Q4 2026 Breville Group Ltd Earnings Call

August 18, 2026

Speaker #2: Thank you for standing by, and welcome to the Breville Group Limited FY26 full-year results conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session for investors and analysts.

Operator 2: Thank you for standing by, and welcome to the Breville Group Limited FY26 Full Year Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session for investors and analysts. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Martin Nicholas, Group CFO. Please go ahead.

Operator: Thank you for standing by, and welcome to the Breville Group Limited FY 2026 Full Year Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session for investors and analysts. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Martin Nicholas, Group CFO. Please go ahead.

Speaker #2: If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Martin Nicholas, Group CFO.

Speaker #2: Please go ahead.

Speaker #3: Thank you very much, and good morning to everyone joining today's call. It's my pleasure to welcome you to the presentation of our full-year 2026 results.

Martin Nicholas: Thank you very much, and good morning to everyone joining today's call. It is my pleasure to welcome you to the presentation of our full-year 2026 results. As normal, I will walk you through the group's financial results, and Jim Clayton, our CEO, will provide an operational and strategic update. I would, however, like to start our presentation today by acknowledging and paying our respects to the traditional custodians on whose land we meet today. I would like to pay respects to their elders, past and present, and further extend that respect to all Aboriginal and Torres Strait Islanders joining us today. We celebrate their continuing connection to and custodianship of this country. Turning to slide 4, we start with the headlines of this year's results. FY26 was an operationally complex period, which we navigated remarkably well to deliver a very solid set of results.

Speaker #3: As normal, I'll walk you through the group's financial results, and then Jim Clayton, our CEO, will provide an operational and strategic update. I would, however, like to start our presentation today by acknowledging and paying our respects to the traditional custodians on whose land we meet today.

Speaker #3: I would like to pay respects to their Elders, past and present, and further extend that respect to all Aboriginal and Torres Strait Islanders joining us today.

Speaker #3: We celebrate their continuing connection to, and custodianship of, this country. Turning to slide 4, we start with the headlines of this year's result. FY26 was an operationally complex period, which we navigated remarkably well to deliver a very solid set of results.

Martin Nicholas: Turning to slide four, we start with the headlines of this year's results. FY 2026 was an operationally complex period, which we navigated remarkably well to deliver a very solid set of results. We substantially completed our manufacturing diversification program, with 85% of our 120V gross profit dollars now sourced outside of China. We collaboratively managed our value chain in response to the ever-changing tariff landscape, and we sustained our investment in the long-term growth drivers of the business. We did all this while delivering another record year with sales of over AUD 1.8 billion. In terms of categories, coffee and cooking both grew in double digits, revenue terms in constant currency, supported by new products, store-in-store investments, and the exciting growth in our young markets.

Speaker #3: We substantially completed our manufacturing diversification program, with 85% of our 120-volt gross profit dollars now sourced outside of China. We have collaboratively managed our value chain in response to the ever-changing tariff landscape, and we sustained our investment in the long-term growth drivers of the business.

Martin Nicholas: We substantially completed our manufacturing diversification program, with 85% of our 120 volt gross profit dollars now sourced outside of China. We collaboratively managed our value chain in response to the ever-changing tariff landscape, and we sustained our investment in the long-term growth drivers of the business. We did all this while delivering another record year with sales of over AUD 1.8 billion. In terms of categories, coffee and cooking both grew in double digits, revenue terms in constant currency, supported by new products, store-in-store investments, and the exciting growth in our young markets. In total, the global segment grew revenue by 9.7% in constant currency terms, with the H2 strengthening to double digits. As forecast, our rapid and successful diversification of manufacturing played through in the H2, with the sourcing mix helping to drive improved gross margins.

Speaker #3: We did all this whilst delivering another record year, with sales of over $1.8 billion. In the categories of coffee and cooking, both grew in double digits in revenue terms, in constant currency, supported by new products, store-in-store investments, and the exciting growth in our young markets.

Speaker #3: In total, the global segment grew revenue by 9.7% in constant currency terms, with the second half strengthening to double digits. As forecast, our rapid and successful diversification of manufacturing played through in the second half, with this sourcing mix helping to drive improved gross margins.

Martin Nicholas: In total, the global segment grew revenue by 9.7% in constant currency terms, with the H2 strengthening to double digits. As forecast, our rapid and successful diversification of manufacturing played through in the H2, with the sourcing mix helping to drive improved gross margins. Across FY2026, we actively managed the challenges of a volatile US trade policy. All year, our approach has been to manage this impact on a net basis. The full value chain lent in to help mitigate the initial cost impact, and we are now taking the same net approach to the IEEPA refunds with a minimal net profit impact in FY2026.

Speaker #3: Across FY26, we actively managed the challenges of a volatile US trade policy. All year, our approach has been to manage this impact on a net basis. The full value chain leaned in to help mitigate the initial cost impact, and we are now taking the same net approach to the AEPA refunds.

Martin Nicholas: Across FY2026, we actively managed the challenges of a volatile US trade policy. All year, our approach has been to manage this impact on a net basis. The full value chain lent in to help mitigate the initial cost impact, and we are now taking the same net approach to the IEEPA refunds with a minimal net profit impact in FY2026. Our full-year EBIT was delivered in line with budget and guidance, and as you will see later, our balance sheet remains healthy, as were our cash flows, leaving us ready and able to continue investing in growth opportunities. Overall, a robust year of performance against a rapidly changing backdrop. Turning to slide 5 and the group summary results. Strengthening double-digit growth in the H2 lifted our overall global constant currency revenue growth to 9.7% for the full year.

Speaker #3: With a minimal net profit impact in FY26. Our full-year EBIT was delivered in line with budget and guidance, and as you will see later, our balance sheet remains healthy.

Martin Nicholas: Our full-year EBIT was delivered in line with budget and guidance, and as you will see later, our balance sheet remains healthy, as were our cash flows, leaving us ready and able to continue investing in growth opportunities. Overall, a robust year of performance against a rapidly changing backdrop. Turning to slide 5 and the group summary results. Strengthening double-digit growth in the H2 lifted our overall global constant currency revenue growth to 9.7% for the full year. The marked H2 weakness in both the US dollar and the euro significantly dampened our reported AUD revenue, with growth of 6.7%. Gross margins of 36% against the prior year of 36.6% reflects the balance of headwinds and tailwinds in a complex year.

Speaker #3: As were our cash flows, leaving us ready and able to continue investing in growth opportunities. Overall, it was a robust year of performance against a rapidly changing backdrop.

Speaker #3: Turning to slide 5 and the group summary results. Strengthening double-digit growth in the second half lifted our overall global constant currency revenue growth to 9.7% for the full year.

Speaker #3: The marked second-half weakness in both the US dollar and the euro significantly dampened our reported Australian dollar revenue, with growth of 6.7%. Gross margins of 36%, compared to a prior year of 36.6%, reflect the balance of headwinds and tailwinds in a complex year.

Martin Nicholas: The marked H2 weakness in both the US dollar and the euro significantly dampened our reported AUD revenue, with growth of 6.7%. Gross margins of 36% against the prior year of 36.6% reflects the balance of headwinds and tailwinds in a complex year. As mentioned, our diversified sourcing mix helped strengthen our gross margins in the H2 to 36.8%, outstripping both the H1 and the PCP. Across the year, we continued to invest in the long-term growth drivers of our business and delivered an EBIT of AUD 207 million, in line with both budget and guidance given at the half year. A strengthened net cash position of AUD 104 million reflects our healthy underlying cash flow. Turning to slide 6, here we see key segment results. Our global product segment constant currency growth grew by double digits in the H2 and 9.7% in the full year.

Speaker #3: As mentioned, our diversified sourcing mix helped strengthen our gross margins in the second half to 36.8%, outstripping both the first half and the prior comparable period.

Martin Nicholas: As mentioned, our diversified sourcing mix helped strengthen our gross margins in the H2 to 36.8%, outstripping both the H1 and the PCP. Across the year, we continued to invest in the long-term growth drivers of our business and delivered an EBIT of AUD 207 million, in line with both budget and guidance given at the half year. A strengthened net cash position of AUD 104 million reflects our healthy underlying cash flow. Turning to slide 6, here we see key segment results. Our global product segment constant currency growth grew by double digits in the H2 and 9.7% in the full year.

Speaker #3: Across the year, we continued to invest in the long-term growth drivers of our business and delivered an EBIT of $207 million, in line with both budget and guidance given at the half-year.

Speaker #3: A strengthened net cash position of $104 million reflects our healthy underlying cash flow. Turning to slide 6, here we see key segment results.

Speaker #3: Our Global Product segment, constant currency growth, grew by double digits in the second half and 9.7% for the full year. New products landed well, with the Oracle Dual Boiler, the IQ Toaster, Baratza Encore ESP Pro, and the Lelit Mara X3 all performing strongly.

Martin Nicholas: New products landed well with the Oracle Dual Boiler, the IQ Toaster, Baratza Encore ESP, and the Lelit MaraX all performing strongly. In category terms, coffee and cooking delivered double-digit revenue growth across the year, while food preparation grew in single digits. As we noted at the half year, our young direct markets of China, Korea, Mexico, and the Middle East continue to excite, growing at over 70% in FY2026. This growth trajectory will be increasingly important to the group as they continue to scale. In margin terms, both product segments experienced cost volatility arising from tariffs and a Middle East conflict-led inflationary spike in both transport and material costs in the H2. The distribution segment fulfilled its strategic role by delivering AUD 4 million of incremental gross profit. Turning to slide 7, here we see our geographic performances in the global segments.

Speaker #3: In category terms, coffee and cooking delivered double-digit revenue growth across the year, while food preparation grew in single digits. As we noted at the half-year, our young direct markets of China, Korea, Mexico, and the Middle East continue to excite, growing at over 70% in FY26.

Speaker #3: This growth trajectory will be increasingly important to the group as they continue to scale. In margin terms, both product segments experienced cost volatility arising from tariffs and the Middle East conflict-led inflationary spike in both transport and material costs in the second half.

Speaker #3: The distribution segment fulfilled its strategic role by delivering $4 million of incremental gross profit. Turning to Slide 7, here we see our geographic performances in the global segments.

Martin Nicholas: Turning to slide 7, here we see our geographic performances in the global segments. The Americas grew total revenue by 10.8% in constant currency terms, with coffee in double-digit growth led by premium NPD launches and a strong performance from the Barista Express. Cooking also grew in double digits, with food preparation in single-digit growth. Exciting also to note that the 300 extra store-in-store installations were completed in Best Buy in the USA in November, and we are delighted by their performance in driving both sales and uptrade. In EMEA, our direct markets, the UK, the EU, and the Middle East, again grew in double digits, led by coffee and NPD. The Middle East continued to thrive despite obvious challenges, which confirms the encouraging outlook for this coffee-centric region.

Speaker #3: The Americas grew total revenue by 10.8% in constant currency terms, with coffee in double-digit growth, led by premium MPD launches and a strong performance from the Barista Express.

Martin Nicholas: The Americas grew total revenue by 10.8% in constant currency terms, with coffee in double-digit growth led by premium NPD launches and a strong performance from the Barista Express. Cooking also grew in double digits, with food preparation in single-digit growth. Exciting also to note that the 300 extra store-in-store installations were completed in Best Buy in the USA in November, and we are delighted by their performance in driving both sales and uptrade. In EMEA, our direct markets, the UK, the EU, and the Middle East, again grew in double digits, led by coffee and NPD. The Middle East continued to thrive despite obvious challenges, which confirms the encouraging outlook for this coffee-centric region. Overall theater growth of 8.5% includes a more moderate performance in distributor-led markets, which are still normalizing after a strong FY2025.

Speaker #3: Cooking also grew in double digits, with food preparation in single-digit growth. It's also exciting to note that the 300 extra store-in-store installations were completed in Best Buy in the USA in November, and we are delighted by their performance in driving both sales and uptrade.

Speaker #3: In EMEA, our direct markets—the UK, the EU, and the Middle East—again grew in double digits, led by coffee and MPD. The Middle East continued to thrive, despite obvious challenges, which confirms the encouraging outlook for this coffee-centric region.

Speaker #3: Overall theater growth of 8.5% includes a more moderate performance in distributor-led markets, which are still normalizing after a strong FY25. In APAC, our direct markets—Australia, New Zealand, Korea, and now China—delivered double-digit constant currency revenue growth across the full year.

Martin Nicholas: Overall theater growth of 8.5% includes a more moderate performance in distributor-led markets, which are still normalizing after a strong FY2025. In APAC, our direct markets, Australia, New Zealand, Korea, and China, delivered double-digit constant currency revenue growth across the full year. NPD landed well, and although still small, China sales were very encouraging, while Korea continued to grow from strength to strength. Total APAC growth of 8.3% for the year included a H2 strengthening to 11.5% as cyclical sales in distributor-led markets normalized.

Martin Nicholas: In APAC, our direct markets, Australia, New Zealand, Korea, and China, delivered double-digit constant currency revenue growth across the full year. NPD landed well, and although still small, China sales were very encouraging, while Korea continued to grow from strength to strength. Total APAC growth of 8.3% for the year included a H2 strengthening to 11.5% as cyclical sales in distributor-led markets normalized. Here we graphically see our EBIT growth drivers across the year, with EBIT meeting both budget and guidance. Gross profit grew by 5% or AUD 30.9 million on a nominal basis as FX also flowed through these numbers. In terms of operating expenses, we maintained our discipline of investing in the future growth drivers of the business, investing AUD 25.8 million or approximately 90% of the OpEx increase in supporting new markets and business growth drivers.

Speaker #3: MPD landed well, and although still small, China sales were very encouraging, while Korea continued to grow from strength to strength. Total APAC growth of 8.3% for the year included a second-half strengthening to 11.5%, as cyclical sales in distributor-led markets normalized.

Speaker #3: Turning to slide 8, here we graphically see our EBIT growth drivers across the year, with EBIT meeting both budget and guidance. Gross profit grew by 5%, or $30.9 million on a nominal basis, as FX also flowed through these numbers.

Martin Nicholas: Here we graphically see our EBIT growth drivers across the year, with EBIT meeting both budget and guidance. Gross profit grew by 5% or AUD 30.9 million on a nominal basis as FX also flowed through these numbers. In terms of operating expenses, we maintained our discipline of investing in the future growth drivers of the business, investing AUD 25.8 million or approximately 90% of the OpEx increase in supporting new markets and business growth drivers.

Speaker #3: In terms of operating expenses, we maintained our discipline of investing in the future growth drivers of the business, investing $25.8 million, or approximately 90% of the OPEX increase, in supporting new markets and business growth drivers.

Speaker #3: This consistency and commitment are important to our sustained future growth. And so are our investments in product development, marketing, solutions, and tech services, which increased to 14.4% of revenue from 14.2% in the prior period.

Martin Nicholas: This consistency and commitment is important to our sustained future growth, and so our investment in product development, marketing solutions, and tech services increased to 14.4% of revenue from 14.2% in the prior period. Investment in AI emerged in FY26, though our total spend on the program is deliberate and controlled. In his section, Jim will walk through the progress and potential of this program. The increased spend on our other operating expenses, as you will see, was very modest. Finally, as noted, EBIT growth of AUD 2.4 million or 1.2% was in line with both budget and guidance. Turning to the balance sheet, it's a story of healthy underlying cash flow, supporting an improved net cash position of AUD 104.4 million.

Speaker #3: Investment in AI emerged in FY26, though our total spend on the program is deliberate and controlled. In this section, Jim will walk through the progress and potential of this program.

Speaker #3: The increased spend on our other operating expenses, as you will see, was very modest. Finally, as noted, EBIT growth of $2.4 million, or 1.2%, was in line with both budget and guidance.

Speaker #3: Slide 9, turning to the balance sheet: it's the story of healthy underlying cash flow supporting an improved net cash position of $104.4 million. The $40 million inventory growth seen here reflects the transition to new manufacturing facilities for our 120-volt products.

Martin Nicholas: The AUD 40 million inventory growth seen here reflects the transition to new manufacturing facilities for our 120-volt products, necessitating an earlier build of inventory for the US peak season. Inventory was broadly flat in all other theaters. Our receivables collection was strong in the H2, and the year-end balance was seasonally normal, with days outstanding in line with the prior year. FY26 also saw PPE and development costs grow, reflecting the continued investment in these key drivers of our business, new products and solutions, store-in-store fixtures, and diversified manufacturing assets. Some specifics. The PPE increase here includes AUD 18 million of store-in-store expansion, including Best Buy in the USA, as well as a further AUD 5 million of additional tooling associated with our diversified manufacturing drive.

Speaker #3: This necessitated an earlier build of inventory for the US peak season. Inventory was broadly flat in all other theaters. Our receivables collection was strong in the second half, and the year-end balance was seasonally normal, with days outstanding in line with the prior year.

Speaker #3: FY26 also saw PPE and development costs grow, reflecting the continued investment in these key drivers of our business: new products and solutions, store-in-store fixtures, and diversified manufacturing assets.

Speaker #3: Some specifics: the PPE increase here includes $18 million of store-in-store expansion, including Best Buy in the USA, as well as a further $5 million of additional tooling associated with our diversified manufacturing drive.

Speaker #3: The growth in capitalized development costs and software is a good leading indicator of the level of investment in product development and the maturity of projects in the pipeline.

Martin Nicholas: The growth in capitalized development costs and software is a good leading indicator of the level of investment in product development and the maturity of projects in the pipeline. The growing balance seen here signals that we have a healthy pipeline of projects moving towards launch or recently launched. Finally, the movement in goodwill brands and licenses is again largely accounted for by FX translation effects. Looking forward into FY26, our balance sheet is in good health. We start the year in a net cash position with significant unused debt facilities and cash in place for our normal seasonal working capital investment, as well as funding further growth opportunities as they arise. Before passing over to Jim, just a few remarks on the environment we face as we enter FY27.

Speaker #3: The growing balance seen here signals that we have a healthy pipeline of projects moving towards launch or recently launched. Finally, the movement in goodwill, brands, and licenses is again largely accounted for by FX translation effects.

Speaker #3: Looking ahead to FY26, our balance sheet remains in good health. We begin the year in a net cash position, with significant unused debt facilities and sufficient cash in place for our normal seasonal working capital investment, as well as to fund further growth opportunities as they arise.

Speaker #3: Slide 10: the forecasting over to Jim. Just a few remarks on the environment we face as we enter FY27. For those in the audience who attempted to utter the words, “Now we know,” in regard to US tariffs, I would posit that the situation remains fluid.

Martin Nicholas: Before passing over to Jim, just a few remarks on the environment we face as we enter FY27. For those in the audience who are tempted to utter the words "Now we know" in regard to US tariffs, I would posit that the situation remains fluid. There are multiple policy initiatives still in play at the same time that could result in a variety of outcomes. We will know when we know in terms of tariffs. I can probably say the same with regard to the oil price and its knock-on impact on plastics, materials, and transport costs, still very much in flux. What I can, however, say is that we are far better placed to withstand this volatility than we were at this time last year.

Martin Nicholas: For those in the audience who are tempted to utter the words "Now we know" in regard to US tariffs, I would posit that the situation remains fluid. There are multiple policy initiatives still in play at the same time that could result in a variety of outcomes. We will know when we know in terms of tariffs. I can probably say the same with regard to the oil price and its knock-on impact on plastics, materials, and transport costs, still very much in flux. What I can, however, say is that we are far better placed to withstand this volatility than we were at this time last year. Firstly, our diversified manufacturing base affords us significantly more optionality. Secondly, we are in many terms battle-hardened, working well with our value chain and are well practiced at tactically managing the unexpected.

Speaker #3: There are multiple policy initiatives still in play at the same time that could result in a variety of outcomes. We'll know when we know, in terms of tariffs.

Speaker #3: I can probably say the saying with regard to the oil price and its knock-on impact on plastics, materials, and transport costs is still very much in flux.

Speaker #3: But what I can say, however, is that we are far better placed to withstand this volatility than we were at this time last year.

Speaker #3: Firstly, our diversified manufacturing base affords us significantly more optionality. Secondly, we are, in many terms, battle-hardened, working well with our value chain, and are well practiced at tactically managing the unexpected.

Martin Nicholas: Firstly, our diversified manufacturing base affords us significantly more optionality. Secondly, we are in many terms battle-hardened, working well with our value chain and are well practiced at tactically managing the unexpected. Indeed, as we plan, we plan to deliver reliably through volatility. Lastly, we start the year with a healthy balance of relatively lower tariff inventory in the USA. All in all, we have put ourselves in a far better place to withstand volatility than last year, and we start the year with momentum. Building on this, in FY27, I fully expect us to continue to use our cash flow and balance sheet to invest in growth assets and inventory where relevant as a mitigant to uncertainty. Of course, consistent with our normal practice, we currently expect to give guidance for FY27 with our H1 results.

Speaker #3: Indeed, as we plan, we aim to deliver reliably through volatility. And lastly, we start the year with a healthy balance of relatively lower-tariffed inventory in the USA.

Martin Nicholas: Indeed, as we plan, we plan to deliver reliably through volatility. Lastly, we start the year with a healthy balance of relatively lower tariff inventory in the USA. All in all, we have put ourselves in a far better place to withstand volatility than last year, and we start the year with momentum. Building on this, in FY27, I fully expect us to continue to use our cash flow and balance sheet to invest in growth assets and inventory where relevant as a mitigant to uncertainty. Of course, consistent with our normal practice, we currently expect to give guidance for FY27 with our H1 results. I hope this outlines where we are today, how robustly we performed in 2026 against a more than challenging backdrop, and our readiness for the landscape we face as we move into FY27. With that, I will hand over to Jim.

Speaker #3: All in all, we've put ourselves in a far better place to withstand volatility than last year, and we start the year with momentum. Building on this, in FY27, I fully expect us to continue to use our cash flow and balance sheet to invest in growth assets, and inventory where relevant, as a mitigant to uncertainty.

Speaker #3: And of course, consistent with our normal practice, we currently expect to give guidance for FY27 with our first half results. So I hope this outlines where we are today, how robustly we performed in '26 against a more-than-challenging backdrop, and our readiness for the landscape we face as we move into FY27.

Martin Nicholas: I hope this outlines where we are today, how robustly we performed in 2026 against a more than challenging backdrop, and our readiness for the landscape we face as we move into FY27. With that, I will hand over to Jim.

Speaker #3: With that, I'll hand over to Jim.

Speaker #2: Thank you, Martin. What I want to do this morning is give you a perspective on the operational progress we've made in FY26, beyond the diversification of our supply chain.

Jim Clayton: Thank you, Martyn. What I want to do this morning is give you a perspective on the operational progress we have made in FY26 beyond the diversification of our supply chain, specifically the US retail channel structure, new country performance, the beanz.com expansion, and where we are on the AI transformation program. Turning to slide 12. In the H1 2026 earnings announcement, we talked about the new Best Buy partnership. While this is an important partnership for sure, the structural channel implications of Best Buy's brand consolidation decision is equally relevant for premium brands in the United States. To understand this, you first need to understand the channel structure itself. Mass brands can enter the market through Amazon, Walmart, Costco, Sam's Club, or Target. While getting into Best Buy could be helpful, there is plenty of runway given the size and scope of the mass retailers.

Speaker #2: Specifically, the U.S. retail channel structure, new country performance, the Beans expansion, and where we are on the AI transformation program. Turning to slide 12, in the first half of '26 earnings announcement, we talked about the new Best Buy partnership.

Speaker #2: While this is an important partnership, for sure, the structural channel implications of Best Buy's brand consolidation decision are equally relevant for premium brands in the United States.

Speaker #2: To understand this, you first need to understand the channel structure itself. Mass brands can enter the market through Amazon, Walmart, Costco, Sam's Club, or Target.

Jim Clayton: Mass brands can enter the market through Amazon, Walmart, Costco, Sam's Club, or Target. While getting into Best Buy could be helpful, there is plenty of runway given the size and scope of the mass retailers. Premium brands, however, play at the specialty retailer level, which collectively has 300 doors, and then use Best Buy to deliver geographic presence with its 1,000 doors, an important ingredient for reach and brand building. Best Buy's decision, however, to consolidate the entire SDA category to a handful of brands forecloses this scale-out opportunity for any premium brand not chosen.

Speaker #2: While getting into Best Buy could be helpful, there's plenty of runway given the size and scope of the mass retailers. Premium brands, however, play at the specialty retailer level.

Jim Clayton: Premium brands, however, play at the specialty retailer level, which collectively has 300 doors, and then use Best Buy to deliver geographic presence with its 1,000 doors, an important ingredient for reach and brand building. Best Buy's decision, however, to consolidate the entire SDA category to a handful of brands forecloses this scale-out opportunity for any premium brand not chosen. Turning to slide 13. Breville has always had very solid relationships at the premium end of the channel. Our execution through this channel is consistently strong, and FY26 is no exception. Williams-Sonoma and Breville partnered with Kelly Wearstler, a famous interior designer, for the launch of the Mixed Metals Collection, which is performing exceptionally well, and we made the front cover of the Crate & Barrel catalog, among other activities. Turning to slide 14. As we mentioned at the half, we rolled out 300 store-in-store installations in Best Buy.

Speaker #2: Which collectively has 300 doors, and then use Best Buy to deliver geographic presence with its 1,000 doors—an important ingredient for reach and brand building.

Speaker #2: Best Buy's decision, however, to consolidate the entire SDA category to a handful of brands forecloses the scale-out opportunity for any premium brand not chosen.

Speaker #2: Turning to slide 13, Breville has always had very solid relationships at the premium end of the channel. Our execution through this channel was consistently strong in FY26, and this year was no exception.

Jim Clayton: Turning to slide 13. Breville has always had very solid relationships at the premium end of the channel. Our execution through this channel is consistently strong, and FY26 is no exception. Williams-Sonoma and Breville partnered with Kelly Wearstler, a famous interior designer, for the launch of the Mixed Metals Collection, which is performing exceptionally well, and we made the front cover of the Crate & Barrel catalog, among other activities. Turning to slide 14. As we mentioned at the half, we rolled out 300 store-in-store installations in Best Buy.

Speaker #2: Williams Sonoma and Breville partnered with Kelly Wearstler, a famous interior designer, for the launch of the Mixed Metals range, which is performing exceptionally well.

Speaker #2: And we made the front cover of the Crate & Barrel catalog, among other activities. Turning to slide 14, as we mentioned at the half, we rolled out 300 store-in-store installations in Best Buy.

Speaker #2: We and Best Buy have seen a significant step up in the performance of the stores with this execution, and we've seen a material increase in the ASP in these stores.

Jim Clayton: We and Best Buy have seen a significant step-up in the performance of the stores with this execution, and we've seen a material increase in the ASP in these stores. As a result of this joint success, Best Buy has asked us to expand this execution into more doors, which we are currently evaluating. The structural point here is the 4-year term. If you're a premium brand that wasn't chosen when Best Buy consolidated, that door doesn't realistically reopen for 4 years. That's not a one-cycle setback. It's a structural repositioning of the competitive landscape. Turning to slide 15. We also had great execution in Target and Amazon. In FY26, we were the only appliance brand that was allowed to build an end-of-aisle display. To promote Prime Day in June, Amazon chose the Barista Express to promote on the 3D display in Times Square in New York.

Speaker #2: As a result of this joint success, Best Buy has asked us to expand this execution into more doors, which we are currently evaluating. The structural point here is the four-year term.

Speaker #2: If you're a premium brand that wasn't chosen when Best Buy consolidated, that door doesn't realistically reopen for four years. That's not a one-cycle setback.

Speaker #2: It's a structural repositioning of the competitive landscape. Turning to slide 15, we also had great execution in Target and Amazon. In FY26, we were the only appliance brand that was allowed to build an in-aisle display.

Jim Clayton: In FY26, we were the only appliance brand that was allowed to build an end-of-aisle display. To promote Prime Day in June, Amazon chose the Barista Express to promote on the 3D display in Times Square in New York. Over the last decade, and particularly through disruptive periods like COVID and Liberation Day, we've invested heavily in our retail partnerships, consistently delivering new, innovative products, supporting them through volatility, and being the brand they can count on. This consistent support of each of our retail partners and the role they play in the channel for their customers is a foundational underpinning of the America's consistent delivery over the past 10 years.

Speaker #2: And to promote Prime Day in June, Amazon chose the Breeze Express to feature on the three-day display in Times Square in New York. Over the last decade, and particularly through disruptive periods like COVID and Liberation Day, we've invested heavily in our retail partnerships, consistently delivering new, innovative products, supporting them through volatility, and being the brand they can count on.

Jim Clayton: Over the last decade, and particularly through disruptive periods like COVID and Liberation Day, we've invested heavily in our retail partnerships, consistently delivering new, innovative products, supporting them through volatility, and being the brand they can count on. This consistent support of each of our retail partners and the role they play in the channel for their customers is a foundational underpinning of the America's consistent delivery over the past 10 years. Slide 16. Now we'll take a look at the performance of our newer direct markets. Slide 17. As a group, Mexico, the Middle East, South Korea, and China grew revenue 74% year over year. As you can see from the slide, FY26 was the first year where we weren't absorbing a distributor-to-direct cutover cost across these countries, which in part accounts for the step-up. To be fair, we also have the Middle East and China coming online.

Speaker #2: This consistent support of each of our retail partners, and the role they play in the channel for their customers, is a foundational underpinning of the Americas' consistent delivery over the past 10 years.

Speaker #2: Slide 16: Now we'll take a look at the performance of our newer direct markets. Slide 17: As a group, Mexico, the Middle East, South Korea, and China grew revenue 74% year over year.

Jim Clayton: Slide 16. Now we'll take a look at the performance of our newer direct markets. Slide 17. As a group, Mexico, the Middle East, South Korea, and China grew revenue 74% year over year. As you can see from the slide, FY26 was the first year where we weren't absorbing a distributor-to-direct cutover cost across these countries, which in part accounts for the step-up. To be fair, we also have the Middle East and China coming online. At the half, I said that China and the Middle East were off to a good start, and here's the next level of detail.

Speaker #2: As you can see from the slide, FY26 was the first year where we weren't absorbing a distributor-to-direct cutover cost across these countries, which in part accounts for the step-up.

Speaker #2: But to be fair, we also have the Middle East and China coming online. At the half, I said that China and the Middle East were off to a good start, and here's the next level of detail.

Jim Clayton: At the half, I said that China and the Middle East were off to a good start, and here's the next level of detail. In FY26, the China team, in its first year, delivered 7.1 times the revenue of our previous distributor, and the Middle East came in at 6.6 times. These are the year-one deliveries you hope for when making the call to go direct. Slide 18. The teams in these four geographies are executing well on building brand and market presence. The Mexico team expanded into El Palacio de Hierro, the most premium department store in Mexico. The South Korea team did a takeover in Shinsegae to tell Breville's coffee story coupled with their store-in-stores. The China team has executed pop-ups, participated in coffee festivals, and collaborated with other leading brands.

Speaker #2: In FY26, the China team, in its first year, delivered 7.1 times the revenue of our previous distributor, and the Middle East came in at 6.6 times.

Jim Clayton: In FY26, the China team, in its first year, delivered 7.1 times the revenue of our previous distributor, and the Middle East came in at 6.6 times. These are the year-one deliveries you hope for when making the call to go direct. Slide 18. The teams in these four geographies are executing well on building brand and market presence. The Mexico team expanded into El Palacio de Hierro, the most premium department store in Mexico. The South Korea team did a takeover in Shinsegae to tell Breville's coffee story coupled with their store-in-stores. The China team has executed pop-ups, participated in coffee festivals, and collaborated with other leading brands.

Speaker #2: These are the year-one deliveries you hope for when making the call to go direct. Slide 18—the teams in these four geographies are executing well on building brand and market presence.

Speaker #2: The Mexico team expanded into Palacio de Hierro, the most premium department store in Mexico. The South Korea team did a takeover in Shinsegae to tell Breville's coffee story, coupled with their store-in-stores.

Speaker #2: The China team has executed pop-ups, participated in coffee festivals, and collaborated with other leading brands. And lastly, you see a picture at the World of Coffee in Dubai, where the team is receiving the Best New Product award for the Oracle Dual Boiler—a well-timed event for introducing Sage to a hall full of coffee enthusiasts.

Jim Clayton: Lastly, you see a picture at the World of Coffee in Dubai, where the team is receiving the Best New Product award for the Oracle Dual Boiler, a well-timed event for introducing Sage to a hall full of coffee enthusiasts. Slide 19. Now a quick update on the beanz.com service. Slide 20. beanz.com is now live in the Netherlands. As a part of this expansion, the team resolved the cross-border complexity of VAT, giving German and Dutch customers choice across 26 roasters, 12 in the Netherlands, and 14 in Germany. With beanz.com operational in the Netherlands and the cross-border VAT capability in place, we'll take the Fast Track Barista program live there in September, which will continue the expansion of our solution offense. Slide 21. Now I'd like to spend some time on the status of our AI transformation program. Slide 22.

Speaker #2: Slide 19, now a quick update on the Bean service. Slide 20, Beans is now live in the Netherlands. As part of this expansion, the team resolved the cross-border complexity of that, giving German and Dutch customers choice across 26 roasters—12 in the Netherlands and 14 in Germany.

Speaker #2: With Beans operational in the Netherlands and the cross-border VAT capability in place, we'll take the fast-track breeze to program live there in September, which will continue the expansion of our solution offense.

