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Good morning, and welcome to the 1-800-FLOWERS.COM Fiscal 2026 First Quarter Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to our fiscal 2026 first quarter earnings call. Joining us on today's call are Adolfo Villagomez, Chief Executive Officer; and James Langrock, Chief Financial Officer. Before we begin, I'd like to remind you that some of the statements we make on today's call are covered by the safe harbor disclaimer contained in our press release and public documents. During this call, we will make forward-looking statements with predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties and including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any of the forward-looking statements that may be made or discussed during this call. Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. And now I'll turn the call over to Adolfo.

Thanks, Andy, and good morning, everyone. I am excited to share some of the early progress that we have made on the strategic initiatives that we discussed in our last call. As I mentioned in our last call, we view fiscal 2026 as a year of stabilization for the company, focused on building a foundation for long-term sustainable growth. We are only one quarter into our turnaround strategy, but we have already begun to move from identifying problems to taking actions. As James will discuss in more detail, our underlying profitability has begun to show a clear positive trend when we adjust for timing-related items. While there is much more work to be done and inevitably, there will be some challenges we are beginning to see some benefits from the changes we have made. Before I share some updates, let me begin by quickly reviewing the strategic initiatives we outlined on our last call. These include 4 key areas: strengthening our customer focus, enhancing talent and accountability, achieving cost savings and organizational efficiency and expanding our reach beyond e-commerce into new channels. Let's begin with strengthening our customer focus. We began to make major changes in our customer acquisition and marketing strategy during the first quarter. Historically, our company relied too heavily on bottom of the funnel marketing activities, that focus on driving revenues without fully taking into account the overall impact on profitability. This was highly inefficient and negatively impacted our financial performance. In Q1, we made a fundamental shift to focus on marketing contribution margin, which allows us to better allocate resources and optimize spending, ensuring that our marketing dollars drive measurable returns. As James will discuss further, we are already seeing positive results from this change. In the short term, we could see additional pressure on the top line as we recalibrate our approach towards a positive marketing contribution margin on paid traffic. As we pivot toward a greater focus on contribution margin, we are placing a stronger emphasis on optimizing our marketing spend to drive profitable growth, not just higher sales. This optimization delivers a twofold financial benefit that improves both efficiency and effectiveness. Efficiency ensures we are maximizing our marketing dollars, reducing waste and aligning spend with our highest return channels. Effectiveness, on the other hand, ensures our investments are more precisely targeted driving stronger engagement and results. Together, these improvements directly impact our top and bottom lines by increasing awareness, accelerating customer acquisition and improving retention. At the end of the day, this strategy positions us for stronger and more sustainable growth and profitability. Additionally, this quarter, we began testing a paid traffic consolidation strategy by redirecting visitors from our lower traffic websites to our main platforms, landing them on the same categories they were originally seeking. This approach is intended to improve productivity and maximize return on investment by increasing conversion and average order value as customers attach other categories merchandise on our primary platforms. Early results are promising, and we are confident that these efforts will help create a more scalable and efficient digital ecosystem. Expanding into new channels has been another key focus area for us. Historically, as a consumer products company with many selling options, we became too dependent on our own websites and on traffic coming directly from web browsers. The company didn't adjust its strategy as customer preferences shifted toward beginning their shopping journeys on third-party marketplaces. I'm excited to announce that we are now selling our products through third-party marketplaces including Amazon and walmart.com, making our offerings more accessible to a broader audience. Additionally, we have successfully opened our holiday pop-up shops which have been well received by customers. These pop-ups will help us test and refine a physical retail concept that we can expand to multiple locations, leveraging our broad range of product categories. Having the right talent in the right roles is foundational to our transformation. Recently, we made a key hire to strengthen our leadership team. I am thrilled to welcome Melanie Babcock to our company as Chief Marketing and Growth Officer. This is a pivotal moment for our company, and Melanie is just the right leader to help us accelerate our transformation, with a proven track record of building teams and businesses that deliver outsized sustainable returns. She was key in leveraging AI to transform the Home Depot marketing platforms from product focus to a customer-centric experience. Her proven ability to scale brands, build high-performing businesses and create customer-centric growth strategies make her the perfect partner for this new chapter of our journey. In this newly created role, she will lead our marketing evolution across the enterprise and will be focused on building a full funnel marketing approach that drives awareness, acquisition and retention, modernizing our digital experience to improve product discoverability, enhancing our merchandising strategy through stronger data infrastructure and AI and streamlining our brand architecture to create a more intuitive and connected customer journey. This customer first approach will help us build a customer lifetime value flywheel, where efficient acquisition and strong retention reinforce each other to drive profitable growth. As part of our effort to drive greater efficiency and agility across the organization, we have made great progress partnering with our external consultants to identify and prioritize additional efficiency opportunities. We have already started to implement targeted organizational changes including centralizing our marketing team and improving coordination between customer service and website development. These adjustments are designed to streamline operations, eliminate unnecessary complexity and better align our teams with strategic priorities. We have also taken steps to increase accountability at all levels of our organization, ensuring that decision-making is faster and more closely tied to bottom line results. We believe these changes position us to execute with greater focus and deliver improved results over the long term. As we enter the critical holiday period, our primary focus is on providing an exceptional experience for our customers during this important season. While we remain committed to driving organizational change, continuously refining our marketing approach, and improving agility and efficiency, we recognize the importance of maintaining stability and delivering a seamless customer experience through the holiday rush. Therefore, we are prioritizing our turnaround road map accordingly. We look forward to keeping you updated on our progress. And now I will turn it over to James for the financial review.

