But if it's overall in an early stage, then you usually have impacting margins. I mean you typically have a bit lower margins in the early stages of a contract, and then it improves and gets better over time. So just in general terms, is if you would normalize over the past 5 years maybe... Samuel Skott: Yes, sorry. But if we look back a couple of quarters, we have talked about that as part of the explanation, and that has been true, especially in Belgium, for instance. But I wouldn't say that, that is something that has a material additional impact now. I think more -- now it's more in the balance as it usually is. So nothing exceptional. Mikael Laséen: Okay. Great. to know. And then maybe a final one, if I may. You mentioned also that there was some sort of pull-forward effect here from potential price increases from your customers in the LCP side. Can you sort of indicate anything how much that potentially was in the quarter? Julia Lagerqvist: I mean it's hard to give an exact estimate of how much orders were actually pulled forward. We always have a bit of movement between the quarters. But if I will give a number, roughly, I would say it can account for up to 4% actually of orders being moved forward, around SEK 200 million in sales. Operator: The next question comes from Daniel Thorsson from ABG Sundal Collier. Daniel Thorsson: Yes. A question on the public sector prebuying and LCP. Did you see any differences between markets like Nordics versus Benelux, larger effects or smaller effects? Samuel Skott: No. I think it was across the board, actually. We have this -- we're in active dialogue in all our markets with all our customers. I think we can clearly see the larger ones being the earliest to act and realize the market situation. So that's where it started, of course. But it's been -- it's a dialogue that is happening across all markets. Daniel Thorsson: Okay. I see. And then linked to that, I guess, that the higher PC prices will affect low-price PC volumes most negatively, given price sensitivity. But how is your margin between high and low end PCs? Any meaningful difference? Samuel Skott: In percentage points, I wouldn't say it's any meaningful difference. Of course, when the price go up, the actual margin can go up also, but -- in exactly the profit. But in percentage point, I wouldn't say that it's any big difference. Daniel Thorsson: Okay. Okay. I see that's clear. And then on SMB growth, when will the B2C discontinuation fade on like comparable numbers? Julia Lagerqvist: Since we exited it now in this quarter, you will have this impact until the first quarter of next fiscal year, basically. Daniel Thorsson: Okay. So it's kind of started in this quarter. So we have it for the next 3 quarters? Julia Lagerqvist: We basically exited everything in December in mid-December. Daniel Thorsson: Will it be similar magnitude of the impact? Or like on a year-on-year basis here, you say around like 4 or 5 percentage points or even 6? Is that what we should expect within SMB? Julia Lagerqvist: I mean the SMB business doesn't have a large cyclicality. So you can assume that it's sort of -- it has been similar size over the year, I would say, without not having -- not having the numbers in front of me, to be very honest. But that will be my estimate at this point. Daniel Thorsson: Yes. I see. That's clear. But then also linked to the question regarding reinvesting this annual savings, I mean, it's a balance between margins and bottom line and reinvesting in growth. But when should we kind of expect to get more margin targets, new financial targets? Like what level you would like to come back to? Because the old financial targets are not relevant at all today, I guess. So for us to understand like what kind of level of margin you would like to approach? Julia Lagerqvist: I mean, the targets that we have set now is the one that we have and the targets are set by the Board. Until then, we are the taste we are living with and we are trying to obviously get closer to as much as we can, but it's a long journey. I don't know if you want to add anything, Samuel. Samuel Skott: No, as said. It's a discussion and a decision for the Board eventually. And if we get -- if and when we get to that point, we will come back to it. Daniel Thorsson: Yes, because I assume that you are far away from the margins, which means that you shouldn't reinvest anything in growth. You should rather drive the margin upwards with the headcount reductions, cost reductions. But I also think that given what you said around the Netherlands that we will have to live with this new type of market development going forward, maybe a lower margin sustainably should be a better target to -- so just to get a comment on that over a time frame when we could expect it, like later in this year? Or what do you think is a fair time? Samuel Skott: Let me put it like this. I think it's a very valid point, a valid question. We are not yet in a position to fully answer that. As soon as we are, we will. Operator: [Operator Instructions] The next question comes from Thomas Nilsson from Nordea. Thomas Nilsson: It's encouraging to see your balance sheet is much stronger with leverage in your stated financial target range. What is your thinking on capital allocation, given the stronger balance sheet with regards to dividends or potential share buybacks, M&A opportunities? Julia Lagerqvist: Our current policy obviously stands. So the 70% dividend payout out of net income. But at the moment, I would say we are not looking into any major acquisitions, obviously, but the focus is on the growth and the margin journey ahead of us. Thomas Nilsson: Okay. And the second final question for my point. You saw a negative mix effect on the gross margin in Q2. What kind of mix effect on the gross margins are you expecting in the coming quarters? Samuel Skott: I think that's very hard to estimate. It's very dependent on how the demand will fluctuate across our different segments. There is always a fluctuation quarter-to-quarter. So I think that's hard to estimate. We had it in this quarter. If we would see the same trend, we would have it next quarter as well. But I think that's too early to tell and hard to estimate. Julia Lagerqvist: As we said, the main mix effect is to move have increased sales to public where we have lower margins and sales declining in the SMB segment where we normally have higher margins. We've seen that trend in the previous quarter as well. But let's see where we -- and obviously, we don't guide for the future. So depends on how the future will develop for us. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Samuel Skott: Thank you very much. Well then, I'd just like to thank everyone for listening in and asking relevant questions to our Q2 report. And with that, we'll close the call. Thank you very much.
Jim Kavanagh: Hello, and welcome to ASML's Q1 2026 results video. Welcome, Christophe and Roger. Jim Kavanagh: Roger, if I could start with you and ask you to give us a summary of our Q1 2026 results. R.J.M. Dassen: For the quarter, total net sales came in at EUR 8.8 billion. That was within guidance. Included in the EUR 8.8 billion was EUR 2.5 billion for Installed Base revenue. That was a little bit above the guidance. If you look at the gross margin for Q1, 53%. That was at the high end of the gross margin that we guided. If you look at the Installed Base business, as I just mentioned, the Installed Base business was higher than we anticipated. But also if you look at the components in the Installed Base business, there were components in there that actually come in at quite some strong gross margins. So as a result of that, a pretty high gross margin at 53%. Net income for the quarter, EUR 2.8 billion. Jim Kavanagh: Can you also provide us with a guide for Q2 '26 results, please? R.J.M. Dassen: For Q2, we expect EUR 8.4 billion to EUR 9 billion of total net sales. Included in there, again, EUR 2.5 billion of Installed Base business. We expect the gross margin to be between 51% and 52%. Jim Kavanagh: Christophe, if I can switch to you. And can I ask you to give us an outlook on the market and how you're seeing things at the moment? Christophe Fouquet: Well, I think we see that the semiconductor industry growth continued to solidify. This is still very much driven by investment in AI infrastructure. So this translates into a lot of demand for advanced memory, for advanced logic. And we expect, in fact, that the supply will not meet the demand for the foreseeable future. So this is creating a strong constraint in the end market from AI to mobile and PC. And as a result, our customers are strongly invited to create more capacity. So if we look at memory, what our customers tell us is that they are sold out for 2026 and their supply constraint will last beyond 2026. For advanced logic, we see our customer building capacity for several nodes, while they also continue to ramp 2-nanometer in order to address the AI products. Jim Kavanagh: So then I guess it's fair to say, a lot of those capacity additions are adding positively to our own outlook? Christophe Fouquet: Well, absolutely, we see our memory and logic customers increasing their capital expenditure and trying to accelerate basically their capacity ramp in 2026 and beyond. What's also very interesting is that a lot of this demand is supported by long-term commitment at their customer. On top of that, we see both memory customers, DRAM customers and advanced logic customers continuing to increase their adoption of EUV but also immersion. So this translates basically into higher litho intensity and a higher litho demand for ASML. So we're going to continue to work very closely with our customers to increase our capacity. We are doing that in 2026. We'll continue to do that in 2027. Jim Kavanagh: And then maybe Roger, just adding on to that, can you provide a little bit more color or details on what we are actually going to do in terms of adding capacity to support market demand? R.J.M. Dassen: So I think Christophe said it right. We're very clearly working with our customers, fully aligned with customers to give them what they need, and that is in a combination of capacity in terms of new shipments, making sure that systems, that the performance of systems is upgraded as best as we can and also provide Installed Base products. So in that combination, we try to give customers what they need, specifically when it comes to our own capacity. What we're looking at for this year for 2026, we believe we can drive an output for this year of at least 60 systems for EUV Low NA. That's what we currently have. That's what we're currently driving. And added to that, we're looking at deep UV for 2026. As I mentioned a couple of months ago, when it comes to immersion deep UV, we actually had a bit of a slow start because in the course of last year, we decided to actually -- we were looking at a significantly lower demand for immersion. That has now reversed itself. And I would say in spite of that slow start, we're still for this year expecting to get pretty close to the immersion sales that we had last year in terms of unit numbers. So that's for 2026. When it comes to 2027, in terms of capability, we're increasing our move rate really quarter-on-quarter. And then when you look specifically at EUV Low NA, we expect that we're able to get to an output for 2027. Again, if customer demand really underpins that, we think that we can get to at least 80 Low NA EUV units. And we're also looking at having the non-EUV business being in line with what customers are asking for, for all of their nodes. Jim Kavanagh: And then specifically on 2026. Can you give us an update then on our own business then for the full year? R.J.M. Dassen: Yes. So clearly, 2026 is panning out very nicely. It's a very strong year. We're looking at a strong growth year. And based on all the customer dynamics that Christophe was talking about, we are actually narrowing the window and also increasing the window of our expectation to EUR 36 billion to EUR 40 billion for this year. If you look at the different moving parts as we already expected, EUV is strong this year. So EUV in combination of Low NA and High NA, strong year there. On the non-EUV business, previously, we were expecting that to be flat in comparison to last year. Right now, what we're looking at is, in fact, an increase of demand there as well. So increased revenue on the non-EUV business is what we're expecting. I already mentioned what we're doing on immersion, but also the dry business is doing quite nicely and also the application business. So we believe in contrast to where we were a couple of months ago, we're looking at an increase for the non-EUV business. When it comes to the Installed Base business, strong growth there because obviously, it is a very fast way for our customers to increase their capacity to cater to the demand that Christophe was talking about. And I would say that within the guidance that we provided, the EUR 36 billion to EUR 40 billion, we believe we can accommodate potential outcomes of the export control discussions that are currently ongoing. Jim Kavanagh: And how about the gross margin then for 2026? R.J.M. Dassen: For the gross margin, we maintain our expectation of 51% to 53%. Jim Kavanagh: Switching gears a bit to technology. Christophe, can you give us some insights and latest updates on how we're progressing with the technology and our road map? Christophe Fouquet: Yes, I think we continue to execute very nicely on our technology road map. I think every year, we use the SPIE conference to give a bit of an update to the entire world about what we have achieved. A few, I think, important news this year. The first one was our demonstration of the 1,000-watt source. And this is very important because it means that we can secure the extendibility of Low NA EUV for many, many years. It means, in fact, that in 2031, we'll be able to run this tool at 330 wafers per hour, which is a major step-up from what we have today. Now the progress on EUV also has a good impact on the short term. We have been able to increase the throughput of our NXE:3800E from 220 to 230 wafers per hour, which is also helping on the short term with capacity. Our customers are very happy to be able to get more wafers out on any tool. And we are also increasing the specs of our next system, the NXE:3800F to 260 wafers per hour. It used to be 250 wafers per hour, and this will help us also with capacity around 2028. Jim Kavanagh: And I think also at SPIE, there were some updates on our High NA platform progress. Can you share a little there? Christophe Fouquet: Yes. And I think what was good about SPIE is that our customers start to talk about High NA. And they reported a few things. The first thing is, of course, the fact that High NA can allow them to reduce the number of masks significantly. DRAM and logic customers were talking about going from 3 to 1 mask for EUV using High NA. And they also mentioned that this can reduce the number of process steps from 100 to 10, which is, of course, significant. That's, of course, the reason why we have High NA. I think we have seen also great progress on the ecosystem, some good presentation with some of our resist partners, pointing to the fact that High NA can be extended when it comes to logic to 18-nanometer line and space pitch. And when it comes to memory to 28-nanometer hole size. So it means basically that not only High NA is getting ready for prime time, but we already know that High NA can be extended mostly for 3, 4 nodes, which is, of course, very important for our customers. And finally, maturity of the tool is important. We continue to see better availability data, more wafers per day, more wafers out. And this is just, of course, becoming more and more important as we see our customers starting to test High NA on real products. Jim Kavanagh: So I'd like to thank you both for joining us today. And yes, thanks very much. R.J.M. Dassen: Pleasure.
Samuel Skott: A warm welcome to the presentation of our second quarter results. My name is Samuel Skott. I'm the group CEO here at Dustin. And with me today, I have our CFO, Julia Lagerqvist. And if we get into the Q2 report, I'm glad to report yet another quarter with organic growth, strong cash flow and reduced leverage, while we continue to streamline and improve the efficiency of our operations. Net sales development was positive in the quarter with organic growth of 4.4%. Growth was driven by strong performance in the public sector and should partly be seen in the light of a strong comparable quarter. The gross margin decreased to 13.2% compared with 13.9% last year, but indicated a sequential improvement compared to the first quarter's margin of 13.1%. The lower margin is mainly explained by mix effects arising from strong public sector growth and continued price pressure in the Netherlands, also a weak performance within nonstandard services that had a negative impact. Adjusted EBITDA was relatively stable at SEK 103 million compared to SEK 110 million a year earlier, where implemented efficiency measures nearly compensated for a lower gross profit. Cash flow from operating activities increased to SEK 258 million compared to SEK 180 million last year, and this is primarily driven by improved net working capital. Leverage measured as net debt to EBITDA, dropped to 2.7x compared to 5.7x last year and is now within our target range of 2 to 3x. And if we then turn into some operational highlights for the quarter, we have taken important steps to further sharpen our business. And the discontinuation of the consumer offering is now completed in all markets, which means that we are now fully focused on our business customers. We have also initiated a new sales organization dividing relation sales between the Nordics and Benelux. By appointing a responsible for relation sales in Benelux, we get more attention and come closer to the customers in the Netherlands, the country where we've had the biggest challenge during the past years. This new organization will also create a stronger local focus in both our regions with better ability to capture local opportunities. To support our continued transformation within services and in the company in general, we have appointed a CTO with a clear mandate to drive both the transformation and efficiency improvements. We have also been reawarded EcoVadis Platinum rating, which further strengthens our position with our customers that have high demands on sustainability. Following weak performance and to accelerate our transformation, we have executed cost-saving initiatives within nonstandard services to better align the cost base with lower volumes, with savings materializing from the third quarter. And with this, I hand over to our CFO, Julia Lagerqvist, to give you some more details on our financials. Julia Lagerqvist: Moving then to Page 4, we look at our top line development. And as Samuel just presented, we saw 4% organic growth in the quarter, and I will now break this down somewhat. If you remember, we talked last time about how we, in the last year, shifted sales from Q1 to Q2 is related to the implementation of the new ERP system in Benelux will lead to delayed invoicing. This effect corresponds to around 6 percentage points in growth headwind in Q2. As we have said, we have fully exited our B2C business this quarter, and that drove roughly 2% decline in total sales. and that explains most of the negative impact coming from the decline in the SMB segment. On the opposite, we saw strong underlying growth in LCP, mainly related to the public sector and driven by two factors: One, the continued upgrade in the wake of the Windows 11 shift; and two, we saw some customer orders that were brought forward to mitigate expected price increases or more limited availability related to the global components outage. All in all, this explains the 4% organic growth in the quarter. We now move to Page 5 to look more closely at the LCP segment. And the sales in LCP was SEK 4.1 billion in the quarter or 5% higher than last year. The organic growth was 10%. So we continue to see a large negative ForEx impact from the strengthened SEC in the quarter. This growth was then on top of a strong Q last year, as just explained. And the growth was mainly driven then by the demand in public sector and related mainly to continued PC upgrades and customer orders brought forward. From a geographic perspective, we saw strong growth in Sweden, Norway and Belgium. We also saw positive development in our life cycle services, where a strong offering have contributed to a new contract as Sykehuspartner in Norway and the Swedish municipality region in Kalmar. I said before, we can see large volatility in sales between quarters in LCP. The gross margin decreased versus previous year but did improve a little bit versus previous quarter. The growing public business contributed to a negative customer mix effect with a large share of public customers that normally has lower average margins. In addition, the continued price pressure in Netherlands was a key driver for lower margins. Increase in take-back had a positive impact on both margin and EBITDA, and we also saw some positive development in our private label business versus last year. We also saw continued improvement in our cost structure, mainly thanks to the restructuring programs. This had a positive effect on the bottom line. And overall, this led to a segment result of SEK 105 million versus SEK 99 million last year and also improvement versus Q1 results. The segment margin ended at 2.5%, in line with last year. Then we move to the review of the SMB segment on Page 6. where our sales landed at SEK 1.3 billion or 14% below last year. Also here, we saw a negative ForEx effect. And excluding this, the decline was 11%. We see some signs of stabilization, but customers remain cautious due to the ongoing economic uncertainty. And we, in the quarter, exited the B2C business in all our markets, which explains more than half of the decline for the SMB segment. Excluding this effect, the organic sales decline was just above 4%. As explained earlier, this is a strategic move to a better focus on our core business, but we always expected some sales headwind coming from this. Looking at the product mix, we saw that the share of software and services sales increased to 13.3% versus 11.6% last year, which was more than effectively declining overall sales than an uptick in software and services. We saw continued decline in our nonstandard services as in previous quarters. The gross margin was stable versus previous year. We saw positive improvement in our base hardware business in both Nordic and Benelux, thanks to continued price discipline. But this was offset by lower margins on services driven by the lower volumes on nonstandard services with fixed costs. We have implemented cost-saving actions to mitigate these lower margins that will have effect in Q3. The improved cost base and previous cost-saving programs partly protected the segment result, but could not offset the lower volumes and the lower margins in nonstandard services. And the segment results landed at SEK 31 million versus SEK 46 million last year. This corresponds to a segment margin of 2.3% versus last year at 3%. Moving then to Page 7, you have an overview of the FTE development over time. we have constantly worked with our operational efficiency and optimizing of our stores a bit by bit. In the last year, in Q2, we did a major reorganization with a focus to improve our go-to-market capabilities, but also to cut costs to match our current market situation, and we removed over 200 of those. Since then, we have continued to reduce our workforce. And as you can see in Q2, we have reduced our total workforce with 226 FTEs or 10% versus the last quarter -- last year. If we prolong the period and look over 2 years, we have taken up more than 300 FTEs or a total of 14% of the total FTEs. Looking ahead, we have, as we have said, done additional costs in our nonstandard services to offset the declining sales, which was executed at the end of Q2. And we have also initiated further reductions with the aim of saving SEK 80 million yearly, with full effect from Q4. So our cost optimization journey continues in line with our strategic focus. On Page 8, we look at our leverage development. Leverage landed at 2.7x compared to 5.7x last year and 3.1 in Q1. So we've seen a continuous improvement, driven both by improved results and improved cash purchase as well as a positive ForEx effect. In addition, we also apply an updated definition of net debt, as described in the previous report, which drives 0.2x a positive effect versus last year. Overall, we are, of course, happy to see this improvement in leverage after a period of higher levels and that we are now in line with our target range to be between 2 to 3x. Moving then to cash flow and CapEx on Page 9, we see that the cash flow for the period was plus SEK 172 million versus SEK 89 million last year. So a good improvement, also on top of the improvement we saw in the first quarter. Looking at the details, we see that the cash flow from operativities before the change in capital was flat versus last year, and the cash flow from change in net capital was positive SEK 169 million despite an increase in inventory. We will look more at the net working capital on the next slide. But in total, the operating cash flow was plus SEK 258 million in the quarter. Cash flow from financing activities is mainly repayment of leasing debt and at a similar level as previous quarters. Looking at CapEx, we see that the total investment was SEK 92 million, of which SEK 39 million affected the cash flow. This is mainly linked to IT development investment and slightly lower than last year. Coming then to Page 9 and looking looking at the net working capital development, we see that net working capital landed at minus SEK 46 million. This is an improvement versus last year SEK 60 million and also an improvement versus the previous quarter at SEK [ 139 ] million. Accounts receivables declined supported by active actions to settle receivables, and this was the main driver of the improvement in net working capital. Inventory increased versus the previous quarter as expected, partly due to that the previous quarter was quite low due to timing effects, but also as a result of the shortage in memory components, putting pressure on inventory levels to secure delivery. But compared to last year, the inventory levels were actually declining. We do expect inventory levels to vary in the coming quarters, depending on opportunities to drive sales and margin as well as the need to secure deliveries in the current market environment with the impact from component shortage. As said before, we always have some timing effects between individual quarters, but our long-term target for net working capital remains to be around minus SEK 100 million. And with that, I would hand back over to Samuel. Samuel Skott: Thank you, Julia. To summarize the quarter, we report continued organic growth, supported by strong development within the public sector and despite meeting a strong comparable quarter and the discontinued consumer business. Gross margin decreased mainly due to the mix effect from strong public sector growth and continued price pressure in the Netherlands. The adjusted EBITDA margin was stable since executed efficiency measures compensated for lower gross profit. Cash flow from operations was strong, and our leverage decreased and is now within our target range. Moving on to the market outlook. During this quarter, we have seen stabilization in the market. But looking ahead, uncertainty definitely continues due to the current geopolitical and economical climate and also the expected continuation of volatility driven by component shortages, where we expect prices to continue to increase and a potential limited availability on lower- and mid-end products. But building on this and looking forward, our focus going forward is very clear. we are driving a set of initiatives aimed at delivering a stronger Dustin and profitable growth. We are accelerating the execution of our strategy with a full emphasis on our position as the preferred IT partner for B2B customers. This means working closer with our customers and leverage on our full service offering. At the same time, we're strengthening our local go-to-market execution and performance through the new sales organization. It will increase our ability to capture local market opportunities and being faster at meeting local customer demands. We also continued to accelerate the transformation towards our standardized and scalable service offering, which is key to improving both efficiency and margins over time. In parallel to this, we are taking decisive actions on costs. We're implementing efficiency measures to deliver an annual savings of around SEK 80 million with full effect from the fourth quarter. And in addition, we are now conducting a full review of our indirect spend to further optimize our cost base. And finally, in this current market environment, we remain focused on managing risks but also capturing opportunities and do that supported with our strong customer relations strong and wide supplier base and relationship as well as our high delivery capabilities. And with that, we open up for Q&A. Operator: [Operator Instructions] The next question comes from Jesper Stugemo from Handelsbanken. Jesper Stugemo: Yes. Okay. Great. So I have a follow-up on the memory prices topic, supply shares et cetera. How has that impacted the volumes here in Q2, LCP versus SMB? I guess, LCP customers a bit more less price sensitive. But what do you see here? Samuel Skott: If we look to the quarter, I think we clearly see an impact in the market of this shortage definitely affecting price levels. It has meant a lot of work for our organization, both in terms of working with our vendors, supply chain with our customers. But I think in the end, the net financial result, the impact of that has been very, very limited. What we have seen is that we have seen some volumes being brought forward into this quarter by some of our largest customers, who wants to safeguard availability for the rest of the year. So that has been, in some cases, in LCP. In SMB, we haven't seen that much impact at all, to be honest. We do see that kind of demand has flattened out but on a low level, of course, but at least flattened out, but no major impact from the component shortage yet. Jesper Stugemo: All right. And do you see any risk as a vendor for your being squeezed when prices increases, i.e., that you have pieces in your inventory already sold, not yet delivered, but then we have this retro price increases from Dell or HP or how are these contracts settled? Samuel Skott: I think we have both risks and opportunities, which we are managing on a daily basis. Risk lies with some of the larger contracts where we have a limited possibility to change prices on a frequent basis. But that's a risk we're managing by close collaboration with our customers, and of course, close revelation with the vendors and the partners. But we also have an opportunity in our transactional business towards the SMB market where we buy in put, especially, PCs on stock which increase in value over time and where we can add -- get some more margin when we sell it later on. And if we look into how this played out during this quarter, I would say that the effect has been neutral. We've seen some additional volumes in LCP, but other than that, I think the net has been neutral. But that's the way our business is positioned in this. And it's a lot of work, but we're doing it and we're doing it daily. And in the quarter, the net effect of it was limited. Jesper Stugemo: Okay. Perfect. And one last question from me on Netherlands. If you could provide us with an update around the competitive market. Do you see any signs of stabilization or anything? And if it's possible to answer how much better would the gross margin have been if you exclude Netherlands and these price-pressured contracts? Samuel Skott: Well, I can start -- if we start with the last question, that's not a number we're going to disclose. And if I go to the first question, I think, and I said it already in the Q1 call, I think the level we are at now is, from a market and price pressure point of view, the level we will have to learn to live with. I don't expect it to get worse, but I think this is the level it will continue to be, given the change in market dynamics, we're going from a larger share of single-supplier frame agreements to more a multi-supplier frame agreements, and that adds price pressure. But I think the level of that will probably stay as it is now. So I don't expect it to get worse. And the way for us over time to work with this is, one, the thing we're doing now with a stronger local management and local-focused sales organization. But then it's also about growing in the private sector and growing with our services, such as take back and life cycle services. But that's a journey that will take some time, but that's a journey we have started. Operator: The next question comes from Mikael Laseen from DNB Carnegie. Mikael Laséen: Okay. Thanks. I have a question on the cost savings that you have initiated, SEK 80 million. Could you break down how much of this is headcount versus procurement and other efficiencies? And how much is already realized versus still to come? Samuel Skott: So the SEK 80 million we announced, that is headcount, 100% coming from headcount, and we expected to be materializing during the fourth quarter. And on top of that, we have also now are performing a review of indirect costs but that is something for the future. The SEK 80 million now is headcount. Mikael Laséen: Okay. And should we expect any reinvestment of these savings into sales capacity or services or other things? Or will we see this flow through to margins? Samuel Skott: I would expect some reinvestment of this into initiatives that we need to do to especially strengthen our go-to-market capabilities. but it will be done always with an eye keeping a balance of the bottom line result, of course. But I would expect a small part of this to be reinvested. Mikael Laséen: Okay. Got it. And you were talking about the nonstandard services here a bit at -- that part is weak or underperforming. Could you explain -- so how much of your services revenue with nonstandardized and standardized and the different profitability levels maybe on the revenue trajectory and what you're doing in these different areas? Samuel Skott: No, I think we can say it like this. From a revenue point of view, the nonstandard part is the minority of our full managed services portfolio. But the area in itself is weak and an area where we're not making money in this quarter. And therefore, we need to take actions. Over time, as we've said, this is an area where we're transforming our customers and the portfolio into the standard portfolio which we have and where we have the majority of our business, and that's where our future lies. So what we're doing now is step-by-step, taking down cost, but in parallel, also looking if we can accelerate that transformation journey to eventually completely get out of the nonstandard business. Julia Lagerqvist: If I can add. I mean, we're also seeing that some of these customers are churning, right? So there is also going to be a continued loss of sales that we basically mitigated them with cost cuts. Mikael Laséen: Okay. Got it. And the final one on the LCP side. Just wondering if you can comment on the maturity profile of your current LCP contract portfolio? So are we seeing more renewals ahead or extensions or new wins that could impact top line or margins that we should be aware of? Samuel Skott: This is not something that we disclose. But we always have a mix of incoming and outgoing and rewins of contracts. So this is something that -- this is a reality we live with every quarter Mikael Laséen: Okay. But if it's overall in an early stage, then you usually have impacting margins. I mean you typically have a bit lower margins in the early stages of a contract, and then it improves and gets better over time. So just in general terms, is if you would normalize over the past 5 years maybe... Samuel Skott: Yes, sorry. But if we look back a couple of quarters, we have talked about that as part of the explanation, and that has been true, especially in Belgium, for instance. But I wouldn't say that, that is something that has a material additional impact now. I think more -- now it's more in the balance as it usually is. So nothing exceptional. Mikael Laséen: Okay. Great. to know. And then maybe a final one, if I may. You mentioned also that there was some sort of pull-forward effect here from potential price increases from your customers in the LCP side. Can you sort of indicate anything how much that potentially was in the quarter? Julia Lagerqvist: I mean it's hard to give an exact estimate of how much orders were actually pulled forward. We always have a bit of movement between the quarters. But if I will give a number, roughly, I would say it can account for up to 4% actually of orders being moved forward, around SEK 200 million in sales. Operator: The next question comes from Daniel Thorsson from ABG Sundal Collier. Daniel Thorsson: Yes. A question on the public sector prebuying and LCP. Did you see any differences between markets like Nordics versus Benelux, larger effects or smaller effects? Samuel Skott: No. I think it was across the board, actually. We have this -- we're in active dialogue in all our markets with all our customers. I think we can clearly see the larger ones being the earliest to act and realize the market situation. So that's where it started, of course. But it's been -- it's a dialogue that is happening across all markets. Daniel Thorsson: Okay. I see. And then linked to that, I guess, that the higher PC prices will affect low-price PC volumes most negatively, given price sensitivity. But how is your margin between high and low end PCs? Any meaningful difference? Samuel Skott: In percentage points, I wouldn't say it's any meaningful difference. Of course, when the price go up, the actual margin can go up also, but -- in exactly the profit. But in percentage point, I wouldn't say that it's any big difference. Daniel Thorsson: Okay. Okay. I see that's clear. And then on SMB growth, when will the B2C discontinuation fade on like comparable numbers? Julia Lagerqvist: Since we exited it now in this quarter, you will have this impact until the first quarter of next fiscal year, basically. Daniel Thorsson: Okay. So it's kind of started in this quarter. So we have it for the next 3 quarters? Julia Lagerqvist: We basically exited everything in December in mid-December. Daniel Thorsson: Will it be similar magnitude of the impact? Or like on a year-on-year basis here, you say around like 4 or 5 percentage points or even 6? Is that what we should expect within SMB? Julia Lagerqvist: I mean the SMB business doesn't have a large cyclicality. So you can assume that it's sort of -- it has been similar size over the year, I would say, without not having -- not having the numbers in front of me, to be very honest. But that will be my estimate at this point. Daniel Thorsson: Yes. I see. That's clear. But then also linked to the question regarding reinvesting this annual savings, I mean, it's a balance between margins and bottom line and reinvesting in growth. But when should we kind of expect to get more margin targets, new financial targets? Like what level you would like to come back to? Because the old financial targets are not relevant at all today, I guess. So for us to understand like what kind of level of margin you would like to approach? Julia Lagerqvist: I mean, the targets that we have set now is the one that we have and the targets are set by the Board. Until then, we are the taste we are living with and we are trying to obviously get closer to as much as we can, but it's a long journey. I don't know if you want to add anything, Samuel. Samuel Skott: No, as said. It's a discussion and a decision for the Board eventually. And if we get -- if and when we get to that point, we will come back to it. Daniel Thorsson: Yes, because I assume that you are far away from the margins, which means that you shouldn't reinvest anything in growth. You should rather drive the margin upwards with the headcount reductions, cost reductions. But I also think that given what you said around the Netherlands that we will have to live with this new type of market development going forward, maybe a lower margin sustainably should be a better target to -- so just to get a comment on that over a time frame when we could expect it, like later in this year? Or what do you think is a fair time? Samuel Skott: Let me put it like this. I think it's a very valid point, a valid question. We are not yet in a position to fully answer that. As soon as we are, we will. Operator: [Operator Instructions] The next question comes from Thomas Nilsson from Nordea. Thomas Nilsson: It's encouraging to see your balance sheet is much stronger with leverage in your stated financial target range. What is your thinking on capital allocation, given the stronger balance sheet with regards to dividends or potential share buybacks, M&A opportunities? Julia Lagerqvist: Our current policy obviously stands. So the 70% dividend payout out of net income. But at the moment, I would say we are not looking into any major acquisitions, obviously, but the focus is on the growth and the margin journey ahead of us. Thomas Nilsson: Okay. And the second final question for my point. You saw a negative mix effect on the gross margin in Q2. What kind of mix effect on the gross margins are you expecting in the coming quarters? Samuel Skott: I think that's very hard to estimate. It's very dependent on how the demand will fluctuate across our different segments. There is always a fluctuation quarter-to-quarter. So I think that's hard to estimate. We had it in this quarter. If we would see the same trend, we would have it next quarter as well. But I think that's too early to tell and hard to estimate. Julia Lagerqvist: As we said, the main mix effect is to move have increased sales to public where we have lower margins and sales declining in the SMB segment where we normally have higher margins. We've seen that trend in the previous quarter as well. But let's see where we -- and obviously, we don't guide for the future. So depends on how the future will develop for us. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Samuel Skott: Thank you very much. Well then, I'd just like to thank everyone for listening in and asking relevant questions to our Q2 report. And with that, we'll close the call. Thank you very much.
Operator: Thank you for standing by, and welcome to the Evolution Mining Limited March 2026 quarter results. [Operator Instructions] I would now like to hand the conference over to Mr. Lawrie Conway, Managing Director and Chief Executive Officer. Please go ahead. Lawrie Conway: Thank you, Ashley, and good morning, everyone. I'm joined on the call today by Matt O'Neill, our Chief Operating Officer; Glenton Masterman, LVP Discovery; Fran Summerhayes, our CFO; and Peter Rocky O'Connor, our GM Investor. Today, we released our March Quarterly Report and an Exploration Update which will be the reference points for the call. A key milestone and highlight for the quarter was the transition to a net cash position on the back of another very good quarter. After generating $406 million in group cash flow at just under $2,500 per ounce, we are now in a net cash position of over $40 million. Our cash balance at the end of the quarter was $1.37 billion, and we have no debt repayments until FY '29. The rapid de-leveraging, where we have moved from over 30% gearing to net cash in just over two years, is a reflection of Evolution's high-margin portfolio consistently delivering to ensure the benefits of the high metal price environment are banked. To put this into perspective, we have removed around $1.7 billion of net at average achieved gold and copper prices that were $2,100 per ounce and $3,200 per tonne below current spot prices while still investing in high-grade projects and paying dividends to our shareholders. We are on track to generate approximately $3.6 billion of operating mine cash flow in FY '26, where the June quarter is planned to further improve our net cash position. The charts on page one of the quarterly report are a great graphical representation of our cash-generating capability and the momentum being built, while at the same time investing in high-return projects that either grow production or extend mine life. This outcome is a credit to everyone involved at Evolution who continue to safely deliver the plan with the right level of cost and capital discipline. In the March quarter, we produced 170,000 ounces of gold and 11,000 tonnes of copper at an all-in sustaining cost of $2,220 per ounce for continuing operations. The high all-in sustaining cost for the quarter was driven by the lower production and especially the lower copper by-product credits at Ernest Henry. We delivered the quarter safely with our TRIF remaining low at 5.9. The March quarter was expected to be a lower production quarter due to the impact of the weather event at Ernest Henry in December and the planned semi-annual maintenance work at Cowal. Ernest Henry is now back to normal operations. The outcomes of the weather impact at Ernest Henry will mean that we are expected to be around the low end of the group copper guidance. We remain on track to deliver our FY '26 group production at the all-in sustaining cost guidance of $1,640 to $1,760 per ounce. This all-in sustaining cost guidance is 6% lower or better than our original guidance. The group cash flow was on the back of $769 million and $486 million of operating and net mine cash flows respectively. It should be noted that these were achieved despite Ernest Henry being cash flow negative for the quarter. Mine cash flows are on track to lift significantly in the June quarter. All our projects remain on plan and budget. The recently approved E22 coarse particle flotation and expansion study projects have progressed well in the first six weeks, while the preparation to commence development of the Bert deposit at Ernest Henry is underway. I want to make a couple of comments about the current global fuel supply situation. To date, we've had no material operational impacts, not just from fuel, but our overall consumables. Matt and Fran are actively managing our supply chain logistics and have appropriate response action plans in place. The greater focus of the team is ensuring continuity of supply of all goods and services. Specifically on fuel, supplies are contracted with major oil distribution companies who continue to fulfill their obligations. Fuel represents 2% of our total costs, and while there is a current elevated pricing, it is not having a material impact on our cost base. On the exploration results released today, Glenton and I are very excited at what they offer in terms of adding low-cost ounces to the portfolio. They show that Mungari and Cowal, there is a lot more gold to be discovered at what are already long-life operations. Some key highlights include the very encouraging results in the underground areas of Genesis and Arctic at Mungari, which supports our aim of extending the high-grade underground mine life at current production rates. While at Cowal, significant high-grade results were received at the Oban underground target. Meanwhile, significant new results in multiple locations across the planned E41 open pit will provide useful insights into the full scale of the deposit ahead of its development. Regional exploration around Ernest Henry will be accelerated over the next six months following our consolidation of large tenement holdings surrounding the mine. We've also started work on the two most recent projects in British Columbia. With that, I'll now hand over to Matt to take us through the operational performance. Matthew O'Neill: Thanks, Lawrie. As Lawrie has already mentioned, the operational performance for the March quarter was in line with our plan on the back of the renovated Ernest Henry in and the normal plant maintenance schedules. Our safety performance remains in a very healthy position with the continued strong performance in this area, thanks to the tireless work occurring across all parts of our business. I'd like to take this opportunity to say a big thank you to all our employees who contribute to this every day. On the production front, we are on track to meet full year guidance for gold and to land at the lower end of guidance for copper. The most significant operational milestone through the March quarter was the resumption of normal operation. For me, the highlight of the work conducted by this team was the fact that it was completed without any significant injuries or incidents. Throughout the March quarter, the Cloncurry region continued to experience higher than average rainfall, which did slow our recovery activities, resulting in additional impacts to the full-year production for Ernest Henry, which are now estimated to be between 9,000 ounces to 11,000 ounces of gold and 6,000 tonnes to 8,000 tonnes of copper. At Cowal, we also saw wet weather have an impact on the completion of mining stage H in the E42 pit. Pleasingly, the processing plant operated uninterrupted, with additional feed sourced from surface stockpiles throughout these weather events. We also completed the regular plant maintenance program on schedule at Cowal. As we move into the June quarter, we will be mining the final ore from stage H, and as previously advised, we will then move to the stage I cutback and be processing stockpile ore in FY '27. This will see Cowal producing around 10% lower ounces next year. However, importantly, we'll not see a material change in cash flows from the processing of the already mined ore. Northparkes, Red Lake and Mount Rawdon all performed in line with expectations, with the quarter's highlights at these operations being the approval by the Board of the growth projects at Northparkes, the cash flow generated at both Red Lake, which was a record $104 million for the quarter and nearly $225 million year-to-date, and at Mount Rawdon, which was $13 million in the quarter and over $30 million year-to-date from processing very low stock material. Mount Rawdon is planned to complete processing at the end of this financial year. Mungari delivered a raft of new records over the quarter, with the fully commissioned mill operating at nameplate capacity throughout the quarter. Most notable of these records are the quarterly net mine cash flow of $175 million and gold production of 51,000 ounces. Mungari has generated over $320 million of net cash flow so far this year, confirming the decision to invest in the planned expansion and the establishment of the Castle Hill mining hub. Looking forward, we are well set for a strong final quarter with the return of Ernest Henry to normal operations, the continued strong performance at Mungari, and Cowal having completed its annual maintenance program and mining back in stage H. I'll now hand over to Glenn to talk through the exploration announcements made. Glenton Masterman: Thank you, Matt, and good morning, everyone. I'd like to turn your attention to our exploration announcement, which was also released this morning, to give a brief update on where we've seen some momentum over the last six months. Starting with Mungari, I want to briefly revisit some of the commentary I made the last time we updated our drilling results. What the team has achieved recently has fundamentally changed the view on historical geological thinking around Kundana, which had largely written off the potential for meaningful new discoveries, particularly beyond the well-known high-grade tram track positions. By challenging that old geological dogma, we've intersected high-grade veins in new structural positions outside where the traditional models were looking. That's significant because it effectively broken the old paradigm and opened up entirely new search spaces around Kundana. In practical terms, that gives us a much bigger opportunity to continue growing high-grade underground resources and reserves. The best example of this occurs at Genesis, where drilling has targeted extensions of a known system we discovered, which is shown in figure one of the update. Infill drilling across a 300-meter gap northwards towards the Barkers mine that previously had no drilling whatsoever, recently returned narrow intervals, but at very high grades, including numerous short intervals grading about 10 ounces to the tonne, yielding intercepts better than 90-gram meters and confirming mineralization occurs continuously across this zone. The results I am describing all occur outside the mineral resource footprint and are importantly located near existing underground infrastructure, so it has real implications for extending mine life. At the nearby Arctic deposit, surface drilling beneath the open pit has also yielded high-grade results. These build on previously reported work and continue to demonstrate the potential to expand underground resources, particularly at depth, where historical drilling has been limited. The objective of ongoing follow-up drilling is to delineate the scale, continuity, and geometry of these mineralized systems with the clear ambition of converting into a long-term underground reserve, securing high-grade production over a longer mine life, capable of maintaining at or above the currently achieved annualized rate of 200,000 ounces per annum. Turning now to Cowal, where step-out drilling highlighted in Figure 2 of the release has been equally encouraging. We recently received results from the surface drilling at E41, which as a reminder, is located a few hundred meters south of E42 and will be mined as part of the Open Pit Continuation project. Results released this morning returned broad, consistent intercepts beyond the outline of the planned E41 pit. What's notable is that drilling perpendicular to the mineralized veins rather than parallel as much of the historic drilling was, is opening up areas that were previously considered well-tested. This highlights clear potential to grow the E41 footprint, particularly to the north towards E42 and the underground mine. I should also add that the E41 pit shape referenced in Figure 2 was optimized at a very conservative gold price of $1,760 per ounce. Underground at Oban, results continue to build confidence. Drilling is targeting major mine-scale structures and a favorable geological contact that elsewhere at Cowal is known to host high-grade mineralization. Importantly, the recognition of this key contact, illustrated in Figure three on page four, has unlocked an entirely new search space to the north and south between the E41 pit and the Glenfiddich Fault, which has hardly ever been drilled. We received multiple high-grade intercepts that support the potential for Oban to evolve into a new independent mining front over time, and a geological position where I'm confident further work will lead to the delineation of future resource iteration in the mine plan in the years ahead. This will be a major focus going forward. Looking beyond the operations, we're also continuing to build our longer-term pipeline. In North Queensland, around Ernest Henry, we've expanded our landholding and identified several drill-ready copper-gold projects with an aggressive drilling program planned over the June and September quarters. In Canada, permitting and community engagement are progressing at Two Times Fred and Clisbako in British Columbia with drilling planned across the summer field season. Meanwhile, drilling is underway at the October Gold Project joint venture in Ontario, with assay results expected later in the June quarter. Overall, these results reflect our discovery strategy in action, continuing to unlock value in the short to medium term at our operating assets while building a strong pipeline of drill ready and more advanced exploration plays with the potential to deliver new greenfields production opportunities in the medium to long term. With that, I'll turn the call back to Ashley to open the line for questions. Operator: [Operator Instructions] Your first question today comes from Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: First one just on Mungari, you got above nameplate through the quarter. I just wanted to get a sense of how much of that is running softer, or are you already finding opportunities to start to push that nameplate a little bit? Lawrie Conway: Thanks, Hugo. I hand that to Matt asked in the same question while going at the higher rates, but it is all. Matthew O'Neill: No, it is. It's an obvious one when you look at those numbers. It is some of the transitional or easy-to-have ore from Castle Hill that's causing the increase there. That said, it's obviously something that we're going to target. At this stage, it's running at nameplate, but we put what we designed through it. Hugo Nicolaci: That's helpful. Second one, maybe a two-parter on exploration. I mean, obviously some exciting drilling results that you put out today. I guess just firstly, when should we start to see those flow into resource updates? Is that something for the update this year? Secondly, at Cowal, I think the resource and asset life upside tends to be firming up at both the open pit and underground there. I think I asked you this last time, but at what point do we start to consider mill expansion studies at Cowal? Lawrie Conway: Glen will talk to the first two parts. The last bit about the plant expansion is, I think as we get more information, we'll look at it. It's going to be predicated on once we get into E46 and E41, as to what we do with the plant. We're probably at least 12, 18 months off worrying about that one. Glenton Masterman: Yes, the results that we put out this morning for Mungari and for Cowal won't be captured in the next MRR update. They've just come in a little too late for us to write those. We have already delivered a resource and reserve at Genesis, so that is a growing kind of ongoing concern. It would be the best way to describe it, and what we're excited about is that we can see the opportunity unfolding along that trend between the Pope John Pit. So it's a hanging wall structure that sits outboard of it, and it looks like it's going to link into Barkers. We believe that we're going to fill in that gap between Genesis and Barkers. What we're looking to do, particularly in the next 12 months, is drill that really aggressively so that we can capture it in the 2026 MRR statement. That's the plan there. I would say turning to Cowal with the particularly what we're doing at Oban, there's a lot of space there and on Figure 3. One of the things that we really like at Oban is the contact that I described earlier appears to be very similar, if not a repeat, we haven't confirmed that, of the contact which controls all of the underground mineralization in the underground mine at the moment. We've got another one of these. What we're showing in that image is all of the drilling, and there's hardly anything along it. There's a long way to go there to explore, but we have the target at open, and we'll continue basically to expand the story as we know it along strike, north and south, and look to get more drilling into that space over the coming 12 to 18 months. Hugo Nicolaci: Fantastic. Just the last one. I know you're 100,000 to 200,000 away at Northparkes and Cowal. Any impacts to safety or mine disruption from the earthquake overnight? Lawrie Conway: No, none from the Northparkes or Cowal side. Operator: Your next question comes from Kate McCutcheon, Bank of America. Kate McCutcheon: Thank you for the '27 Cowal, remind you that. So for this year, still on track for the guidance. Help me think about the four key step up here to get you to that circa 190-ounce level that you did a couple of quarters back. I assume it's Cowal plus stage H grade with Ernest Henry normalizing. Can you just talk through that? Lawrie Conway: Yes. I'll get Matt to add to it. I think he's got too much to add, but the two biggest drivers are assets. Matthew O'Neill: Yes, I think the two big ones that people are well aware of, finishing the scheduled maintenance at Cowal, Ernest Henry coming back online are the two primary. Outside of that, the Mungari operation continuing to run at a pretty good rate, Northparkes doing what it's done. You will see a little dip with Northparkes with the old stockpiles from E31 coming towards the end. Outside of that, business as usual with the uplift from the two ones that you identified. Kate McCutcheon: Okay, got it. Cowal, the underground opportunity there, I like it, returning hits of 1 to 2 grams under E41 and the underground system is extending. Obviously, the prize is getting out more high-grade underground tonnes. Glenn spoke to this a little before, but I guess what do you need to get confidence to say another exploration decline there? How do we think about timing or stage gates for a larger underground operation? Glenton Masterman: Kate, I was hoping someone would ask that. Look, I think if we go back to the discovery in 2018 of the underground mine, particularly the Dalwhinnie Lode, which really made the difference there, the first drill hole results into commencing production in the underground. That is the timeframe that we would be thinking. A minimum of 3 years. This is going to require a lot of drilling. We actually also have to get new positions in to improve the angle of attack on the ore body, I should say. That would be something that we need to be doing and I'll be leaning on Matt very heavily to help drive that for us so that we can get the rigs in position to do that. I'd see that being a 3-year opportunity. I think, reflecting on the results at E41, the historical drilling has been largely oriented in an east-west direction, and that, as we have learned in the Cowal underground, has been a suboptimal drilling orientation. We've pivoted the rigs around now to hit those veins at a much better angle. What we have seen historically in the underground is when we've done that, we do see in some areas improvement in grades. We're hoping that as we start to fill that in at a much better angle, we'll see similar behavior at E41. Obviously, as I mentioned, the pit shell that we're showing there is a fairly conservative shell. We do expect as we get resource space drilling into E41, that we can improve the way that pit optimizes. Kate McCutcheon: Okay, got it. If I can sneak one last quick one in, the operating cash flow projected this year, you've noted no intent before to sit on a cash stockpile or do deals at record prices. Is it fair to assume the Board revisits the capital management policy at the FY, or how do we think about capital returns? Lawrie Conway: Yes, Kate. We previously said, as we get to the end of the financial year, once we've got our life of mine plans in, Fran and the team will put together an updated capital management plan, looking at what we do with dividend policies and capital returns. That will come out with the full-year financial results. Operator: Next question comes from Levi Spry with UBS. Levi Spry: Maybe another question for Fran then. Just on the costs, markets obviously focused on it across all sectors. Diesel's only a very small portion of your cost base, and you're probably relatively a much better set up than some of your peers. What about the rest of the pie chart? What are you seeing there? How do we think about what happens into FY '27? Lawrie Conway: Yes. Levi, just in regards to the costs, when you look at our cost structure, nearly 50% of our costs are labor. I would have said six months ago as inflation was sort of trending in that sort of 3.5%-3.8% range and trending down. That's certainly changed now. We would expect you're probably going to be seeing somewhere between 4% and 5% in terms of labor cost movement going into FY '27. When you then look at our other costs, power, fairly well set up there with Cowal and Northparkes pricing fixed. Ernest Henry and Mungari are through FY '27 as well in terms of pricing. Some slight escalation there. When you look at our consumables, it is going to be dependent upon how long the current situation lasts in terms of temporary pricing that we'd be requested to cover for additional logistics costs and the like. Given that that's sort of 50% of our cost base, you're probably going to see a few % increase in that bucket as well. Overall, I think, it's still being well managed, but it does depend on what happens over the next 3 to 6 months, Clyde. Operator: Your next question comes from Daniel Morgan with Barrenjoey. Daniel Morgan: My question is on Mungari, just on costs. For this question, can we just put diesel to one side for a moment about what we're experiencing in a live session? Just on cost, was this a representative quarter for Mungari, i.e., $2,150 AISC? In previous quarters on the cost side, we had obviously some capitalization of different spend, and obviously the project wasn't fully ramped up. Just wondering if you feel this is a representative quarter. Lawrie Conway: Yes, Dan, it's getting close. I mean, we said around a 16% reduction in all-in sustaining costs once they're running and depending then on the mix of the ore. We would see it's probably somewhere in the $2,250 to $2,350 range is what you would see, $2,400 at sort of the upper end, which would be in line with what we had projected. It was a good quarter, really predicated, I'd say, on the campaign of the EKJV. Higher grade material, therefore, helping us in terms of both mining and processing costs there. What you'd see in Q4 is slightly higher, but then you're getting close to the reflection of what Mungari will operate at. Daniel Morgan: Just on Cowal, it's quite clear that you're moving from stage H and that high-grade ore next quarter towards stage I, where you're going to be pushing back. Just wondering how long is it before you start to get material access to stage I ore? Is this FY '27? Obviously a lot of hard work through there, but do we start to see better grades in '28? Lawrie Conway: Yes, it'll be first half of FY '28 is when we'll start to get back into stage I ore, and also be getting into good material coming out of E46 as well. There'll be nothing really of substance in 2027, and a little bit coming through in the first half and the second half of 2028 is when you'll see it start to ramp up in stage I. It's about 18 months. Daniel Morgan: And last question just on Red Lake. It has been a period of better stability, delivery. I think one of the comments you say set up for a good end to the year. Can we just expand on the latest live view of ops through to the end of this year and anything beyond? Matthew O'Neill: Yes. It's Matthew, Dan. Essentially the final quarter, we're going into a couple of higher grade areas, driving an expected little bit of an uplift in grade. The development, if you have a look through that's been really quite consistent. Same thing, you get a little bit of a drop with some ore in terms of throughput in the quarter. We had a few interruptions with power and with the winter side of things. Outside of that's really where it's headed. Pretty consistent, pretty well set up for both grade and volume for the next quarter. Daniel Morgan: And is that sustainable or are the benefits sustainable? Lawrie Conway: So Dan, I mean, the position on Red Lake still hasn't changed. We're focused on getting 30,000 to 40,000 ounces out quarter-in, quarter-out, be positive cash, and what Matt's been working well with John and the team is making sure they've got contingency in the system, given you'd know the difficulties you have at Red Lake with those, make sure that when some things don't work out, they've got other areas to get to..... Daniel Morgan: Okay. Sorry. You just cut off. Operator: Our next question comes from Jon Sharp with JPMorgan. Jonathon Sharp: First question just on Ernest Henry. You've said you've returned to normal operations. Can you just explain what exactly back to normal is, and is there any improvements there to go in this quarter? Probably more importantly, has anything changed with dewatering or water management to prevent this happening again or even just decreasing the consequences? Just trying to understand if it remains an operational constraint in the future. Glenton Masterman: Yes. I'll address the first one. Normal operations basically back to running out of the cave as we were prior to the event. That's essentially what we've done, so running our truck loops and the crushers and everything back operating there. There's some minor work still to go. We're still dewatering the bottom section of the mine. It's not an operational area, it's where we're doing our development. There is still some dewatering activities occurring through there, but they don't impact the day-to-day operations at the moment. In terms of going forward, we've done the investigations and we're working through that process as we talk now. There will be some learnings from it, but I think it's important to remember that event was sort of three times what we'd seen previously in 2023. Whilst it's easy to sit here and say it's a one-off event, it's something that we need to learn from and the key for us will be preventing the water from getting there in the first place and then being able to work with it once it does. We are learning from it, and we will take steps to make sure we minimize the chance that it happens again. Jonathon Sharp: Yes. Okay. That's clear. And just second question, Lawrie, you've reiterated this morning that you're tracking below the original all-in sustaining cost guidance. With three quarters now complete, Ernest Henry back to normal, do you have enough visibility to indicate whether this year's all-in sustaining cost is likely to land below the midpoint of the updated range? Lawrie Conway: I won't put Matt into a difficult spot or Fran by saying where. Our view is we're going to get in that range. There's a number of things that will determine it. You've got the gold price, copper tonnes, copper price. One thing I will say, and it's mentioned on the call, the cost and capital discipline in the business, we're running very well in terms of our sustaining capital and our operating costs against budget. We'll be in the range. That's the political answer that you needed to give Matt some room. Operator: Next question comes from Matthew Frydman with MST Financial. Matthew Frydman: Sure. Can I firstly extend on Levi's question on diesel? Obviously, pretty modest in isolation on the pie chart at 2%. Just so I'm clear, how does that play through in terms of the various kind of rises and falls across some of your mining contracts and other contracts you might have in place across the business that are sort of sensitive to diesel? Are there any other exposures outside of that sort of 2% in isolation that we should be thinking of? In particular, I suppose your sort of CapEx plan, the major projects you've got in your pipeline, presumably a lot of that is waste movement or underground development, so should we be thinking about, I guess, diesel or explosives or sort of other cost sensitivities there also? Is it fair to kind of assume that sort of low single-digit number is a representative sensitivity in those areas of CapEx also? Lawrie Conway: Yes, Matt. If you look at it, the rise and fall for any of the contracts that require use of diesel, be that haulage or mining contractors, you will see that diesel cost flow through. As we've said, though, it's still captured in terms of the cost of our business. It's not the major part of it. Labor is still half, and then you've got power at around 9%, 10% and the like. We're not seeing a material impact, but those rise and falls do come through. In terms of then the capital, Yes, you look at the biggest mine development we've got going over the next couple of years is at Cowal with E46 stage I and the like. In terms of the mining cost, the material movement isn't going to be significantly higher or nothing that's of consequence for us in terms of our cost there. We just have to monitor it over the next few months to see where it all lands, Matt. Matthew Frydman: Understand. And maybe secondly, just quickly, it's not a particularly material one, but obviously noting that in Ernest Henry during the quarter, you kind of highlighted non-operating costs of $26 million related to recovery from the December quarter. Presumably with the ongoing impacts in the March quarter in terms of whether there'll be some ongoing, I guess, non-operational recovery costs in future quarters, can you give us a sort of indication of what we should expect there, whether that's going to be a bigger quantum in the June quarter or onwards? Yes, I expect there's some sort of tail costs there. Lawrie Conway: Yes, Matt. It looks similar to what we had in March '23. You'll start out as a large amount of costs of recovery and getting equipment out and getting all the infrastructure back to normal, and then it tails off. I would say through the June quarter you'll see some more. As Matt said, we've still got water at the bottom of the mine that we need to get out and the like. We've still got some equipment. It will trend out. I don't think you're going to see multiple quarters at $25 million, $26 million, but I think most of it is being captured in this first quarter. Operator: Your next question comes from Adam Baker with Macquarie. Adam Baker: Congrats on achieving your net cash position. Appreciate a new capital management plan will be provided with the financial results. I'm just keen to hear your initial thinking surrounding capital management moving forward. Do you think the current dividend policy fits the purpose or could we see a change to this current dividend policy or could we potentially see an implementation of a buyback like some of your peers have done? Lawrie Conway: Yes, Adam, thanks for the acknowledgement of net cash. It's actually really pleasing to see the business get to that point with what we've been able to do over the last couple of years. It does give us a good problem. I think it's fair to say over the last two quarters, Fran and I have received the most amount of feedback from shareholders as to what to do with the cash versus increased dividends, reinvestments, specials, buybacks. We'll take all of that into consideration into the June year-end and discuss it with the Board. As I said, it's a good problem to have. It's come earlier than we probably would have expected. I think the interim dividend that we paid, which was a material lift based on the cash that we've generated, and we paid forward some of the second-half cash. I think that's a good reflection of what shareholders should expect going forward. Adam Baker: That's a positive signal. Thank you. Just a clarifying remark with Cowal. You mentioned 10% lower ounces for FY '27. Just wondering, is that 10% lower versus the midpoint of current guidance or is that 10% lower versus the lower point of guidance? Just trying to get an understanding here. It could be anywhere between 275,000 and 286,000 ounces. Lawrie Conway: I'll try and help you out here, Adam. I'd say if you work out your estimate for the June quarter and take 10% off the full year, that's going to give you a pretty good estimate of how it would be for next year. Matt's explained we've finished the shutdown. You'll see an uplift in production in the fourth quarter. Work that one through and then that'll give you the number for next year. Matt and Joe won't like it. Operator: Your next question comes from Baden Moore with CLSA. Baden Moore: Thanks for your comments on your fuel supply situation. I was just wondering if you could talk a little bit more to the duration of your contract position, what sort of time frames that you have in place, and then maybe whether you've had any conversations with government about how all your suppliers on how you might be prioritized for fuel in the event there is any level of rationing in the country. I guess the third layer might be just how do you think about just resilience and planning around if there is any disruption to supply. How do you plan around that? What are the safeguards for you? Lawrie Conway: Yes, I'll answer the second question first in terms of government. Our position has always been that we're responsible for our operations and making sure that we've got continuity of supply. And that's what Matt and Fran and the site teams are working through. We don't put our reliance on in terms of that government support. In terms of if they make a decision on rationing, we would address what the impact is on our operations at that point in time. I think, the one thing I'd say is our open pits are the largest diesel consumers, and at both Mungari and Cowal, we do have stockpiled material that we'd be able to put through the plant. It would mean you would slow some of your mine development down to preserve that use of diesel. When we then look at the other consumables and everything like that is the work that Matt and Fran have got in place around what are our response actions that we need to take as we see any issues with consumables. The good news is that through March, we had no interruptions on anything in terms of supply of consumables into the business, and the outlook into the June quarter is very similar. In the first part, the contracts are multi-year contracts. We've got very good relationships with the oil companies that are the distributors for us. We would see them, as I said on the call earlier, they're fulfilling their obligations. We're not trying to do anything outside of the contract, and that's maintaining the really good relationship to guarantee our supply. Baden Moore: And just a quick follow-up. Can you talk to how many months inventory you'd have at hand? With the stockpiles you mentioned, what's the duration that, that would run for before you'd have any sort of impact to your cash flow? Lawrie Conway: Yes. Look, in terms of volumes on-site, as we've said, we've got adequate volumes on-site and continual delivery to our orders. That's not seen as an issue. Much relevance to say what the percentages are because they'll change today and they'll be different again next week as we either consume or get deliveries. We've got adequate coverage. If you look at it, the biggest one is at Cowal. We've got over 47 million tons of stockpiled ore. We run at 8.8 million tons per annum. I think it gives you enough understanding of the impact on our largest operating asset should we not be able to have fuel on-site. Operator: Your next question comes from Belinda Humphries with iQ Industry Queensland. Belinda Humphries: I just wanted to talk about the exploration efforts near Ernest Henry. Are you able to go into a bit more detail about what's going to happen in the June and September quarters of meters drilled, budget, that sort of thing? Lawrie Conway: I'll hand that over to Glenn. I don't think he's going to talk through the meters. I think he'll talk more to the programs are more important for us. Glenton Masterman: Yes. So look, the real objective of the program, on not just the recent tenements, but the sort of overall package that we've been sort of building up over the last several years, is to identify new production opportunities that can support filling the mill at Ernest Henry. We have latent capacity there, and so we're not looking for huge deposits, but if we find one, we absolutely take it. We're looking for probably more modest-style deposits that can help achieve that goal, essentially. The drilling programs, they'll commence in the next month or two. We've been basically waiting. There's been a lot of weather up there. We need to wait until everything is completely dry. Very difficult to get any access, particularly equipment, until it is dry. As soon as it is, we'll be drilling. We gave some examples of the types of targets that we're looking at this morning in our update. That gives you a bit of a sense, 10 km from Ernest Henry, previous drilling, identifying anomalies. The consolidation of the tenements up there is the really exciting thing that's happening because bringing those together means that we can explore the full opportunity rather than piecemeal it on tenement to tenement. That's actually really helped how we're going to prioritize the drilling program over the dry season. I just advise to stay tuned. We would look to be talking more about what we're getting at the end of the December quarter by the time we have some results from that drilling program. Operator: [Operator Instructions] Thank you. There are no further questions at this time. I'll now hand back to Mr. Conway for closing remarks. Lawrie Conway: Thanks, Ashley. It's pleasing to have delivered another very good quarter, and we're on track to deliver our group guidance and taking full advantage of the current high metal prices. Having moved to net cash and no debt repayments till FY '29, we're certainly building the flexibility and Upcoming, we'll release our 2025 MROR report in the next month. And then we also have an investor briefing and visits to Cowal and Northparkes. Thank you for your time on the call today. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
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