Good day, and thank you for standing by. Welcome to the Brown Foreman Fourth Quarter and Fiscal Year 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sue Parham, Vice President, Director, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown Foreman's fourth quarter and fiscal year 2026 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Jim Peters, Executive Vice President and Chief Financial Officer. This morning's conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict. You should not place undue reliance on any forward-looking statements, and, except as required by law, the company undertakes no obligation to update any of these statements, whether due to new information, future events, or otherwise. This morning, we issued a press release containing our results for the fourth quarter and fiscal year 2026, in addition to posting presentation materials that Lawson and Jim will walk through momentarily. Both the release and the presentation can be found on our website under the section titled Investors, Events, and Presentations. In the press release, we have listed a number of the risk factors you should consider in conjunction with our forward-looking statement. Other significant risk factors are described in our 2025 Form 10-K and, from time to time, in our Form 10-Q reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures, a reconciliation to the most directly comparable GAAP financial measures, and the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations, are contained in the press release and investor presentation. With that, I would like to turn the call over to Lawson.

Thank you, Sue, and good morning, everyone. I'm pleased to report that Brown Foreman delivered a strong finish to fiscal 2026, with full-year results coming in ahead of our organic expectations. Today, I'll walk through the key drivers of this performance, including the continued success of our innovation pipeline and our momentum in international markets. Then, I'll turn the call over to Jim to discuss our financial metrics and our full-year outlook for fiscal 2027. Before I move to our results, I want to provide a few comments regarding the termination of our discussions with Pernod Ricard. First, Brown-Forman regularly explores strategic opportunities in the normal course of business, evaluating every opportunity against the standard of long-term shareholder value. In this particular case, we were unable to reach mutually agreeable terms. Our ultimate goal was to create long-term value for all shareholders, and we intend to do that by focusing on our strategic and operational priorities, which include expanding our geographic footprint, building brands that resonate with consumers, and enhancing operational efficiency. Our strong balance sheet and healthy free cash flow support our long-held capital allocation philosophy of investing in the business, paying increasing regular dividends, pursuing strategic opportunities, and returning cash to shareholders. With that, let's turn our attention to our results. Despite continued volatility and uncertainty, we delivered fiscal 2026 organic net sales and organic operating income above our expectations and performed near the top of our industry. The drivers of our business were very consistent throughout the fiscal year as market conditions remained largely unchanged. Specifically, key emerging international markets and the travel retail channel experienced strong growth supported by solid demand for our brands, while macroeconomic uncertainty continued to pressure discretionary spending in the U.S. and many developed international markets. Substantially lower used barrel sales and the trade dispute between the U.S. and Canada remained persistent headwinds, negatively impacting our full-year organic net sales by more than two points, with a significantly greater impact on our organic operating income. While these external factors were outside of our control, internally, our team remained laser-focused on executing our fiscal 2026 strategic initiatives, including our organizational evolution, a generational U.S. route to consumer transformation, and meaningful innovation, led by the launch of Jack Daniels Tennessee BlackBerry. I'm very proud of the way our people navigated a challenging and dynamic operating environment. They remained resilient and agile while making the necessary changes in how we think, work, and lead. The results Jim and I are sharing with you today are a direct result of their efforts and a testament to their dedication and hard work, and I'm deeply appreciative of their continued focus on our strategic priorities. Now to the numbers. For the year, reported net sales declined 1%, with organic net sales flat after adjusting for the unfavorable impact related to the absence of Corbell and Sonoma Guthrie, as well as the positive effect of foreign exchange. For the first time in decades, Brown Foreman is no longer in the wine or champagne business. From a geographic perspective, the emerging international markets collectively delivered organic net sales growth of 12%, driven by the strong double-digit performance of Numix in Mexico. Numix, Mexico's original tequila RTD, continues to gain market share while leading the fast-growing RTD category in Mexico. This momentum is supported by the consumer trends of flavor, convenience, and value, especially as macroeconomic headwinds continue to impact consumer spending. The Travel Retail Channel delivered 5% organic net sales growth, driven by Jack Daniel's Tennessee Whiskey, which benefited from an increase in the number of travelers, as well as new product launches such as Jack Daniel's Tennessee Blackberry and Jack Daniel's Heritage Barrel. Organic net sales collectively for the developed international markets declined by 3%. This was led by Canada, which decreased nearly 60% as American-made products remain off-shelves in the majority of Canadian provinces. In addition, the macroeconomic landscape within numerous European markets remains under pressure as persistent headwinds continue to weigh on consumer sentiment, resulting in a more cautious approach to discretionary spending. This behavior is notable in Germany and the UK, where total distilled spirits trends remain weak and our organic net sales decline 7% and 9% respectively. Despite the challenging environment in Europe, we're maintaining or gaining share of the whiskey category and six of our top eight European markets, and strategic innovation is delivering growth, with Jack Daniels Tennessee BlackBerry continuing to outperform expectations, achieving almost 150,000 9-liter depletions across six European launch markets in fiscal 2026. Also within the developed international markets, our route-to-consumer decisions are delivering strong growth in our most recently launched own distribution markets of Italy and Japan. In fiscal 2026, Italy doubled its organic net sales, driven by price and distribution momentum. We experienced growth across the entire portfolio brands, led by Gin Mare, Italy's number one super premium gin by volume and value, and Jack Daniel's Tennessee Whiskey, which both delivered very strong double-digit growth. In Japan, our distribution of the William Grant & Sons portfolio enables us to leverage our combined premium spirits expertise to scale our Japanese operations and deepen our relationship with trade partners, further reinforcing our commitment to driving growth and innovation within the world's third largest whiskey market. We continue to believe that owning our distribution fosters deeper engagement with our trade partners, drives the expansion of super-premium labels such as Diplomatico and Gin Mare, and reinforces the strength of our iconic American whiskey portfolio, anchored by the Jack Daniels family of brands. Let's turn now to the United States, where we also made significant route-to-consumer decisions, naming 11 new distributors across 25 markets. With these changes, we've engaged with distributors who we believe bring the capabilities, scale, and operational excellence required to drive our next generation of growth as we recognize the benefits of enhanced dedication and focus, increased distributor investment funds, and an improved margin structure. Organic net sales were flat in the U.S. in fiscal 2026, which remained ahead of both our depletion-based results and takeaway trends, driven by the benefit from our U.S. distributor changes and the ongoing impact of innovation. In general, innovation has been one of the few sources of growth within Total Distilled Spirits. Since the launch of Jack Daniels Tennessee BlackBerry in August of 2025, the brand has continued to exceed expectations, reaching almost 300,000 9-liter depletions by the end of the fiscal year. It's the second largest new product by value within Total Distilled Spirits and Nielsen. We had expected the gap between shipments and depletions of BlackBerry to close during fiscal 2026, but we continue to see excitement and outstanding consumer engagement for the brand. While shipments of BlackBerry exceeded depletions, the gap between the two continues to narrow. In addition to the strong U.S. launch, we're encouraged by BlackBerry's early performance in markets outside of the United States, where we have launched the brand. Our team is now focused on capitalizing on this momentum as we continue executing our multi-year phased global launch of BlackBerry. But BlackBerry wasn't the only innovation within the Jack Daniels family of brands in fiscal 2026. This year, we made the Jack Daniels Single Barrel Heritage Barrel, the newest permanent addition to the Jack Daniels Single Barrel collection. The expression was originally shared as a special release in 2018 and 2019 and has already received multiple awards. In 2018, it was named Whiskey Advocate's No. 3 Whiskey of the Year, and just last year, it was named Breaking Bourbon's No. 1 Whiskey of 2025. Our super premium innovations further strengthen Jack Daniel's craftsmanship and whiskey-making credentials, and we believe they will be continued growth drivers for the Jack Daniel's family of brands in the upcoming years. In addition to innovation, RTDs are the other source of growth within Total Distilled Spirits, and we continue to apply a consumer-first approach to our RTD portfolio. First, the launch of NuMix in select U.S. markets has surpassed our expectations. NuMix is an opportunity for us to connect with Mexican-American consumers through a highly recognizable brand while simultaneously introducing new consumers to the world's first tequila-based RTD. We're also continuing to innovate within the high-growth tequila RTD category in the U.S., where we launched El Hemador Spritz this spring for RTD drinkers seeking a light, refreshing option. Following the brand's initial introduction in Australia last summer, performance has continued to exceed our expectations, giving us confidence in its potential. While still early, we believe the initial launch in the U.S. is off to a solid start and look forward to providing you with future updates. In summary, I'm proud to say that we delivered on our plan in fiscal 2026 by executing our strategic priorities with excellence and managing the factors within our control. We acted swiftly in a challenging and dynamic operating environment with a focus on our brands, geographies, and people, as we strategically innovated with a focus on the premium-plus brands and ready-to-drink offerings to strengthen our brand portfolio and align with current consumer trends. We made key route-to-consumer transitions, including Japan, Italy, and the United States, and streamlined our workforce structure with the goal of accelerating growth in an increasingly challenging and competitive environment. With that, after 19 quarters of hosting this conference call with Leanne, we now have a new CFO, and I'm pleased to introduce Jim Peters. Jim is a seasoned financial leader who brings a proven track record of driving operational discipline and resilience. During his 22-year career at Whirlpool, Jim led the company through complex global cycles and navigated margin pressures and volatile global consumer demand. Just as importantly, Jim is a values-based leader with a strong commitment to developing the next generation of talent. While the CFO recruitment process took a bit longer than we originally anticipated, this was not a decision to be rushed. Jim has been with us since the end of March, and as expected, the transition has been smooth.

I'll now turn the call over to Jim. Thank you, Lawson, and good morning, everyone. I'm excited to be here and joining this strong leadership team. I truly believe we have the right brands, products, and people to continue winning in this industry. Building on Lawson's overview, I will dive into the financial drivers that underpinned our fiscal 2026 performance, including our gross margin expansion, operating expenses, and capital allocation. From there, I will provide context on our fiscal 2027 outlook, outlining how we will manage the business through a unique cost cycle that we have discussed previously. First, looking at our gross margin, in fiscal 2026, our reported gross profit increased 2%, resulting in a reported gross margin of 60.5%. Our gross margin expanded 160 basis points due to a 130 basis point A&D benefit largely related to the conclusion of our relationship with Corbell and the absence of the prior year transition services agreement for Sonoma-Couture, a 20 basis point favorable impact from foreign exchange, and 20 basis points of lower cost. While we are still experiencing higher costs due to lower production levels and inflation on our input costs such as wood, these were largely offset by the timing of cost fluctuations. These benefits were partially offset by 10 basis points of unfavorable price mix due to the strong growth of new mix and lower used barrel sales. Turning to operating expenses, our long-term philosophy remains investing in our brands to drive sustainable growth. In fiscal 2026, our organic advertising expense decreased 5%, reflecting a more targeted, efficient, and disciplined approach to our marketing spend, as well as strategically investing behind sources of growth such as innovation, particularly Jack Daniels Tennessee BlackBerry. Our organic SG&A investment increased 7%, driven by costs associated with the contemplated business transaction discussions, as well as higher compensation and benefit-related expenses. In the fourth quarter, we recognized $45 million and $87 million non-cash impairment charges for the Gin Mare and Diplomatico brand names, respectively. These impairments largely reflect a decline in our forecast assumptions due to the softening category outlook and challenging macroeconomic environment in many of our top markets for these brands. While the brands had a slower start than we planned and the operating environment has become more challenging since we acquired the brands in 2023, we continue to expect that Chinmari and Diplomatico will contribute long-term growth to our portfolio of brands. In total, reported operating income decreased 10% and organic operating income decreased 2% in fiscal 2026. Diluted earnings per share decreased 17% to $1.53 per share, which was driven largely by the non-cash impairment charges and the absence of the prior year gain on sale of our investment in Duckhorn. We continue to maintain a strong balance sheet and have strengthened our cash position in 2026. Our capital allocation philosophy has not changed. We continue fully investing in our business through both organic growth and strategic acquisitions. We balance these investments with a commitment to returning cash to shareholders through increasing regular dividends, share repurchases, and special payouts, all aimed at the fundamental goal of generating sustainable, long-term value for our shareholders. We have been disciplined in managing our working capital appropriately. In fiscal 2026, our working capital needs were lower as we completed a series of significant multi-year capital investments that we believe will set us up well for the future. We grew cash flows from operations by $402 million to $1 billion, primarily reflecting our disciplined approach to working capital management. As you can see on Schedule E of our earnings release, free cash flow, which we define as cash provided by operating activities, less capital expenditures, increased by $462 million to $893 million, reflecting strong operating cash flow generation and the lower capital expenditure needs. For the 42nd consecutive year, we increased our regular dividend and paid quarterly dividends totaling $427 million to stockholders in the fiscal year. We also repurchased $400 million of our outstanding shares of Class A and Class B common stock. Now to our full-year fiscal 2027 outlook. The spirit sector continues to face macroeconomic headwinds and geopolitical uncertainties. We anticipate that these conditions will continue to influence consumer behavior, negatively impacting beverage alcohol consumption, largely within developed markets, resulting in category growth that remains below long-term historical averages for total distilled spirits. As we navigate these cyclical disruptions, we will continue to leverage the strength of our portfolio of brands, including strategic innovation, our evolved route to consumer structure, and our talented team of people around the world. With this in mind, in fiscal 2027, we expect the depletion-based trends in the U.S. and developed international markets to remain similar to fiscal 2026, offset by continued growth in our emerging international markets and the travel retail channel. There are a few exceptions, though, mainly related to year-over-year comparisons. First, while we remain hopeful for the return of American Spirits products to Canadian store shelves, we continue to assume they will remain off the shelves across most of Canada for our full fiscal year, although this will compare against a similar environment in the year-ago period. Next, the demand and pricing for used barrels remains volatile and at cyclical lows. Therefore, we expect continued pressure on used barrel sales, but the year-over-year dollar impact on net sales will be significantly less. Finally, we anticipated that shipments would be roughly in line with the depletions in 2026. Yet shipments related to innovation, particularly for Jack Daniels' Tennessee BlackBerry, continue to exceed our expectations. While it is taking slightly longer than anticipated, we continue to expect that the gap between shipments and depletions will close. Therefore, we anticipate that depletions will exceed shipments in fiscal 2027. These expectations are reflected in our fiscal 2027 outlook. While we continue to execute on our long-term pricing strategy and expect to benefit from our revenue growth management activities and strategic innovation, particularly the continued international launch of Jack Daniels Tennessee BlackBerry, we anticipate product mix headwinds due to the faster growth of our RTD portfolio. Based on the currently known factors, we expect organic net sales to be approximately flat. In this dynamic operating environment, we will carefully manage our costs and operating expenses. As we shared on our last earnings call, our inventory includes whiskey and barrels produced during the hyperinflationary years of the early 2020s, when we face significant cost increases for barrels, grain, energy, as well as general inflation. As we bottle and sell this inventory, we expect the cost pressures associated with our barreled whiskey to persist for the next couple of years. While we have taken strategic steps to optimize our wood supply chain due to the aging of most of our products, the impact of these actions will take time to materialize in our results. Therefore, we have also been identifying other cost savings and efficiencies to help partially offset these cost pressures in the near term. We project higher input costs in fiscal 2027, largely driven by the impact of inflation, particularly transportation and glass, related to higher energy costs as well as lower production volumes. Our outlook for organic operating expenses continues to reflect investment behind our brands, utilizing our long-term brand investment philosophy. We anticipate a reduction in SG&A as we lap the significant investment levels of fiscal 2026. Based on the above, we forecast organic operating income to decline in the 3% to 5% range. We expect our estimated capital expenditures outlook to be in the range of $60 to $70 million, which is down significantly compared to recent years. We believe our fiscal 2027 effective tax rate will be in the range of approximately 20% to 22%. In summary, we delivered above our organic net sales and organic operating income expectations in an uncertain and volatile operating environment in fiscal 2026. While we navigate these near-term cycles, we are leaning into the power of our brands, our innovation momentum, and the benefits of our optimized route to consumer, supported by a more agile organization and strong balance sheet. We remain focused on driving sustainable growth and delivering long-term value for our shareholders. Before proceeding to the Q&A, I want to briefly reiterate a few points on the termination of our discussions with Pernod Ricard. As Lawson noted, we evaluate every opportunity against the standard of long-term shareholder value, and in this case, we were unable to reach mutually agreeable terms. Our focus remains on our strategic and operational priorities and delivering long-term value creation for our shareholders. We will not comment further on this topic or any M&A speculation, so thank you in advance for focusing your questions on our ongoing business operation. This concludes our prepared remarks. Please open the line for questions.

Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. And our first question will be coming from the line of Lauren Lieberman of the Barclays. Your line is open.

Good morning, everyone. First thing I wanted to ask is just the CapEx guidance. So the implication is something less than 2% of sales. That's a level we haven't seen since sort of the depths of COVID.

So capital discipline makes a lot of sense, of course, but just curious if you see this as sort of a short-term decision or reflective of later capital needs kind of over the medium term like stretching beyond fiscal 27 and any additional color you think would be relevant there thanks yeah lauren this is jim and uh here's where i start with i think you have to kind of look back over a multi-year time frame to begin with on where our capex has been and we've made some significant investments over the last few years and and what we're doing is we're coming to the end of those significant investments right now and so i would say that that 2027 or fiscal year 27 is really reflective of what is more of an ongoing level, and then as we continue to evaluate our portfolio and what the needs are, obviously we'll vary off of that, but I think this is just more reflective of the completion of a lot of big investments we've made that will give us the portfolio and the capacity that we believe is necessary on a go-forward basis.

And our next question will be coming from the line of Peter Gromp of UBS. Your line is open.

Great. Thank you. Good morning, everyone. This is maybe a bit more of a housekeeping question, but just over the last year, there's a lot of moving pieces as we think about gap operating income versus kind of the organic. So can we maybe just walk through the various puts and takes? And I guess what I'm trying to understand as we think about the gap operating income of fiscal 26, around a billion dollars, what's the right starting point after adjusting for these items and then kind of applying the minus 5% to minus 3% guidance?

So here's what I would say. I think obviously the biggest item in there has been the impairments. And, you know, those are a type of one-off type of thing, and obviously we did have something with GenMare last year. But I believe when you look at that and you back that out, you get to some significantly smaller items that we have there that are very reflective of just some opportunities, to be honest, that we've taken advantage of around duty drawbacks and some other things. And so I think if you think about it on a go-forward basis, I don't know that we expect that to be a significant amount, you know, within our results. And so I think, you know, our organic and our gap will be relatively close absent of anything unknown out in the marketplace.

And our next question will be coming from Filippo Filorne of Citi. Your line is open.

Thank you. Good morning, everyone. I wanted to ask about the guidance on organic sales for fiscal 27 or about flat. I think, Jim, you said that you expect depletions to outpace shipments next year, which kind of would imply depletion-based results probably up slightly as you get the reversal of the overshipment. I guess what gives you the confidence to get to more positive kind of depletion numbers given, to your point, the macro environment in developed markets is still being challenging. Emerging market is still growing nicely, but it just feels there's quite still a bit of headwind in the macro environment under the distilled spirits category. So I was hoping to get a little bit more clarity on the drivers to get to that implied positive kind of shipment result, positive depletion result.

So let me kind of start here. And what I would say is you took some of the big moving pieces there and moving parts. But, you know, what you've got to start with is I think we're going into the year with good momentum to begin with, especially around our innovation portfolio. And you've kind of heard mentioned multiple times the Jack Daniels, Tennessee BlackBerry. We're rolling that out, Internet. That's been mainly a domestic launch this year. It's now becoming more of an international launch. Also, we're launching different sizes of that into the marketplace at this time. So, you know, as I start to step back and say, yes, from a macro environment perspective, we still see that to be challenging. From a, you know, depletion standpoint, we do believe that distributor inventories will come down some next year. But there still will remain some additional inventory probably in the system as we look at the innovation and new launches as well as our new distributor portfolio. You know, additionally, what we've had over recent years is a negative impact of barrel sales decreasing, which is starting to stabilize now. this point so we don't have that type of drag you know other things that I see as a neutral to positive or things around pricing in that and again we continue to execute our long-term pricing strategy and you know maybe what will put a little bit of pressure will help us from a volume perspective but puts a little bit of pressure on mixes just as our portfolio ships more to RTDs but I think when you take all of those into account we feel good about the innovation in the new products we're bringing to market that are really offsetting what I'd say is a challenging environment right now.

And our next question will be coming from the line of Nadine Sarwa of Bernstein. Your line is open.

Hi, guys. Thanks for taking my question. Mine is on the guidance and in particular operating income growth being weaker than top line. Could you provide us with your expectations with regards to gross margin contraction in particular? And here, you know, I'm trying to get a sense of how much of that contraction would come from more costly barreled whiskey versus the present day headwinds from transportation and glass versus the negative product mix you called out. Any form of magnitude that you could provide around those would be helpful.

Yeah, I think, and again, this is Jim, I think, you know, we don't necessarily split out all those kind of components as we look at it. I mean, we had talked in the previous earnings calls about, you know, the whiskey that we have in barrels, that is a cost that we know, a cost that we understand very well, and a cost headwind that will be with us for, you know, the next few years. And I think that's probably, if you just start to take order of magnitude, that's maybe one of the bigger cost issues that we see in front of us and that we're dealing with to offset. The other things that I talked about within there are more just reflective of the current environment and what's going on and can be costs that fluctuate on a regular basis, such as energy and transportation costs and the rest of that. So I think you just have to think about the biggest part of it is what we have in our barreled whiskey inventory right now, and that's driving the gross margin impact for 2027, which we'll continue to see. But we do believe it's stabilizing and it's very predictable. and then on a go-forward basis, our cost actions will begin to offset more and more of that.

And let me add something to it, too, on the pricing side of things, because I think there's some good news sort of bubbling down low in the world of pricing in the U.S. market. I mean, if you look at it, XRTDs, excuse me, I mean, the 13-week numbers in TDS pricing is down one, 52-week is basically down one also, and we're like down a half a point. For all those that thought the Kila business and the American whiskey business and expect a big significant drop in pricing around that, it has not happened. Even Kila's down two. I think American whiskey's down one and a half-ish. So, I mean, it's not great, but it's certainly not reflective of a giant repositioning of the category or a big amount of discounting or anything like that. As we have said on a few of the last quarters, the big companies seem to be pretty rational on the state of pricing, at least in the U.S. market, and I think it's true for Europe, too, and it's holding together. So now, impact on gross margin, I'm not saying we expect a big increase either. We're just trying to hold our own at this point, but it shouldn't be a drag. Pricing and mix, I don't expect an if and drag at all on fiscal 27. up. I know you didn't ask Nadine, but I gave it to you anyway.

And our next question will come from the line of Kevin Grundy, BNP Paribas. Your line is open.

Excellent. Thanks. Good morning, everyone. Question for Jim. First, congratulations and welcome. Of course, you're joining the company at a very unique time. I don't need to tell you that with the strategic discussions and some pretty intense demand headwinds. First of all, I wanted to ask for your early observations, what you see as the biggest opportunities here to unlock shareholder value as you think about sort of the big value triggers, sales, margins, and capital efficiencies. I don't expect you to comment, of course, on the terminated discussions, but within that context and thinking about those value triggers, what would you share with shareholders in terms of what you think is misunderstood about your current share price? So I'd appreciate your comments there. Thank you.

Yeah, and thank you. And maybe I'll kind of tell you a little bit of my thoughts here. I mean, first off, as you heard in my prepared remarks, I'm excited to be here. I mean, you know, and Brown Forman, you know, has been a strong performer in what is now a challenging industry cycle. And I think, you know, fiscal year 2026 represents that. You know, strengths that, you know, I see within this company, obviously our brand and product portfolio, you know, are second to none out there. And I think that really gives us the tools that we need to be able to drive value. I think, you know, the other thing is, and this is where you asked, you know, one of the things that I would say differentiates us and maybe is misunderstood in our value proposition is we have an extremely strong balance sheet. We generate extremely strong free cash flow. And as you saw with this year, and I think, you know, that will continue into the future. And, you know, in our industry, I tell you what, we're the top out there in terms of that. So I think that sets us up very well, you know, for the future. Listen, I think we're taking a lot of strong actions towards, you know, margin improvement and gaining share. And that is going to be key, especially in a market that is down and in a cyclical type of environment. And, you know, as you kind of heard from Lawson, I spent almost 20 years, you know, dealing with a cyclical. If you look at what I bring, hopefully my role now will continue to drive shareholder value here. So, you know, when I just step back and kind of summarize it all up, listen, I believe there is a very talent sheet we have.

And our next question will come from the line of Andrea Pistashi of Bank of America. Your line is open.

Yeah, thank you. So my question is actually on the new mix launch in the U.S., which you said is exceeding your expectations. Now, looking at Nielsen data, which I know may be skewed to certain states, but it appears to have had a really strong start. and is becoming an important contributor to your growth. So could you update us on where you are with the distribution rollout, what you see as a potential, in what way has it exceeded your expectation, what makes a brand really stand out in a crowded RTD space?

I'll try this one. I mean, look, Numix, I think you all realize, is a massive – it is very well known among Mexican consumers, both in Mexico and in the United States. And so it's been, you know, one of our, in terms of top line, just a massive driver now for several years in a row. And, you know, very market. So we've got a set of consumers that know the brand already, and we want to go after that inside the United States. So it was launched in October in nine markets. I did say it's the eighth largest contributor to the RTD category growth, and we haven't even had it out there for a year. So we're pretty happy with the beginning days of this, and it's a way to really get into the Mexican-American accounts, and they are where you probably would expect heavy emphasis on California and the Southwest and places like that, which are very much Nielsen-scanned markets, but it's exciting stuff. We've also done an El Hemador Spritz, which just launched in the last few weeks. similar it's going to be a broader set of consumers that we go after with that but it's still a brand that's well known both in Mexico and the United States and it's a little bit different it's very much going after that light refreshing option which you know pretty much dominates the RTD category these days so yeah so off to a good start it's just so new but we'll see I think there's a lot of enthusiasm and excitement and we will slowly begin to launch you know, move it out into the rest of the United States.

And our next question will be coming from the line of Robert Oddenstein of Evercore ISI. Your loan is open, Robert.

Great. Thank you very much, and congratulations, Jim. So, Lawson, I was wondering if you can talk a little bit, and you kind of inched into it, right, with your discussions on price, price being down a little bit. But I was wondering if you could talk about to what extent you think that price levels are a barrier to more spirits consumption in the U.S. and to what extent, you know, given, you know, a pretty constrained consumer, particularly at the lower end, you know, the fact that in general spirit on the package side doesn't have maybe as much flexibility in terms of variety of package sizes and units as some other categories. And so, you know, perhaps you don't have as many levers to pull in terms of price pack architecture and revenue management tools to address affordability issues. So kind of big topic there, I know, but love to get your thoughts on that in terms of the spirits industry and Brown Forman in particular and how you may or may not address those challenges. Thank you.

Yeah, so interesting question. taking a real long, like a long, like a decade view on it to start with a little bit. I've always kind of found it interesting, and quite honestly, I think Spirits has underpriced over the last decade, not overpriced. But I always compare it to beer. So beer a decade ago, or even a little longer, was not getting any volume growth, and they got all their value growth through pricing, which looked great on the financial statements at the time, it improved margins it does all that kind of stuff but now what stand where we are today relatively speaking beer is more expensive than than spirits at least compared to history and so as i said spirits really hasn't taken all that much pricing over the last decade there was that spot you know we're post-covid but for the most part it it hasn't been all that much where the pricing challenge i think for the spirits industry is is the on-premise and it's not that we're selling in and particularly, you know, higher prices or anything like that, it's the restaurants that have taken massive margin increases on the spirit side of their business and to pay for the rent and higher wages and all the rest of it. So I don't really see pricing, particularly off-farm pricing, I guess, as a, you know, a significant impediment to consumers. Now, Now you're right, the sort of K economy changes. You still have, you know, super ultra premium price brands that are doing really, you know, doing well, and that's a concern. We're not very exposed to the sort of the lower end products, and that's kind of been a debate over the last, you know, year, really, should we have more exposure. And we've had some good, you know, some success stories. I mean, I'll say Jack Heritage Barrel is one that we had this year that is very high-priced, and it's flying. It absolutely flies off the shelf. So we're feeling pretty good about where the consumer is relative to our brands, and I just don't think pricing is the – And our next question will be coming from the line of Steve Powers of Deutsche Bank.

Your line is open, Steve.

Great. Thank you very much. I guess going back real quick, going back to Peter's question on organic operating income, I'm just wondering if there is a specific dollar amount in terms of we should anchor to exiting fiscal 26 as the organic operating income base, which of fiscal 27 guidance is based, because I'm not 100% sure exactly what the base is. That'd be kind of cleanup number one. And then I wanted to talk about the 150 basis points over the next couple of years of higher costs that are flowing through the P&L. You know, I guess as I think about it, a lot of those costs should be cash expenditures that were made historically. So I'm just, I'm wondering if there is a silver lining to those costs as they flow through the P&L that maybe the cash conversion on, you know, as they flow through is actually improved because maybe today's costs are less than what's flowing through on a cash basis, if that makes sense. Thanks for both.

So maybe I'll start with your second question because I think that's probably the very straightforward one. And yes, there is an obvious cash benefit with that as you look at the inventory that we have that that you know is with higher priced and already has been paid for and then what we're able to sell it for right now and looking at what we're doing and how we're managing our inventory levels working capital and especially inventory should generate positive cash flow for us on a go-forward basis and I think even if you look at working capital within this year it was positive to cash flow so I think that's you know the the right way to think about it I think you know the other thing is as we kind of talk about this year on the starting point for you know organic income compared to you know what to expect for next year and if you really just go to the schedule that we had that shows that our reported was around 1 billion dollars and you know then then you know you do the adjustments off of that and especially the biggest one being the impairment it really kind of implies but that that's probably on an organic basis closer to $1.1 billion. And that's the base where we start from an organic perspective and work off of there.

And our next question will be coming from the line of Robert Moscow of TD Cohen. Your line is open.

Hi, this is Seamus Cassidy on for Robin. Thanks for the question. I wanted to ask about the realignment of your U.S. control state distribution network. I know it's been three days now, so I won't ask about early learnings yet. But can you discuss, I guess, your expectations for this transition from an execution standpoint? And do you anticipate any short-term disruption? And then also, what sort of benefit does your organic sales guidance bake in just from an improved margin standpoint? Thanks.

I can't make sure I heard all that. But look, control state evolution isn't really – we're not expecting dramatically different than what we've been through in the open states over the last year. If anything, it's a little bit easier, quite honestly, because just like that. So look, this is going to be a good thing for Brown Farman. We've made these changes over the last year. And look, last summer and into the fall, there were some bumps along the way. It's going to take a little bit to get the emerging brands, as an example, going again. Everybody focuses on Jack first and sort of works their way down. So we expect better performance in the emerging brands over the next year um and i think look at this point the particularly distributors that were beer distributors before it took a little bit of time to sort of get them up to speed but they're they're fully up to speed now and um you know we're regaining i mean the one thing that happens when you do these changes are we lost some on-premise listings and a hand you know in a lot of states we lost them you just got to go fight and go get it back um and they're doing that now So, you know, hopefully this year just it has a little bit less disruption, a little bit less volatile. And I know there are a lot of puts and takes in there and everybody's trying to figure it all out. But at the end of the day, we feel pretty good about our position now, better than we did a year ago. And excited to see what happens in fiscal 27.

And our next question will be coming from the line of Chris Pitcher of Rothschild & Company. Redburn, your line is open.

Thanks very much, Lawson and Tim. Can I ask a question and a quick follow-up? In terms of Japan, given your opening comments, Lawson, I'm surprised it wasn't called out in the statement, given the extra sales you'd have got from William Grant and Sons, etc. Are there any technical effects which held back the performance of Japan in the year? Because you sounded pretty confident on it. And then secondly, could I just follow up on the comment around the non-branded and bulk? That's only been reported during a period of strong growth in the scotch industry, for example. Is there any sort of residual income within that, like contract bottling or maybe some bulk sales, that means it can't go to zero?

Well, let me hit Japan here first. So, and I'm not quite sure exactly what your question was, other than let me just talk about Japan for a second. So look, it's one of the biggest whiskey markets in the world. It's a very big American whiskey market and is one that we've had success. We're actually pretty good sized there. We hired a lot of people to be able to go after that market. It's a challenging market. So we've hired a lot of people with the expectation of pretty significant growth. Bringing in William Grants & Sons, just a handful of brands from them, just helps us get started. And they're good brands. They're brands that fit well within our portfolio. They're very premium. And so it's just a, it's a way for us to supplement our, you know, bring more brands in, more scale so that we can just, not justify, but so that we can continue to use our sales force and optimize the people that we have. Do you want to try to get the barrel thing?

Yeah, then the biggest impact when you look at the, you know, the non-branded involved is, that's where our barrel sales flow through. And we've talked about this multiple times, but you know, our barrel sales probably peaked around 2022, 2023, and then have come down significantly right now. And I think that the one question that what you implied there is, yes, you get to a point where eventually you don't have any and that would just hit the bottom. But right now, I'd say we're still selling used barrels, but the prices are down significantly and the market is down significantly. And as I mentioned earlier in some of the comments, it should not be a significant impact on our top line go forward, that we've really seen the bulk of the decline in that has already occurred. And so now we're kind of, what is a steady state level that, you know, at some point we would probably expect to go back up, but doesn't have much further it could fall.

And our next question will come from the line of Eric Serrata of Morgan Stanley. Your line is open, Eric.

Great. Thanks for taking the question. Lawson, can you just give us a little bit of an update as to the BlackBerry international plans? And first, I guess, where are you today in terms of which markets and when you entered them? What are the plans for the next 12 months? And maybe it's too early, but how are these markets tracking versus, you know, other international flavors or other flavors in other international markets It's like how honey is done. Thanks.

Yeah, yeah, yeah. We said on the car about the U.S. and how fast it's going. So I'll focus real things. So we went into the U.K., Germany, Poland, Chile, and France in fiscal 26, so about halfway through the year. So they are, you know, they have launched and they're continuing to go. It's actually, you know, the volumes are nice. and we're pretty excited about it. Now, as I think we've said multiple times, this was always planned out to be a two-year launch plan. We have the advantage where others don't of having a very large demand for the Jack Daniels brand, and so BlackBerry's going to basically go everywhere eventually, everywhere where we've got our other flavors. And honey, honey has been a long time. It's been in the market now for 15-ish years. It's approaching 2 million cases, so we're very happy with where that goes. We'll see how big BlackBerry can get. But it's a flavor that works well, we think, in the international markets. It's just a globally relevant flavor. And they're harder to find globally relevant flavors, to be honest. There have been brands out there these days. But, you know, the initial response from retailers and consumers has been really strong. And we're going to continue this launch throughout fiscal 27. We've got probably the market to look at or that we would say to be the most optimistic is Brazil just because Apple has been a home run down there. And even Tennessee, basically the entire Jack Daniels portfolio does so well down there. And we think BlackBerry can do well. Just to end on, one of the things about BlackBerry I think that is exciting is it mixes so well with lemonade. It's just a simple two, you know, Simply Lemonade and Blackberry makes for a great summertime drink as we move into summer. Other flavors, even our own flavors, it's more challenging to have a natural partner for it. The cocktails either get fancy or it just hasn't been as easy. This one seems to work really, really well, and so we're going to continue to grow that basically around the world.

And I would now like to hand the conference back to Sue Parent for closing remarks thank you and thank you lawson and jim and thank you to everyone for joining us today for brown foreman's fourth quarter and fiscal year 2026 earnings call if you have any additional questions please contact us as we close just to let you know national bourbon day is june 14th it's a day to commemorate the 1964 u.s congressional resolution declaring bourbon as America's native spirit. On this day, wherever you are, we hope that you will responsibly enjoy a glass of Old Forester and Woodford Reserve. And always remember that all bourbon is whiskey, but not all whiskey is bourbon. With that, this concludes today's call.

And this concludes today's conference call. Thank you for participating. You may now disconnect.