Thanks, Adolfo, and good morning, everyone. This morning, I will review our fiscal 2026 first quarter performance. Please note that all comparisons are made to the prior year period and represent adjusted results unless otherwise stated. During the first quarter of fiscal 2026, we saw a clear and immediate benefit from our strategic shift in marketing spend toward a marketing contribution margin focus. This metric is calculated as gross profit less credit card fees and marketing fees expressed as a percentage of sales. Both the first and second months of the quarter experienced profitability improvements as our marketing resources were more efficiently allocated, driving higher returns on investment. Third month of the quarter also benefited from this approach. The results were impacted by timing items, including the shift of certain wholesale orders from Q1 in the prior fiscal year into Q2 of this fiscal year. After adjusting for timing-related items, the trend in adjusted EBITDA was slightly positive for the quarter. Notably, this represents the first year-over-year improvement in adjusted EBITDA trends over the past 7 quarters. By focusing on marketing contribution margin, optimizing spend and streamlining operations, we were able to partially mitigate the effects of softer sales. As is the case of many companies, a portion of our cost of goods sold is fixed which creates some gross margin pressure due to sales deleveraging. We believe the changes we are implementing provide a strong foundation for stabilization as we progress through the remainder of the fiscal year and positions us for future growth. Looking ahead, we will remain disciplined in our marketing investments while becoming more effective. We will continue to partner with our external consultants to explore additional opportunities for operational efficiency. We are encouraged by the early positive momentum generated by our new approach and are confident that these efforts will drive sustainable financial performance as we progress through fiscal 2026. Now let's review our performance. Consolidated revenue for the first quarter decreased by 11.1%. This included a 14.6% decline in the Consumer Floral and Gift segment and an 8.6% decline in the Gourmet Foods and Gift Baskets segment. Revenues in our BloomNet segment were essentially flat with the prior year period. These results were primarily driven by a strategic shift toward emphasizing positive marketing contribution margin and to a lesser extent, changes in wholesale order timing, which shifted from the first quarter of the previous year to the second quarter of this fiscal year. Now turning to gross margin. Our first quarter gross margin decreased 240 basis points to 35.7% compared with 38.1% in the prior year period. This was primarily due to deleveraging on the sales decline combined with the impact of higher tariffs. Operating expenses decreased $12 million to $127.3 million, primarily due to lower marketing and labor costs. Excluding nonrecurring charges and the impact of the company's nonqualified deferred compensation plan in both periods, operating expenses declined $10.9 million as compared to prior year to $124.9 million. As a result of these factors, our first quarter adjusted EBITDA loss was $32.9 million as compared with a loss of $27.9 million in the prior year period. Before I review our balance sheet, I want to briefly update you on our cost reduction efforts. We continue to collaborate with external consultants to streamline operations and drive greater efficiency across the business. As we shared last quarter, we have already implemented $17 million in annualized cost reductions. We are beginning to see the early benefits of our cost reduction initiatives flow through the P&L. However, those savings are currently being offset by the impact of tariffs, investments in people and higher transportation costs. Based on the analysis we have done in collaboration with our external consultants, we anticipate we can achieve an incremental $50 million in cost savings over the next 2 years on a run rate basis. Please note this figure excludes onetime expenses such as consultant fees and severance costs. Additionally, this amount does not account for savings associated with improvements in marketing spend efficiency. Now turning to our balance sheet. At quarter end, net debt was $259.3 million compared with $224.1 million a year ago. Our cash balance was $7.7 million. Inventory was $269.8 million compared with $275.3 million a year ago. In terms of our debt, we have $157 million in term debt and borrowings of $110 million under our revolving credit facility in preparation for the upcoming holiday season. We expect borrowings under the revolver to be fully repaid during fiscal second quarter. And now we'll open the call for Q&A. Operator, please provide instructions for those interested in asking a question.

[Operator Instructions] And the first question comes from Michael Kupinski with NOBLE Capital Markets.

I have quite a few questions here. First of all, I know last year, you were talking a little bit about gas prices. They have seemed to come down a little bit from last year. I was wondering if you're still dealing with price surcharges on gas prices? Or have they gone away?

So Michael, this is James. So the fuel surcharge is always part of the FedEx charges. So they've moderated. They haven't gone away, but they haven't increased.

Okay. And in terms of your marketing efforts, I know you made changes there, but have you also included changes in products and price points on your products?

Michael, this is Adolfo. Yes, the merchandising organization continuously review their assortment strategy and pricing strategy to adjust their costs accordingly.

Okay. And then in terms of -- in the last call, you mentioned that consumer floral had become very price competitive. And I was wondering if you can just give us an update on the competitive environment on the consumer floral space?

So the way I would characterize that is there are more competitors emerging in the space. And what that is doing is not so much on the pricing side of the product. It's on the cost of buying clicks. Sometimes we are competing to buy the same search terms and that increases the marketing costs and therefore, reduces the marketing productivity.

Got you. And then it has always been said that how back-to-school goes, so does Christmas. Can you just provide your thoughts on how back-to-school looked for you and how Christmas is looking? Any thoughts on your -- and then maybe if you could just kind of give us some thoughts on how the wholesale business is looking as you go into the holiday season?

Yes. So Michael, on the back-to-school, that's obviously not -- for the PMall, it's part of the business, but it's a smaller part of the business. The real holiday peak for us, as you know, is the Christmas holiday season. So -- and as you know, it's still early -- it's early days in the holiday season. So that's sort on that front. As it relates to wholesale, we did have a shift, as you know, timing of wholesale orders between the end of September and early October always kind of impacts us historically. So we did have a shift from Q1 into Q2 of this year, but we are seeing really strong wholesale sales and anticipate that will be up on a year-over-year basis for this holiday season.

Michael, let me build on that. The team recently was analyzing the sales per week throughout the quarter and the fiscal year. Basically, all the way from the beginning of Q1, so July through, I would say, October, we sell per week about the same. You see the significant increases that what really matters to us, as James was suggesting, it's the holiday season. And that will start in the next week or in the next couple of weeks. That's when the season really starts for us, and that's what really moves the needle.

I got you. Okay. I was just wondering in terms of the tone of the environment right now. Are you seeing any particular changes in the tone? We saw some Fed rate action and whether or not you're starting to see the benefits from that. I'm just wondering how you're seeing what the consumer is feeling right now and just the general environment for the consumer.

I don't think nothing meaningful to comment on.

And the next question comes from Anthony Lebiedzinski with Sidoti & Company.

So just wanted to follow up on the wholesale piece. Is there any way you guys could quantify what you think the revenue impact was of the shift between first quarter and second quarter?

Yes, it was several million dollars, $3 million, $4 million, Anthony.

All right. That's very helpful, James. And then just thinking about the -- in terms of the $50 million in gross savings, how should we think about the timing of those savings? And is there any way you could say what the savings will be on a net basis?

So let me just first take the first question, Anthony. So of the $50 million we believe, on a run rate basis, that will get half of it in fiscal '26 and half of it remaining in fiscal '27. We've started already to take actions -- immediate actions, but there's certain areas like, say, supply chain and procurement that take a little longer to get implemented. So again, half this year, half next year, started to implement some of those actions as we speak. Quantifying the cost of that is a little difficult right now as we work through it, Anthony, but we believe that we'll probably -- this year, we'll have more of the cost than in next year. But at this point, it's hard to quantify. I don't want to give you a number until we have more finalized numbers.

Understood. Okay. And then for the quarter, you guys had a small tax expense. Normally, you guys have a tax benefit in the quarter. Can you talk about what happened there? And what should we expect for the tax rate for the fiscal year?

Yes. So Anthony, what's happened is we've had 3 years of cumulative losses. So typically, we would have a tax benefit in Q1. But being that we've had 3 years of cumulative losses, we are now setting up a valuation allowance for those deferred tax assets. So it's more of an accounting thing. