Greetings, and welcome to the Interparfums Fourth Quarter 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Devin Sullivan, Managing Director of the Equity Group. Thank you. You may begin.

Thank you, and good morning, everyone. Thank you for joining us today. Joining us on the call this morning will be Chairman and Chief Executive Officer, Jean Madar; and Chief Financial Officer, Michel Atwood. As a reminder, this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors may be found in the company's filings with the Securities and Exchange Commission under the headings Forward-Looking Statements and Risk Factors. Forward-looking statements speak only as of the date on which they are made, and Interparfums undertakes no obligation to update the information discussed. Interparfums' consolidated results include two business segments, European Based Operations through Interparfums SA the company's 72% owned French subsidiary and United States Based Operations. It is now my pleasure to turn the call over to Jean Madar. Jean, please go ahead.

Thank you, Davin. Good morning, everyone, and thank you for joining us on today's call. 2025 was a record year for Interparfums with sales rising to $1.49 billion, including fourth quarter sales of $386 million representing our best-ever fourth quarter performance. We saw the industry, including ourselves, return to a more historically normalized level of growth. And while new and ongoing challenges such as tariffs and exchange rate pressures have influenced the environment, we have been able to manage through them with disciplined operational execution. Fragrance remains a resilient category and is widely considered an everyday essential luxury that delivers an irreplaceable experience of self-expression and daily indulgence. In 2025, we energized our portfolio through the launch of several blockbuster fragrances and new line extensions across our brands, including the introduction of Solferino, our first proprietary ultra-luxury offering and strengthened our marketing efforts with impactful advertising and promotional support. Our diverse portfolio of fragrances attracted consumers throughout the year with impressive annual performances by several of our top brands as well as brands newer to our portfolio such as Lacoste and Roberto Cavalli. We generated growth in the majority of our markets, made meaningful progress to improve efficiencies and optimized our supply chain to mitigate cost pressure and support long-term growth and continue to deepen our sales reach on increasingly meaningful platforms such as digital and travel. We delivered a high level of client service, maintained a strong financial position and continued to skillfully navigate lingering macroeconomic headwinds in certain key markets, mainly caused by the effect of tariffs and trade destocking and, of course, geopolitical conflicts. Innovation will continue to define our success, including the rollout of brands recently signed or acquired, namely Longchamp, Off-White and Goutal as well as the 15-year extension of our GUESS license and our…

Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking them down into our two operating segments, European and United States Based Operations. As reported, we delivered net sales growth of 7% to $386 million during the fourth quarter, leading to a record $1.49 billion in sales for the full year in 2025. Foreign exchange movements positively impacted our top line, contributing 3% to growth in the fourth quarter and 2% for the full year. However, as outlined in recent quarters, the stronger euro has also driven higher costs across the rest of our P&L as well as on our balance sheet. Organic sales, excluding FX and the completed phaseout of Dunhill and initial Solferino sales in late 2025 rose 3% in the fourth quarter and 2% for the full year, respectively. Gross margin contracted 20 basis points to 63.6% in 2025, and this was primarily driven by the higher costs due to tariffs. Tariff resulted in about $12.8 million in higher costs in 2025 or 0.9% of sales. We have been able to partially mitigate these impacts through favorable segment and brand mix which each contributed to 20 basis points of margin expansion as well as pricing and leaving us with a gross margin erosion of only 0.3%, considering the situation and the tariffs. We expect tariffs will continue to represent a significant headwind in 2026 as we annualize these tariffs for the full year. We continue to actively work on cost saving programs and tariff mitigation strategies to help limit these impacts. We estimate that these programs in combination with the full year impacts of the price increases we took in August 2025 will enable us to maintain our gross margins flat in 2026. Moving to SG&A. SG&A expenses as a…

[Operator Instructions] And your first question comes from Sydney Wagner with Jefferies.

So in terms of revisiting your guidance later in the year, what are some specific metrics that you'll be looking for or do you need to see to give you confidence to update the guide? And then just curious, like is the category or your own pipeline or innovation uptake more of the swing factor in that? And then my other question, just on promotions. Some peers have called out some pressure there. Can you share a little bit more about what you've seen?

Michel, do you want to start on guidance?

Yes. Sydney, look, I mean, we're just starting the year. We had a really strong Q4, but we're waiting to see really what happens. The environment remains very, very volatile. We are seeing a slowdown in market growth. The market growth in the fourth quarter for the markets that we're tracking was up 2%, and it's definitely starting to slow down. For the year, we're at about 3%. So definitely a slowdown in the market. The destocking situation was a lot better in the fourth quarter. We shipped better than expected, and we saw some restocking. At the same time, we believe that structurally, destocking will continue to be a factor as retailers and distributors normalize their inventory levels. It's just a normal part of the cycle. And so we're waiting to really see how all of that kind of plays out. In terms of our innovation pipeline, I mean, we have a very, very strong innovation pipeline for 2027. But for 2026, our strategy is really more of a flankering strategy. So we're waiting to see also how that basically holds up and how that's basically being received in the market before we feel comfortable updating our guidance. I don't know, if you want to add anything...

Yes. Thank you, Sydney, for the question. Regarding the guidance, as you know, this company has always been conservative. And we spent a good amount of time reevaluating the guidance, and we have decided to keep it, not to change it because even though we had a quite good January and February, and I think we're going to -- we're anticipating a strong first quarter, the visibility is not great. So we are cautiously optimistic. And instead of retouching the guidance many times, I prefer to wait a little bit more. So it's not a sign that things are not going well. It's just we continue in our approach of being prudent. So that's regarding the guidance. The promotion, Michel, do you want to answer on the promotion?

Yes. I mean we've -- as you know, we -- pretty much the whole industry in the U.S. took pricing related to tariffs. Those price increases largely went through. But we did see an uptick in promotions in the fourth quarter, a little bit more discounting than usual. I think this is normal. In this category, as you know, we don't typically do a lot of discounting. We typically offer the consumer value in the form of gift sets and GWPs. But I would say there was a little bit more of these friends and family discounts than we have seen normally in the fourth quarter.

But nothing out of the ordinary.

Yes. Nothing significant, but maybe a slight uptick. but nothing significant and nothing of any large magnitude.

Your next question comes from Aron Adamski with Goldman Sachs.

I have two. First, on the portfolio. After signing of the two new brands that you recently announced, do you have any further capacity to secure additional licenses? And in that context, would you prefer to add brands more in the mass end of the fragrance industry or build up the prestige presence further? And then my second question is on the flanker pipeline that you have mentioned for this year. Can you please give us a sense of your expectations of which brands do you expect to gain market share in 2026? And conversely, which parts of the portfolio are you relatively more cautious about at this stage in the year?

Okay, Aron. Let me try on the first one. Do we have a capacity to take more after the signing of these two new brands, which are David Beckham and Nautica. Before I answer the question, let's take 2 minutes to analyze what we think we can do with these two brands. David Beckham is an icon. David Beckham has a huge name recognition. And we think that in this lifestyle world, we can do well. This is not the first transfer of license that we'll do from Coty. We've done it with GUESS, we've done it with Lacoste, we've done it with Cavalli, all went well. I think that these two new brands are a good addition to the portfolio. Let's not forget that the portfolio of [ Interparfums ] is very diversified. We go from very high end, Van Cleef, Graff, Boucheron to a very lifestyle. So we think that this addition and what it brings to us and what we can bring to them is a great fit. So this being said, do we still have capacity after these two brands? And the answer is yes, absolutely. We have the structure, we have the human structure and also the process and the desire to grow the portfolio. So we can take more. And we are working on more and without any guarantees that we will be able to make announcement. We are working on very important brands. So for us, the evolution of the portfolio is a natural thing to do. We will edit some smaller brands. We will add newer and more important brands. We have the capacity. We have the distribution also. Let's not forget that we are present in 110 countries -- 120 countries through -- either directly or through our distributors. And there is an appetite for newness. So this is for the portfolio and the new brands. Michel, do you want to answer on the flankers?

Yes. Maybe I'll just -- maybe just build a little bit on what you said. I think coming back to our design and our structure, I mean, the fact that we operate with two segments gives us a lot more capacity to manage bigger -- to manage more brands. We also have our hub in Italy, which is run by U.S. operations. So that gives us a third hub. And it gives us the opportunity also to put the right brands in the right places where they will get more -- where they will have access to people that will have more affinity with the brand. So for example, we will be managing the David Beckham brand out of Italy, whereas we'll be managing the Nautica brand out of the U.S. and obviously, the Longchamp brand out of France. So again, that's part of this. Now I think the other thing is we believe there are many brands out there that are underserved and that could benefit from our expertise, as Jean pointed out. We spend a lot of time looking for new opportunities, and we will continue to do so. The timing, obviously, between the moment when we have conversations and we get brands can take time because, as you know, licenses have an expiration date. And if you look at what we've announced recently, even if we have announced the licenses, we don't get them immediately. So that's always a factor and that continues to play in that fact...

Michel, you're breaking up.

Yes. Can you hear me?

Yes.

Yes. Okay. And then on the flankers, look, our flankers are really designed to hold share, not necessarily to build share, but they are necessary to drive healthy top and bottom line growth. When a flank -- when a line starts to basically get a little bit more worn out, that is when we go out and design basically new blockbusters. And we have a significant pipeline of new blockbusters in 2027 across all of our key brands, whether it's Jimmy Choo, Coach, Montblanc, Lacoste, GUESS. So we have a significant amount on top of the new launches that will be coming. So really, for next year, what we believe is we still have brands like GUESS, Lacoste and Cavalli will outperform. And Montblanc, Jimmy Choo and Coach, I think, will be more moderate growth, but we'll continue to do well, we believe, with our existing flanker strategy. Jean?

Yes, I agree. We are really looking at 2027 as a very special year because the five biggest brands in the portfolio will have five very important launches for blockbuster. It's quite unusual for us. It happens once every, I don't know, every 10 years. So we are gearing up for that. But we'll have a reasonable growth in 2026 with our strategy of flankers.

And your next question comes from Susan Anderson with Canaccord Genuity.

I guess maybe just to follow up on the gross margin. I think you guys were originally expecting maybe a little bit less deleverage in the fourth quarter. Maybe if you could just talk about what happened there versus your expectations? And then also looking to this year, how should we think about the cadence of the gross margin? Should we expect it to be, I guess, down in the first half as we still have the tariff impacts and then potentially up in the back to get to that flat for the year?

This is a perfect question for Michel. Michel, go ahead.

Thank you, Jean. Susan, yes, look, I mean, the gross margin in quarter 4 looks pretty -- erosion looks pretty scary. I think when you see the 300 bps. And it's a combination of a lot of puts and calls that all basically went in the opposite direction, right? So sometimes these things tend to neutralize themselves. But in this particular case, basically, they were all unfavorable. So really, if you really look at what happened, first of all, you have the tariff impact, which hit us fully. We -- there's always a ramp-up with a FIFO and as we buy inventory, it kind of makes its way through. It made its way fully into the fourth quarter, and that basically represented about 2 points for the quarter. The other thing that we talked about is foreign exchange. So foreign exchange helped us on the top line, but really hurt us significantly because a lot of the products that we sell are actually made in Europe. And so what the cost based in euros were -- while our sales were basically in USD. So that represented -- and just for perspective, the euro was at $1.07 last year and it was at $1.16 this year. So that represented about 50% of our sales are denominated in dollars. So that also had a significant impact. And the last piece is it's a little technical, but it's channel mix. As you know, some of our businesses with direct to retailers with higher gross margin, but also higher A&P, and some of our businesses with distributors with lower gross margins and lower A&P. And in the fourth quarter, we had significantly more of our business was through the distributors rather than direct to retail. It was about 68% mix of business versus 63%. So it's a combination of all those factors. And it's true that it looks a little bit scary. But overall, going back to next year, we feel that we have good mitigation strategy in place that will enable us to kind of get to roughly a flat gross margin. And yes, we should see some hurts in the first and second quarter, and we should see improvements in the third and fourth quarter as we lap our tariff impacts in the back half of the year and our cost savings and cost savings and efficiency programs actually start to kick in.

[Operator Instructions] Your next question comes from Hamed Khorsand with BWS Financial.

Just want to ask you, you've talked a lot about the top 5 today. Is there anything in your other brands that could be a breakout situation for you to get into the top 5? Or you're not expecting that this year?

This year, breaking to top 5, I don't think so. Michel?

No. I mean, Hamed, look, I mean, I think our top -- our largest brands are really -- basically are really our engines of growth. And they're diverse, I mean, in the various categories, price points, gender, I think those are really where we're going to get the growth going forward. And I think effectively, the tail end of the portfolio will either be stable with brands like Lanvin and Rochas or will probably continue to decline. And then those will eventually bleed out and probably be opportunities for us to consider exits, as Jean talked about cleaning up our portfolio.

I don't think that -- the top 5 are brands that are anywhere above or around the $200 million. The second tier is really below that. So there is quite a difference between the first tier and the second tier. But we will add with new license that we are taking. I think that Longchamp has a great potential. We think that Nautica has a great potential. They come also. So let's not forget, if we take Lacoste, we took Lacoste, we doubled the sales in less than 3 years. We took Cavalli. We increased the sales 50% in 2 years. So we know how to -- what to do with new brands. And I think that there is a lot of potential for the new brand in the portfolio.

Got it. And Michel, on the working capital end, there was a considerable amount of free cash flow generation in Q4. I think that's very seasonal. But is there potential for more here as you try to wind down some of the inventory? Or is that more just a function of how the industry is right now with the destocking?

Yes. Well, look, I mean, one of the upsides of sales starting to normalize is you kind of -- you're not investing as much in working capital, right? So definitely, the sales normalization has helped us basically deliver working capital improvements, but we've also done a lot of good work in terms of managing down those inventories. And I think we're going to continue to see that, and we're going to continue to see strong operating cash flow productivity going forward.

And your next question comes from Aron Adamski with Goldman Sachs.

I wanted to quickly ask on the trends that you're seeing across your key regions, so by geography so far in 2026. Where are you seeing the strongest, whether it's your own -- the demand for your own brands or for the category as a whole so far in 2026? And conversely, in which geographies have you seen maybe a relatively slower start to the year than you expected?

So I'm going to try, but Michel follow this very carefully. What I see is the U.S. is doing well. In a very quick, short word, the U.S. is doing well. Southern Europe is doing fine. Northern Europe is more difficult. Eastern Europe is okay. This is for the U.S. and Europe. Asia for us, China continues to be slow, nothing new. Australia is showing some strong signs of growth. We traveled a lot in the first 2 months of the year to make sure that the Christmas went well. What I see is, in general, the level of inventory in stores or at distributors is not high, which is a good sign. Sell-through was good. Nobody is holding too much. The level of reorders is quite strong. So we're not really worried. Michel, I'm sure you can add more...

Yes. I would just build on that, Jean, say -- LatAm obviously continues to do very, very well. I think our brand portfolio is really resonating well with the consumers. And then in Asia, while we had a little bit slower sales, we fixed our distribution in India and Korea, and I think we'll expect to see some good bounce back in 2026 behind that intervention on top of what effectively you just said for Australia.

And there are no further questions at this time. So I'll hand the floor back to Michel Atwood for closing remarks.

All right. Well, thank you again for joining our call today. Before I end the call, I'd like to express my sincere appreciation once again to our teams for their tremendous effort throughout 2025. Our achievements are a direct reflection of our people, their dedication, creativity and the unique contributions they bring every day and particularly the agility that we've had to deal with this year with all of the moving pieces that we all are aware of. If you have any additional questions, please contact Devin Sullivan from the Equity Group, our Investor Relations representative. And thank you, and have a great day.

Thank you. Thank you.

Thank you. This concludes today's conference.