Speaker #2: Slide 21: Now I'd like to spend some time on the status of our AI transformation program. Slide 22: Before getting into the program itself, I want to first frame where and how AI is relevant to BRG.

Jim Clayton: Slide 21. Now I'd like to spend some time on the status of our AI transformation program. Slide 22. Before getting into the program itself, I want to first frame where and how AI is relevant to BRG. In 2018, I presented this innovation flywheel framework. Investing more in NPD to launch more new products will increase revenue. Take that increased revenue and invest it into GTM to pull forward the revenue curve, and you will get more revenue. Use that to expand the TAM by going into new countries, and you will accelerate even more revenue, which can be reinvested into NPD for the next cycle. The flywheel compounds. This is how we have doubled the size of the company in the last six years.

Jim Clayton: Before getting into the program itself, I want to first frame where and how AI is relevant to BRG. In 2018, I presented this innovation flywheel framework. Investing more in NPD to launch more new products will increase revenue. Take that increased revenue and invest it into GTM to pull forward the revenue curve, and you will get more revenue. Use that to expand the TAM by going into new countries, and you will accelerate even more revenue, which can be reinvested into NPD for the next cycle. The flywheel compounds. This is how we have doubled the size of the company in the last six years. From 2016 to 2025, the levers we had for feeding this flywheel were headcount and money. This is the flywheel feedstock. If you want more NPD, hire more designers and engineers. For 2026 forward, we now have an incremental lever, AI tokens.

Speaker #2: In 2018, I presented this innovation flywheel framework. Investing more in NPD to launch more new products will increase revenue. Take that increased revenue and invest it into GTM to pull forward the revenue curve, and you'll get more revenue.

Speaker #2: Use that to expand the TAM by going into new countries, and you'll accelerate even more revenue, which can be reinvested into NPD for the next cycle.

Speaker #2: The flywheel compounds. This is how we've doubled the size of the company in the last six years. From 2016 to 2025, the levers we had for feeding this flywheel were headcount and money.

Jim Clayton: From 2016 to 2025, the levers we had for feeding this flywheel were headcount and money. This is the flywheel feedstock. If you want more NPD, hire more designers and engineers. For 2026 forward, we now have an incremental lever, AI tokens. We can now drive the flywheel with headcount, tokens, and money. This is the acceleration potential AI provides. With the macro framework set, I will now take you down a level to show you where we are in this journey. Slide 23. At the half, I walked you through our three-layered approach to the program: AI infrastructure, agent process automation, and training and enablement.

Speaker #2: This is the flywheel feedstock. If you want more NPD, hire more designers and engineers. For 2026 forward, we now have an incremental lever: AI tokens.

Speaker #2: We can now drive the flywheel with headcount, tokens, and money. This is the acceleration potential AI provides. With the macro framework set, I'll now take you down a level to show you where we are in this journey.

Jim Clayton: We can now drive the flywheel with headcount, tokens, and money. This is the acceleration potential AI provides. With the macro framework set, I will now take you down a level to show you where we are in this journey. Slide 23. At the half, I walked you through our three-layered approach to the program: AI infrastructure, agent process automation, and training and enablement. We are now at the point where we are moving into the second phase of the program, which is the step change from individual amplification, the me, to team functional level amplification, the we. We have made quite a bit of progress on the individual amplification front. As a result of our capability building efforts, over 50% of our employees are now amplified, meaning they are competently using AI as a tool to make themselves more effective.

Speaker #2: On slide 23, at the halfway point, I walked you through our three-layered approach to the program: AI infrastructure, agents, process automation, and training and enablement. We're now at the point where we're moving into the second phase of the program, which is the step-change from individual amplification—the 'me'—to team and functional-level amplification—the 'we.'

Jim Clayton: We are now at the point where we are moving into the second phase of the program, which is the step change from individual amplification, the me, to team functional level amplification, the we. We have made quite a bit of progress on the individual amplification front. As a result of our capability building efforts, over 50% of our employees are now amplified, meaning they are competently using AI as a tool to make themselves more effective. The rest are still progressing and learning how to get the most out of the tool. But if you want to truly flex the ROI of AI, you need to move from individual amplification to team amplification. In part because of the immaturity of this technology, this is a very different kind of challenge.

Speaker #2: We've made quite a bit of progress on the individual amplification front. As a result of our capability-building efforts, over 50% of our employees are now amplified—meaning they are competently using AI as a tool to make themselves more effective.

Speaker #2: The rest are still progressing and learning how to get the most out of the tool. But if you want to truly flex the ROI of AI, you need to move from individual amplification to team amplification.

Jim Clayton: The rest are still progressing and learning how to get the most out of the tool. But if you want to truly flex the ROI of AI, you need to move from individual amplification to team amplification. In part because of the immaturity of this technology, this is a very different kind of challenge. Slide 24. The fundamental requirement to move from me to we is getting the core infrastructure in place to support this step change. In phase one, we exposed our structured data and put the governance platform in place. For clarity, structured data is data organized in fixed fields and tables, like sales figures in an Excel spreadsheet. This by itself was a huge step forward. Business users and AI agents can now get directly at source business data without the need for the data science team to spin up a new dataset.

Speaker #2: And in part because of the immaturity of this technology, this is a very different kind of challenge. Slide 24: The fundamental requirement to move from 'me' to 'we' is getting the core infrastructure in place to support the step change.

Jim Clayton: Slide 24. The fundamental requirement to move from me to we is getting the core infrastructure in place to support this step change. In phase one, we exposed our structured data and put the governance platform in place. For clarity, structured data is data organized in fixed fields and tables, like sales figures in an Excel spreadsheet. This by itself was a huge step forward. Business users and AI agents can now get directly at source business data without the need for the data science team to spin up a new dataset. This was a major unlock for individual amplification, myself included.

Speaker #2: In phase one, we exposed our structured data and put the governance platform in place. For clarity, structured data is data organized in fixed fields and tables, like sales figures in an Excel spreadsheet.

Speaker #2: This by itself was a huge step forward. Business users and AI agents can now get directly at source business data without the need for the data science team to spin up a new dataset.

Speaker #2: This was a major unlock for individual amplification, myself included. To enable the 'me to we' step up, we've recently gone live with the two incremental components required to unlock team functional amplification, which are: one, the collection and access to BRG's unstructured data—which is data without a predefined format, like transcripts.

Jim Clayton: This was a major unlock for individual amplification, myself included. To enable the me to we step up, we have recently gone live with the two incremental components required to unlock team functional amplification, which are, one, the collection and access to BRG's unstructured data, which is data without a predefined format, like a PowerPoint deck or a Zoom transcript, and two, a SaaS application deployment platform native to our infrastructure. With this complete stack in place, business users can now build AI-enabled applications for their teams and deploy them on our corporate platform, inheriting its security framework and scalability. Instead of teaching someone how to use AI, you are teaching them how to use a functional application to get real work done. Slide 25. Full disclosure, given the breadth of the change, I struggle with how best to help you understand the impact we are seeing.

Jim Clayton: To enable the me to we step up, we have recently gone live with the two incremental components required to unlock team functional amplification, which are, one, the collection and access to BRG's unstructured data, which is data without a predefined format, like a PowerPoint deck or a Zoom transcript, and two, a SaaS application deployment platform native to our infrastructure. With this complete stack in place, business users can now build AI-enabled applications for their teams and deploy them on our corporate platform, inheriting its security framework and scalability. Instead of teaching someone how to use AI, you are teaching them how to use a functional application to get real work done. Slide 25. Full disclosure, given the breadth of the change, I struggle with how best to help you understand the impact we are seeing.

Speaker #2: And two, a SaaS application deployment platform native to our infrastructure. With this complete stack in place, business users can now build AI-enabled applications for their teams and deploy them on our corporate platform, inheriting its security framework and scalability.

Speaker #2: Instead of teaching someone how to use AI, you're teaching them how to use a functional application to get real work done. Slide 25—full disclosure, given the breadth of the change, I struggle with how best to help you understand the impact we're seeing.

Speaker #2: At the half, I showed you what three weeks of work delivered for our global customer service team. This time, I'm going to start with the customer benefit and work my way back to how AI made it possible.

Jim Clayton: At the half, I showed you what 3 weeks of work delivered for our global customer service team. This time, I am going to start with the customer benefit and work my way back to how AI made it possible. Next month, we will be launching our NFC coffee experience, an extension of our solution offense. It delivers a premium customer experience across the entire ownership journey, from choosing the right machine at retail to the last cup of coffee you make with it at home. It starts in the store. Tap your phone on the tap and know card or the machine itself, and you get an engaging, customer-validated experience that walks you through the machine's key features and lets you compare across machines. No hunting for a sales associate or reading a spec sheet.

Speaker #2: Next month, we will be launching our NFC coffee experience and extension of our solution offense. It delivers a premium customer experience across the entire ownership journey, from choosing the right machine at retail to the last cup of coffee you make with it at home.

Speaker #2: It starts in the store. Tap your phone on the tap-and-go card reader of the machine, or the machine itself, and you get an engaging, customer-validated experience that walks you through the machine's key features and lets you compare across machines.

Speaker #2: No hunting for a sales associate or reading a spec sheet. Then at home, during unboxing, you'll find a Breville card with an embedded NFC tag, plus a backup tag on the machine itself.

Jim Clayton: Then at home, during unboxing, you will find a Breville card with an embedded NFC tag, plus a backup tag on the machine itself. Tap either one, and it walks you through setup and making your first coffee. It keeps working for you over the years that follow, finding your favorite coffee on beanz.com, creative coffee recipes, leveling up your skills, upgrading accessories, troubleshooting, and support. What you need, when you need it, from a single tap. This is what premium should feel like. So that is the customer experience. The question that matters for this part of the discussion is how did one team build all of that in 8 months? 17 machines, 17 languages across 40 countries. This is where the AI storyline intersects. Slide 26. Four SaaS AI applications, all running on the BRG platform, make this experience possible.

Speaker #2: Tap either one, and it walks you through setup and making your first coffee. And it keeps working for you over the years that follow.

Speaker #2: Finding your favorite coffee beans, creative coffee recipes, leveling up your skills, upgrading accessories, troubleshooting, and support—what you need, when you need it, from a single tap.

Speaker #2: This is what premium should feel like. So that's the customer experience. The question that matters for this part of the discussion is: how did one team build all of that in eight months?

Speaker #2: Seventeen machines, seventeen languages, across forty countries. This is where the AI storyline intersects. Slide 26—four SaaS AI applications, all running on the BRG platform—make this experience possible.

Jim Clayton: Slide 26. Four SaaS AI applications, all running on the BRG platform, make this experience possible. The UX design application designed and consumer-validated both the retail and at-home experiences. The recipe production application produced the 120 hero recipes and extended them to the 660 machine-specific variants. The translation application will transform this output into 17 languages, and the customer support application, when incorporated, will give consumers AI-enabled troubleshooting support. Project kickoff was last January. Go-live is September across the entire coffee range in 40 countries, with some at-home experience functionality being added over the next couple of months. For calibration, the most comparable program we have run is the Fast Track Barista Pack program in 2025. This pre-AI deployment took 14 months to take 8 markets live. AI has driven a step change in our operating velocity.

Speaker #2: The UX design consumer-validated both the retail and at-home experiences. The recipe production application produced the 120 hero recipes and extended them to the 660 machine-specific variants.

Jim Clayton: The UX design application designed and consumer-validated both the retail and at-home experiences. The recipe production application produced the 120 hero recipes and extended them to the 660 machine-specific variants. The translation application will transform this output into 17 languages, and the customer support application, when incorporated, will give consumers AI-enabled troubleshooting support. Project kickoff was last January. Go-live is September across the entire coffee range in 40 countries, with some at-home experience functionality being added over the next couple of months. For calibration, the most comparable program we have run is the Fast Track Barista Pack program in 2025. This pre-AI deployment took 14 months to take 8 markets live. AI has driven a step change in our operating velocity. Here is the me to we point. Three of the four applications were built by business users with no coding background who self-deployed the applications onto our platform.

Speaker #2: The translation application will transform this output into 17 languages, and the customer support application will incorporate it and provide consumers with AI-enabled troubleshooting support. Project kickoff was last January.

Speaker #2: Go live is September. Across the entire coffee range, in 40 countries, with some at-home experience functionality being added over the next couple of months.

Speaker #2: For calibration, the most comparable program we've run is the Fast Track Barista Pack program in 2025. This pre-AI deployment took 14 months to take eight markets live.

Speaker #2: AI has driven a step change in our operating velocity. And here's the 'me to we' point: three of the four applications were built by business users with no coding background, who self-deployed the applications onto our platform.

Jim Clayton: Here is the me to we point. Three of the four applications were built by business users with no coding background who self-deployed the applications onto our platform. Their teams aren't learning how to use AI. They are using a new application to get work done, which compounds because all future work runs through it. This is the ROI that derives from the productization of AI. Slide 27. Here is the magnitude of acceleration we are seeing from the recipe in UX applications. The 120 hero recipes that will make it into the NFC experience would have taken roughly 425 hours under the team's 2025 process. With the recipe application, they produced the 660 variant recipes in 67 hours.

Speaker #2: Their teams aren't learning how to use AI. They're using a new application to get work done, which compounds, because all future work runs through it.

Jim Clayton: Their teams aren't learning how to use AI. They are using a new application to get work done, which compounds because all future work runs through it. This is the ROI that derives from the productization of AI. Slide 27. Here is the magnitude of acceleration we are seeing from the recipe in UX applications. The 120 hero recipes that will make it into the NFC experience would have taken roughly 425 hours under the team's 2025 process. With the recipe application, they produced the 660 variant recipes in 67 hours. That is a 6.3x improvement the first time they used the app. Couple it with a translation application pushing 660 recipes into 17 languages, and the benefit will go exponential. The UX design application is broader.

Speaker #2: This is the ROI that derives from the productization of AI. Slide 27—here's the magnitude of acceleration we're seeing from the recipe and UX applications.

Speaker #2: The 120 hero recipes that will make it into the NFC experience would have taken roughly 425 hours under the team's 2025 process. With the recipe application, they produced the 660 variant recipes in 67 hours.

Speaker #2: That's a 6.3x improvement the first time they used the app. Couple that with the translation application, which is pushing 660 recipes into 17 languages, and the benefit will go exponential.

Jim Clayton: That is a 6.3x improvement the first time they used the app. Couple it with a translation application pushing 660 recipes into 17 languages, and the benefit will go exponential. The UX design application is broader. That team designs product experiences like the Oracle Dual Boiler touchscreen, application experiences like Breville+ and the NFC program, and our websites across five brands in 17 languages. With this new application, they are developing consumer-tested prototypes five times faster and handing off to the firmware team two to three months earlier. That handoff drives ROI leverage. It shortens the development cycle of the product itself, which means products with a heavy UX component get to market faster, accelerating revenue.

Speaker #2: The UX design application is broader. That team designs product experiences like the Oracle Dual Boiler touchscreen, application experiences like Breville Plus, and the NFC program.

Jim Clayton: That team designs product experiences like the Oracle Dual Boiler touchscreen, application experiences like Breville+ and the NFC program, and our websites across five brands in 17 languages. With this new application, they are developing consumer-tested prototypes five times faster and handing off to the firmware team two to three months earlier. That handoff drives ROI leverage. It shortens the development cycle of the product itself, which means products with a heavy UX component get to market faster, accelerating revenue. Back up to the flywheel I opened with, NPD to GTM to geography. The NFC program and the supporting AI applications touch all three, and tokens are enabling the same team to cover more ground faster. While we are on the front edge of our progression from me to we, the compounding is already visible. Every application we deploy makes the next project faster and better permanently.

Speaker #2: And our websites span five brands and 17 languages. With this new application, they are developing consumer-tested prototypes five times faster and handing off to the firmware team two to three months earlier.

Speaker #2: That handoff drives ROI leverage. It shortens the development cycle of the product itself, which means products with a heavy UX component get to market faster, accelerating revenue.

Speaker #2: Back up to the flywheel I opened with: NPD to GTM to geography. The NFC program and the supporting AI applications touch all three, and tokens are enabling the same team to cover more ground, faster.

Jim Clayton: Back up to the flywheel I opened with, NPD to GTM to geography. The NFC program and the supporting AI applications touch all three, and tokens are enabling the same team to cover more ground faster. While we are on the front edge of our progression from me to we, the compounding is already visible. Every application we deploy makes the next project faster and better permanently. I've said that with this enterprise transformation, you eat the elephant one bite at a time. With the requisite infrastructure deployed, we are now doing this at pace. Rolling all of this execution together, we now have a geographically diversified manufacturing base, a compelling premium channel structure in the US.

Speaker #2: While we are on the front edge of our progression from 'me' to 'we,' the compounding is already visible. Every application we deploy makes the next project faster and better, permanently.

Speaker #2: I've said that with this enterprise transformation, you eat the elephant one bite at a time. With the requisite infrastructure deployed, we are now doing this at pace.

Jim Clayton: I've said that with this enterprise transformation, you eat the elephant one bite at a time. With the requisite infrastructure deployed, we are now doing this at pace. Rolling all of this execution together, we now have a geographically diversified manufacturing base, a compelling premium channel structure in the US. Our new markets are firing on all cylinders, and we have continued innovation in NPD and an expanding solution footprint with beanz.com and Fast Track in the Netherlands and the global NFC coffee experience, all of which are being accelerated by the AI transformation program. As always, there is much more to do, but I continue to be bullish about the hand we are playing. With that, I'll hand back to the operator for questions.

Speaker #2: Rolling all of this execution together, we now have a geographically diversified manufacturing base, a compelling premium channel structure in the US, our new markets are firing on all cylinders, and we have continued innovation in NPD and an expanding solution footprint with Beans and Fast Track in the Netherlands and the global NFC coffee experience, all of which are being accelerated by the AI transformation program.

Jim Clayton: Our new markets are firing on all cylinders, and we have continued innovation in NPD and an expanding solution footprint with beanz.com and Fast Track in the Netherlands and the global NFC coffee experience, all of which are being accelerated by the AI transformation program. As always, there is much more to do, but I continue to be bullish about the hand we are playing. With that, I'll hand back to the operator for questions.

Speaker #2: As always, there is much more to do, but I continue to be bullish about the hand we are playing. With that, I'll hand back to the operator for questions.

Speaker #1: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.

Operator 2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. We kindly request that each participant limit their questions to one per turn. Please refrain from asking multi-part questions in order to ensure everyone has the opportunity to participate. If you have additional questions, please rejoin the queue. Your first question comes from Shaun Cousins with UBS. Please go ahead.

Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. We kindly request that each participant limit their questions to one per turn. Please refrain from asking multi-part questions in order to ensure everyone has the opportunity to participate. If you have additional questions, please rejoin the queue. Your first question comes from Shaun Cousins with UBS. Please go ahead.

Speaker #2: Thank you.

Speaker #1: If you're on speakerphone, please pick up the handset to ask your question. We kindly request that each participant limit their questions to one per turn.

Speaker #1: Please refrain from asking multi-part questions to ensure everyone has the opportunity to participate. If you have additional questions, please rejoin the queue.

Speaker #1: Your first question comes from Sean Cousins with UBS. Please go ahead.

Speaker #3: Thanks. Good morning, Jim and Martin. My question is just around the revenue uplift in '26 from the store-in-store with Best Buy. Could you just discuss the selling benefit that you got from those 300 Best Buy stores?

Shaun Cousins: Thanks. Good morning, Jim and Martin. My question is just around the revenue uplift in 2026 from the store-in-store with Best Buy. Could you just discuss the sell-in benefit that you got from those 300 Best Buy stores? Was that material to growth? And how do you cycle that in 2027? Or does it sort of annualize a little bit more in 2027 plus?

Speaker #3: Was that material to growth? And how do you cycle that in 2027, or does it sort of annualize a little bit more in '27 plus?

Speaker #2: So I think it's some of it. What I think is really driving the step up is actually the sell-out, in the sense where you get the sell-in.

Jim Clayton: I think it's some of it. What I think what's really driving the step up is actually the sell out, in a sense where you get the sell in. I think the difference in, whatever, the H1 of 2027 is those store-in-stores didn't go till November. Effectively from July to November, you don't have a prior year.

Speaker #2: So, I think the difference in whatever the first half of '27 is, those store-in-stores didn't go until November. So, effectively, from July to November, you don't have a prior year.

Speaker #3: So we will get annualization onto that piece, yeah.

Martin Nicholas: We will get annualization onto that piece, yeah.

Speaker #2: You know what I mean? So you have the sell-in that happened pre-November, but now you have the July-to-November period this year, where you then catch up and you go on a forward run rate in November.

Jim Clayton: You know what I mean? You have the sell in that happened pre-November.

Martin Nicholas: Yeah.

Jim Clayton: Now you have the July to November period this year where you then catch up, and you go on a forward run rate in November. I wouldn't say it wasn't, not material. Like you'll take it, but it's not what you are.

Speaker #2: So I wouldn't say it was not material. You'll take it, but it's not what drives.

Speaker #3: So the annualization benefit will be there, but I think the question is more around how do you feel those stores are going. Are we pleased with the implementation?

Martin Nicholas: The annualization benefit will be there, but I think the question is more around how do you feel those stores are going? Are we pleased with the implementation?

Speaker #2: Yeah, I mean, the real trick is, is it working? And the short version, which I said in the script, without disclosing something I shouldn't, is it's going really well.

Jim Clayton: Yeah, I mean, the real trick is it working? And the short version, which I said in the script without disclosing something I shouldn't, is it's going really well, which is why Best Buy is asking us to expand.

Speaker #2: Which is why Best Buy is asking us to expand.

Speaker #1: Your next question comes from Craig Wolford with MST Marquee. Please go ahead.

Operator 2: Your next question comes from Craig Woolford with MST Marquee. Please go ahead.

Operator: Your next question comes from Craig Woolford with MST Marquee. Please go ahead.

Speaker #3: Good morning, Jim and Martin. Can I just clarify the tariff impact? You've obviously highlighted a negligible impact on the P&L—that makes sense. But there are two numbers that have been disclosed.

Craig Woolford: Good morning, Jim and Martin. Can I just clarify the tariff impact? You have obviously highlighted a negligible impact on the P&L. That makes sense. But there is two numbers that have been disclosed. One was the cash flow refund of AUD 59.6 million, and then somewhere buried in the annual report, there is a provision amount in there of, I think it was something like AUD 55 million.

Speaker #3: One was the cash flow refund of $59.6 million. And then, somewhere buried in the annual report, there's a provision amount in there of, I think it was something like $55 million.

Martin Nicholas: Yeah.

Speaker #3: Please clarify that.

Craig Woolford: Can you just clarify that?

Speaker #2: Yeah, so happy to speak to tariffs. It hasn't been an easy year with tariffs. There's been volatility all over the place. And probably the headline, Craig, is I'm genuinely proud of how we've managed this robustly, collaboratively, and critically, on a net basis with our value chain.

Martin Nicholas: Yeah. So happy to speak to tariffs. It hasn't been an easy year with tariffs. There's been volatility all over the place. Probably the headline, because I'm genuinely proud of how we've managed this robustly, collaboratively, and critically on a net basis with our value chain. So when we paid tariffs, our value chain, our supply chain lent in to help manage the cost imposed in all of our interests, and we're treating the refund with the same net approach. So we've provided accordingly, and that's the provision you see in note 6 in our accounts. You're correct, we did receive AUD 59.6 million in. So they're not quite a one-for-one match, but they're pretty close, and therefore net-net on FY26, the profit impact was minimal.

Speaker #2: So when we paid tariffs, our value chain—our supply chain—leaned in to help manage the cost impost in all of our interests. And we're treating the refund with the same net approach.

Speaker #2: So we've provided accordingly, and that's the provision you see in Note 6 in our accounts. And you're correct, we did receive $59.6 million in.

Speaker #2: So they're not quite a one-for-one match, but they're pretty close. And therefore, net-net on FY26, the profit impact was minimal.

Speaker #1: Your next question comes from Apov Segal with Jordan. Please go ahead.

Operator 2: Your next question comes from Apoorv Sehgal with Jarden. Please go ahead.

Operator: Your next question comes from Apoorv Sehgal with Jarden. Please go ahead.

Speaker #3: Hey, good morning, Jim and Martin. My question is about gross margins. Can we talk about the gross margin trajectory into FY27 compared to the second half '26 outcome of 36.8%?

Apoorv Sehgal: Hey, good morning, Jim and Martin. My question is about gross margins. Can we talk about the gross margin trajectory into FY27 compared?

Martin Nicholas: Yeah

Apoorv Sehgal: to the H2 2026 outcome of 36.8%? I think one key upcoming tailwind seems to be the opportunity to localize component sourcing, which is something you discussed at the H1 result. I think back then in February, you were saying that localization opportunity was more of an FY26 story. I guess net-net, if we assume no further changes in the US tariff environment or the oil-related supply chain backdrop, would it be fair to expect FY27 gross margins to potentially move a bit higher versus that H2 2026 outcome of 36.8?

Speaker #3: I think one key, sort of upcoming tailwind, seems to be the opportunity to localize component sourcing, which is something you discussed at the first half results.

Speaker #3: I think back then, in February, you were saying that the localization opportunity was more of an FY27 story. So, I guess, further changes in the US tariff environment or the oil-related...

Speaker #1: Supply chain backdrop. Would it be fair to expect FY27 gross margins to potentially move a bit higher? First, that's a second half '26 outcome of 36.8%.

Speaker #2: A good question , Paul . There certainly is some tailwinds . There's certainly some company specific tailwinds , the first of which is we we finished the half at 36.8 .

Martin Nicholas: Good question, Apoorv. There are certainly some tailwinds. There are certainly some company-specific tailwinds. The first of which is we finished the half at 36.8. The second of which is we have now got our manufacturing base just where we want it. That has given us the benefit at the moment of slightly lower tariffs. The mix of tariffs is slightly in our favor, certainly versus H1 last year, even versus H2 as that mix has moved towards 100% from the new sites. I guess the third tailwind that you have got going forward is the localization and the efficiencies of those new plants. So as they get up to full speed, we get a benefit from that. As we get localization, which is progressing well, we get a benefit from that of not moving parts from China and then manufacturing locally.

Speaker #2: The second of which is we've now got our manufacturing base just where we want it. And that's given us the benefit at the moment of slightly lower tariffs; the mix of tariffs is slightly in our favour.

Speaker #2: Certainly, versus the first half last year, even versus second half, as that mix has moved towards 100% from the new sites.

Speaker #2: And I guess the third headwind , sorry , the third third tailwind that you've got going forward is the localisation and the efficiencies of those new plants .

Speaker #2: So as they get up to full speed , we get benefit from that . And as we get localisation , which is progressing well , we get a benefit from that of not moving parts from China .

Martin Nicholas: As we get localization, which is progressing well, we get a benefit from that of not moving parts from China and then manufacturing locally. The other point that is important about that is it also gives us the locally contributed content. So if rules and tariffs start changing around what defines something as local, we are moving on the right side of that equation. So there are definitely tailwinds in our favor. Headwinds, a little bit more uncertain. The Middle East situation and oil prices remains unknown, could get worse, could get better.

Speaker #2: And then manufacturing locally. The other point that's important about that is it also gives us the locally contributed content. So if rules and tariffs start changing around what defines something as local, we're moving on the right side of that equation.

Martin Nicholas: The other point that is important about that is it also gives us the locally contributed content. So if rules and tariffs start changing around what defines something as local, we are moving on the right side of that equation. So there are definitely tailwinds in our favor. Headwinds, a little bit more uncertain. The Middle East situation and oil prices remains unknown, could get worse, could get better. As I said in my part of the speech, tariff rates at the moment, reasonably happy with them, but there is some thought that they would move higher in the H2. So yes, we have got tailwinds against that 36.8, which if you like, are in our hands. Then we have got external possible headwinds of the oil price and of tariff rates pushing against us, and then we will see how we balance out.

Speaker #2: So there's definitely tailwinds in our favor. Headwinds are a little bit more uncertain. You know, the Middle East situation and oil prices remain unknown.

Speaker #2: Could get worse could get better . And as I said in my speech , in my part of the speech , tariff rates at the moment , reasonably happy with them , but there is some thought that they would move higher in the second half .

Martin Nicholas: As I said in my part of the speech, tariff rates at the moment, reasonably happy with them, but there is some thought that they would move higher in the H2. So yes, we have got tailwinds against that 36.8, which if you like, are in our hands. Then we have got external possible headwinds of the oil price and of tariff rates pushing against us, and then we will see how we balance out.

Speaker #2: So yes , we've got tailwinds against that 36.8 , which , if you like , are in our hands . And then we've got external possible headwinds of the oil price and of tariff rates pushing against us .

Speaker #2: And then we'll see how we balance out.

Speaker #3: Your next question comes from Sean Su with CLSA. Please go ahead.

Operator 2: Your next question comes from Shaun Cousins with CLSA. Please go ahead.

Operator: Your next question comes from Shaun Cousins with CLSA. Please go ahead.

Speaker #4: Morning, team. Thanks a lot for taking my question. My question is around the yarn market, or what you call the emerging market here.

[Analyst] (CLSA): Morning, team. Thanks a lot for taking my question. My question is around the young market or you call it emerging market here. It's good to see the 74% growth for the full year FY2026. I'm just curious to know what's the revenue growth in the H2 2026, and also is China and the Middle East looks like it's contributing to the biggest growth here? Thank you.

Sean Xu: Morning, team. Thanks a lot for taking my question. My question is around the young market or you call it emerging market here. It's good to see the 74% growth for the full year FY2026. I'm just curious to know what's the revenue growth in the H2 2026, and also is China and the Middle East looks like it's contributing to the biggest growth here? Thank you.

Speaker #4: It's good to see the 74% growth for the full year FY26. I'm just curious to know—what's the revenue growth in the second half of '26?

Speaker #4: And also is China. The Middle East looks like it's contributing to the biggest growth here. Thank you.

Speaker #2: The growth in the second half was better than in the first half. I can give you that, Sean. But I think Jim can talk more broadly to how we're performing in those markets.

Martin Nicholas: The growth in the H2 was better than in the H1. I can give you that, Shaun, but I think Jim can talk more broadly to how we're performing in those markets.

Speaker #5: I mean honestly , all four of them , they have different levels of maturity . You know , in the sense that the Middle East and China have just posted their first year .

Jim Clayton: Honestly, all four of them, they have different levels of maturity, in the sense that the Middle East and China have just posted their first year. I think both of them did exceptionally well and continue to. I find the Middle East most interesting given all the activity that's been going on there. Mexico and Korea went a little bit earlier, but they're still firing as well. It really is all. I look at all four of them together in a sense, from a construct of magnitude. Korea's been on a run since we got there and doesn't seem to be slowing down. I think all of them are doing well. I think this bit of a step up that we see is a function of, I guess, three things. One, we're not eating the cutover cost for one.

Speaker #5: I think both of them did exceptionally well . And continue to . I find the Middle East most interesting , given all the activity that's been been going on there And Mexico and Korea , you know , went a little bit earlier .

Speaker #5: But they're still firing as well . So , you know , it really is all I look at all four of them together in a sense , you know , from a constructive magnitude .

Speaker #5: Korea has been on a run since since we got there . And , you know , it doesn't seem to be slowing down .

Speaker #5: So I think all of them are doing well . I think this this bit of a step up that we see is a function of , I guess , three things .

Jim Clayton: I think this bit of a step up that we see is a function of, I guess, three things. One, we're not eating the cutover cost for one. You now have China and the Middle East at the same time coming into that group, and both China and Middle East came out very strong in their first year. You just wrap all that together. Do I think it's going to hold 74% for the next 10 years? No. But

Speaker #5: One, we're not eating the cutover costs for one, and you now have China and the Middle East at the same time.

Jim Clayton: You now have China and the Middle East at the same time coming into that group, and both China and Middle East came out very strong in their first year. You just wrap all that together. Do I think it's going to hold 74% for the next 10 years? No. But

Speaker #5: You know , coming in to that group . And both the China , China and Middle East came out very strong in their first year .

Speaker #5: So you just wrap all that together. You know, I think it's going to hold 74, you know, for the next ten years.

Speaker #5: No , but but it will be getting bigger , faster . Yeah . And it's not they're not growing just a little bit faster than the enterprise .

Martin Nicholas: It will be bigger.

Jim Clayton: It's getting bigger faster.

Martin Nicholas: It will be bigger. Yeah.

Jim Clayton: They're not growing just a little bit faster than the enterprise. They're growing a lot faster than the enterprise. So they will fight above their weight as we move forward.

Speaker #5: They're growing a lot faster than the enterprise, so they will punch above their weight as we move forward.

Speaker #3: Your next question comes from Sam Hadad with Petra Capital. Please go ahead.

Operator 2: Your next question comes from Sam Haddad with Petra Capital. Please go ahead.

Operator: Your next question comes from Sam Haddad with Petra Capital. Please go ahead.

Speaker #6: Hi , Jim . Hi , Martin . Congratulations on the strong cash flow result just on the on the supplier . In terms of suppliers , what they see in terms of supply of raw materials , availability of raw materials , particularly on the back of the flare up of the Iran war .

Sam Haddad: Hi, Jim. Hi, Martin. Congratulations on the strong cash flow result. Just on the supplier, in terms of suppliers, what we have seen in terms of supply of raw materials, availability of raw materials.

Martin Nicholas: Yeah

Sam Haddad: Particularly on the back of the flare up of the Iran war. I understand it moved into sort of like an auction-like market in plastic resins. What are you seeing right now, and how far forward have you secured supply, both on plastic resin? Also, just talk about stainless steel and what the backdrop looks like there as well. Thank you.

Speaker #6: I understand it moved into sort of like an auction-like market in plastic resins. What are you seeing right now, and how far forward have you secured supply?

Speaker #6: Both on plastic and also just talk about stainless steel in that what the what , what the backdrop looks like there as well .

Speaker #6: Thank you

Speaker #2: Okay . Thanks , Sam . Yeah , In terms of the longer the Middle East situation goes on , the tighter some of the materials are getting .

Martin Nicholas: Okay. Thanks, Sam. You are right in terms of the longer the Middle East situation goes on, the tighter some of the materials are getting. We have deliberately bought forward in plastic resins, substantially forward, which we will find out in the fullness of time if that was a good move or a bad move. It is a good move in terms of securing supply. We will see what pricing does during the year. We are starting to see the same in stainless steel. Jim, I do not know if you want to talk about how we work with chief operating officer and how that was pushed through.

Speaker #2: We have deliberately brought forward, in plastic resins, substantially forward, which we'll find out in the fullness of time if that was a good move or a bad move.

Speaker #2: It's a good move in terms of securing supply. We'll see what price does during the year, and we're starting to see the same in stainless steel.

Speaker #2: But Jim, I don't know if you want to talk about how we work with the Chief Operating Officer and, you know, how that was pushed through.

Speaker #5: Yeah . Look , we've whether it's Covid or everything else that happened , right ? All of these volatility things that hit our supply chain because we plan every single SKU out for 104 weeks , rolling it allows us to confidently is maybe the word I would use make forward decisions .

Jim Clayton: Yeah, look, whether it is COVID or everything else that happened, right? All of these volatility things that hit our supply chain, because we plan every single SKU out for 104 weeks rolling, it allows us to confidently, is maybe the word I would use, make forward decisions. We, on the resin front, we took two steps, which is, when things kicked off, almost immediately

Speaker #5: And so we on the resin front , we took two steps , which is when when things kicked off almost immediately . Yeah , we we moved on getting physical possession that took us through roughly about January , February .

Martin Nicholas: Yeah

Jim Clayton: we moved on getting physical possession. That took us through roughly about January, February.

Jim Clayton: We moved on getting physical possession. That took us through roughly about January, February.

Speaker #5: Yeah. First time was kind of round one. And then when we got into June, I signed off on the rest of '27.

Martin Nicholas: Yeah.

Jim Clayton: Was kind of round one. When we got into June, I signed off on the rest of 2027. I think within the next, I do not know, month and some change, plastic resin will not be relevant in a sense in that conversation other than on that 2020 hindsight of how did Martin do on price. It would suggest that right now it looks like it was a good decision. It is a good decision, period. Then it is just dollars and cents after that.

Speaker #5: So I think within the next , I don't know , month and some change plastic resin will not be relevant . You know , in a sense in that in that conversation , other than , you know , on the 2020 hindsight of how did Martin do on price ?

Speaker #5: But it would suggest that it's right now , it looks like it was a good decision . It's a good decision period . Then it's just dollars and cents after that .

Speaker #2: Yeah , I feel good about security supply . Yeah , it's one of the minor minor headwinds in terms of yes , that plastic resin in FY 27 is going to be a bit more expensive than we paid in 26 , but I'd rather have it in the barn .

Martin Nicholas: Yeah, I feel good about security of supply.

Jim Clayton: Yeah.

Martin Nicholas: It is one of the minor headwinds in terms of, yes, that plastic resin in FY27 is going to be a bit more expensive than we paid in 2026, but I would rather have it in the barn.

Speaker #7: Yep

Jim Clayton: Yep.

Speaker #2: Okay .

Martin Nicholas: Okay.

Speaker #7: I think .

Speaker #3: Your next question comes from Tim Lawson with Macquarie. Please go ahead.

Operator 2: Your next question comes from Tim Lawson with Macquarie. Please go ahead.

Operator: Your next question comes from Tim Lawson with Macquarie. Please go ahead.

Speaker #8: Hi , Jim Martin , thanks for taking my question . Just in terms of the new markets , obviously , principally China and EMEA , how material was that performance at 74% to the overall group ?

Tim Lawson: Hi, Jim and Martin. Thanks for taking my question. Just in terms of new markets, principally China and EMEA, how material was that performance at 74% of the overall group? Should we anticipate any other new direct markets impacting sales in the outlook?

Speaker #8: And should we anticipate any other new direct markets impacting sales in the outlook?

Speaker #5: So, how material is it? I haven't run the number.

Jim Clayton: How material is it? Actually, I have not run the number.

Speaker #7: Yeah .

Martin Nicholas: Yeah. I would be using the words not material yet, Tim, but more material than it was last year. It is growing the whole time. Did it help us hit the 9.7 constant currency? Yes, it was definitely a help. Is it big enough to yet compensate for other major markets? Not yet, but potential is exciting. But in terms of new markets, Jim?

Speaker #2: I would be using the words 'not material yet,' Tim. But it's more material than it was last year, so it's growing the whole time.

Speaker #2: So, did it help us hit the 9.7% constant currency? Yes, it would definitely help. Is it big enough yet to compensate for other major markets?

Speaker #2: Not yet, but the potential is exciting. But in terms of new markets, Jim...

Speaker #5: Yeah . So the we , we continue to work on that vector as we always do , whether that hits in 27 or 28 , it's a little early to call , but new markets will be coming online in the next two years for sure .

Jim Clayton: Yeah. We continue to work on that vector as we always do. Whether that hits in 2027 or 2028, it is a little early to call. But new markets will be coming online, in the next two years for sure.

Speaker #7: Yeah , exactly

Martin Nicholas: Yeah. Sure.

Speaker #3: Your next question comes from Tom Kierath with Barrenjoey. Please go ahead.

Operator 2: Your next question comes from Tom Kierath for Barrenjoey. Please go ahead.

Operator: Your next question comes from Tom Kierath for Barrenjoey. Please go ahead.

Speaker #9: Oh , morning , Jim . Morning , Martin . You guys always kind of target double digit Ebit growth . So the 10% this year , you know , you're saying , well , this year just delivered one .

Tom Kierath: Morning, Jim. Morning, Martin. You guys always kind of target double-digit EBIT growth, so the 10%. This year, you are saying, well, this year you have delivered one. If I read out from February your guidance, you say here, "Given the magnitude of US tariff increases our value chain is absorbing in 2026, we are going to do lower growth." But as it turns out, to answer to Craig's question, you did not actually absorb higher tariff costs. You got that refund. So I am just trying to work out why earnings growth was not your usual 10%, or is it something that you are kind of going to catch up potentially over the next few years?

Speaker #9: And if I read out from February, your guidance— you say here, given the magnitude of US tariff increases, our value chain is absorbing…

Speaker #9: In 26 . You know , we're going to do lower growth . But as it turns out , to answer to Craig's question , you didn't actually absorb higher tariff costs .

Speaker #9: You got that refund. So I'm just trying to work out why earnings growth wasn't your usual 10%, or is it something that you're kind of going to catch up on potentially over the next few years?

Speaker #2: I think thank you Tom . A couple of a couple of things on that . I tariffs is one of the tariffs that have been faced in the year and certainly the neutralisation of those doesn't turn 26 into a low cost year .

Martin Nicholas: Thank you, Tom. A couple of things on that. IEEPA tariffs is one of the tariffs that have been faced in the year, and certainly, the neutralization of those does not turn 2026 into a low-cost year. So we also had steel tariffs, and then applying to all steel, then to the total value of the goods. We had global tariffs introduced in April when IEEPA rolled off. We had the small matter of transitional costs as we were rapidly diversifying our manufacturing base from China to outside of China. So yes, IEEPA tariffs late in the day were neutralized, but it did not turn us into a low-cost year. But what you did see as we exited the H2 was improving gross margins. So you are seeing some of the benefit of a lower tariff position as we exited the half.

Speaker #2: So we also had steel tariffs, and then applying to all steel, then to the total value of the goods. We had global tariffs introduced in April.

Speaker #2: When I put 'rolled off,' and we had the small matter of transitional costs as we were rapidly diversifying our manufacturing base from China to outside of China.

Speaker #2: So yes , Iipa tariffs late in the day were neutralized , but it didn't turn us into a low cost year . But what you did see as we exited the second half was improving gross margins .

Speaker #2: So you are seeing some of the benefit of a lower tariff position as we exited the half . So as I sit and look at FY 26 , it certainly wasn't a low cost year .

Martin Nicholas: So you are seeing some of the benefit of a lower tariff position as we exited the half. So as I sit and look at FY26, it certainly was not a low-cost year. It was a high-cost year. That is why, as we kept investing in the growth engines of our business, we delivered a lower EBIT growth than in inverted commas normal. As we move into next year, yes, let us see if we move back to a more normal cadence.

Martin Nicholas: So as I sit and look at FY26, it certainly was not a low-cost year. It was a high-cost year. That is why, as we kept investing in the growth engines of our business, we delivered a lower EBIT growth than in inverted commas normal. As we move into next year, yes, let us see if we move back to a more normal cadence.

Speaker #2: It was a high-cost year. That's why, as we kept investing in the growth engines of our business, we delivered a lower EBIT growth than in inverted commas.

Speaker #2: Normal. And as we move into next year, yes, let's see if we move back to a more normal cadence.

Speaker #3: Your next question comes from James Lee with Goldman Sachs . Please go ahead James Lee , your line is now live . Please proceed with your question .

Operator 2: Your next question comes from James Leigh with Goldman Sachs. Please go ahead. James Leigh, your line is now live. Please proceed with your question.

Operator: Your next question comes from James Leigh with Goldman Sachs. Please go ahead. James Leigh, your line is now live. Please proceed with your question.

Speaker #10: Hello . Can you hear me ? Yes . Thanks for taking my questions , guys . My questions are around the US consumer .

James Leigh: Hello, can you hear me?

Martin Nicholas: Yes.

James Leigh: Thanks for taking my questions, guys. My question is around the US consumer. I note we had an earlier Amazon Prime Day this year. What sort of reordering activity have we seen post that day? Any comments on the US consumer at the start of 2027?

Speaker #10: I know we had an earlier Amazon Prime Day this year. What sort of reordering activity have we seen post that day? And, yeah.

Speaker #10: Any comments on the US consumer at the start, for the start of '27?

Speaker #5: I mean, you know, I'd say the same thing I said at the half, which is: the premium consumer remains resilient.

Jim Clayton: I would say the same thing I said at the half, which is the premium consumer remains resilient, maybe is the way I would describe looking at the US. I know we are talking about 2026, but we are all of one month into 2027. I would say we are seeing the trends of 2026 carrying to 2027. So far the premium consumer continues to do well and both coffee and cooking seem to have a tailwind behind them.

Speaker #5: Maybe as the is the way I would describe , you know , looking at the US , you know , if I , I know we're talking about 26 , but you know , we're all of one month into 27 , I would say we're seeing the trends of of .

Speaker #5: 26 carrying to 27 so so far , the premium consumer continues to , to do well . And . And both coffee and cooking seem to have a tailwind behind .

Speaker #7: Them

Speaker #3: Your next question comes from Wei Wang Chen with RBC Capital Markets. Please go ahead.

Operator 2: Your next question comes from Wei Chen with RBC Capital Markets. Please go ahead.

Operator: Your next question comes from Wei Chen with RBC Capital Markets. Please go ahead.

Speaker #11: Hi guys. Just on the value provision of $55.2, just wanting to double check that the difference between the money and the $59.6, and that $55.2 was the P&L impact for this year.

Wei Chen: Hi, guys. Just on the value and provision of AUD 55.2, just wondering to double-check that the difference between the money in the AUD 59.6 and that AUD 55.2 was the P&L impact for this year. Also just what the confidence level you have in that number that you have provided for. Are these obligations contractually binding? Is there a scenario whereby you might need to reverse these provisions?

Wei-Weng Chen: Hi, guys. Just on the value and provision of AUD 55.2, just wondering to double-check that the difference between the money in the AUD 59.6 and that AUD 55.2 was the P&L impact for this year. Also just what the confidence level you have in that number that you have provided for. Are these obligations contractually binding? Is there a scenario whereby you might need to reverse these provisions?

Speaker #11: And also, just kind of, what is the confidence level you have in that number you've provided? Are these obligations contractually sort of binding?

Speaker #11: And is there a scenario whereby you might need to reverse these provisions?

Speaker #2: Well, look, they're absolutely my best estimate of the liability that exists today, or else it wouldn't be in our balance sheet.

Martin Nicholas: Well, look, they are absolutely my best estimate of the liability that exists today, or else it would not be in our balance sheet. Yes, if you just take those two binary numbers, the difference between those two, one was a cost to P&L, one was a benefit to P&L. So yes, you would get a net number coming out at the end. But, yeah, the provision represents the fact that when tariffs came on, we shared the burden. When tariffs come off, we would expect to share the refunds.

Speaker #2: And yet , if you just take those two binary numbers , that the difference between those two one was a cost to PNL one was a benefit to to PNL .

Speaker #2: So yes , you would get a . Net number coming out at the end , but yeah , the , the provision represents the fact .

Speaker #2: That when tariffs came on, we shared the burden. When tariffs come off, we would expect to share the refund.

Speaker #11: And are they contractually obliged?

Wei Chen: Are they contractually obliged?

Wei-Weng Chen: Are they contractually obliged?

Speaker #2: Contractually, no. It's more a recognition of a commercial reality of how tariffs were managed on a collaborative basis, all.

Martin Nicholas: Contractually, no. It is more a recognition of a commercial reality of how tariffs were managed on a collaborative basis all year.

Speaker #7: Year

Speaker #3: Your next question comes from Jared Mino with Morgans. Please go ahead.

Operator 2: Your next question comes from Jarrod Del-Giacco with Morgans. Please go ahead.

Operator: Your next question comes from Jarrod Del-Giacco with Morgans. Please go ahead.

Speaker #12: Hi, guys. Thanks for taking my question. I'm just trying to understand the composition of the half. I think we've seen some pretty strong updates from peers through the second quarter.

Jarrod Del-Giacco: Hi, guys. Thanks for taking my question. Just trying to understand the composition of the H1. I think we've seen some pretty strong updates from peers through the Q2. I'm trying to understand, how you guys performed relative to that. In terms of market share, how would you view your performance through the Q2 in terms of holding main or holding growing or potentially losing some?

Jared Gelsomino: Hi, guys. Thanks for taking my question. Just trying to understand the composition of the H1. I think we've seen some pretty strong updates from peers through the Q2. I'm trying to understand, how you guys performed relative to that. In terms of market share, how would you view your performance through the Q2 in terms of holding main or holding growing or potentially losing some?

Speaker #12: I'm just trying to understand how you guys , you know , performed relative to that . I mean , in terms of market share , how would you view your performance in the second quarter in terms of holding or holding growing or potentially losing some

Speaker #5: Second quarter ? You mean ? I think you mean the second half ? I mean , so we we saw a step up in the second half .

Jim Clayton: Q2, I think you mean the H2. So we saw a step up H2.

Speaker #2: The second half of the second half.

Martin Nicholas: The H2 of the H2, I think was the question. Did you strengthen through the H2?

Speaker #5: Yeah. The second half of the second half.

Speaker #7: Yeah . Yeah .

Jim Clayton: Oh, the second half of the H2.

Martin Nicholas: Yeah.

Speaker #5: I don't look at the second half of the second half . If I look at the second half as a whole . Look I think I mean my read is if you look across the whole subset you you come up with the same kind of storyline that we've had for years , right ?

Jim Clayton: I do not look at the second half of the H2. If I look at the H2 as a whole, my read is if you look across the whole subset, you come up with the same kind of storyline that we have had for years, right? Which is there is a coffee tailwind. Everybody in the coffee space benefits from that tailwind and rising tide lifts all boats. So within, we have different, depending on who you pick, we all kind of have our parts of the market in which we play. And it looks, my read is that that tailwind is robust and wide. So I think everyone is doing well, which is what you want to see.

Speaker #5: Which is there is a coffee tailwind . Everybody in the coffee space benefits from that tailwind and rising tide lifts all boats . So within we have different depending on who you pick , we all kind of have our parts of the market in which we play .

Speaker #5: And , and I , it looks , you know , my read is that that that tailwind is robust and wide . So I think everyone's doing well , which is what you want to see

Speaker #3: Your next question comes from Olivier Cullen with E&P Financial Group. Please go ahead.

Operator 2: Your next question comes from Olivier Coulon with E&P Financial Group. Please go ahead.

Operator: Your next question comes from Olivier Coulon with E&P Financial Group. Please go ahead.

Speaker #13: Arjun , just on the contribution from the distributor pockets obviously lagged a bit . Some of those quite mature . But is it fair to say that they're probably being a bit more cautious in terms of investing in selling and inventory levels , then , then certainly you have .

Olivier Coulon: Hi, James. Just on the contribution from the distributor markets, obviously lagged a bit. Some of those are quite mature, but is it fair to say that they are probably being a bit more cautious in terms of investing in sell-in and inventory levels than certainly you have?

Speaker #5: I honestly , Olivia , it isn't that it's actually just how long that cycle is , how long their lead time is with us .

Jim Clayton: Honestly, Olivier, it isn't that. It's actually just how long that cycle is, how long their lead time is with us. In a sense, they have to guess forward. In a way, it's almost like if I pick on China and the team delivered 7.1 times the revenue of our distributor, why didn't the distributor deliver that the year before? Because obviously the market was there. The distributor market is what I would call relatively inefficient, and has been since 2015, which is one of the reasons why we go through the conversion. It's just a function of how long their lead times are in ordering from us. It's kind of an 18-month cycle, through and through.

Speaker #5: And , you know , in a sense , they , they have to guess forward . So in a way , it's , it's almost like if I , if I pick on China and the team delivered 7.1 times the revenue of our distributor , you know , why didn't the distributor deliver that ?

Speaker #5: You know, the year before? Because obviously the market was there, and the distributor market is what I would call relatively inefficient and kind of has been since 2015, which is one of the reasons why we go through the conversion.

Speaker #5: And it's just a function of how long their lead times are In ordering from us . And so they it's kind of an 18 month cycle , you know , through and through .

Speaker #5: So I can , if I lined up all of the distributors , you'll see in any given period , like any given snapshot , you'll see some of them growing faster than BRG , some of them slower this and that .

Jim Clayton: If I lined up all of the distributors, you'll see in any given period, like any given snapshot, you'll see some of them growing faster than BRG, some of them slower, this and that. It's all because they're at a different point in their wave. I don't think it's not anything related to their individual market or whatever. I think their relative performance is a function of how effective they are in that market. Basically, you just see this sine wave that plays through, and that's really what you're seeing.

Speaker #5: And it's all because they're at a different point in their wave . So I don't think it's it's not anything related to their individual market or , or whatever .

Speaker #5: I think their relative performance is a function of how effective they are in that market . But , but basically , you just see this , you know , kind of sine wave that plays through .

Speaker #5: And that's really what you're seeing.

Speaker #3: Your next question comes from James Casey with Ord Minnett. Please go ahead.

Operator 2: Your next question comes from James Casey with Ord Minnett. Please go ahead.

Operator: Your next question comes from James Casey with Ord Minnett. Please go ahead.

Speaker #6: Good morning, gentlemen. Just...

James Casey: Hi. Good morning, gentlemen. Just given all the distractions and challenges you encountered in FY26, I just wonder if you could make some broad comments around NPD and how the outlook looks for the next year or two.

Speaker #14: Given all the distractions and challenges you encountered in FY26, I just wonder if you could make some broad comments around NPD and how the outlook looks for the next year or two.

Speaker #5: So the good news about NPD is that they ride below the what I call right below the water line . So if I think Covid , that would be a distraction .

Jim Clayton: The good news about NPD is that they ride below the, what I call, ride below the waterline. If I think about COVID, that would be a disruption that was much bigger than 2026. The operations team runs around with their hair on fire every day, and the NPD team, like a metronome, continues to do what they do. I think the one thing that was different, to be fair, in 2026 was a part of the NPD team was heavily engaged in the diversification of the supply chain. That is, in a way, the first time, really since I have been here in 2015, that anything affected them.

Speaker #5: That was much bigger than 26 . And so the operations team runs around with their hair on fire every day . And the NPD team , like a metronome , you know , continues to do what they do .

Speaker #5: I think the one thing that was different, to be fair, in '26 was a part of the NPD team was heavily engaged in the diversification of the supply chain.

Speaker #5: So that's in a way , the first time , really , since since I've been here in 2015 , that anything , you know , affected them , what what I would say on the NPD pipeline is that the pipeline that I see in front of us over the next 24 and some change .

Jim Clayton: What I would say on the NPD pipeline is that the pipeline that I see in front of us over the next 2024 and some change, I would describe as the strongest pipeline I have seen since I have been here. We will start to see the front edge of that release in H1 2027. Then you are going to see just one after another after another. I think what you do get a little bit, because we had to put some of the team onto the diversification exercise, the extent to which we had to allocate that capacity pushed some delay in the products that they were associated with. But if you go out to 24 months, that all washes out. So, very encouraged by the pipeline that I am seeing over the next 2024.

Speaker #5: I would describe it as the strongest pipeline I've seen since I've been here. So we'll start to see the front edge of that release in the first half of '27, and then you're going to see just one after another after another.

Speaker #5: I think what you do get a little bit, because we had to put some of the team onto the diversification exercise, the extent to which we had to allocate that capacity pushed some delay in the products that they were associated with.

Speaker #5: But if you go out to 24 months, that all washes out. So, very, very encouraged by the pipeline that I'm seeing over the next 24.

Speaker #3: Thank you. That is all the time we have for questions today. And that does conclude our conference for today. Thank you for participating.

Operator 2: Thank you. That is all the time we have for questions today, and that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Thank you. That is all the time we have for questions today, and that does conclude our conference for today. Thank you for participating. You may now disconnect.

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Q4 2026 Breville Group Ltd Earnings Call

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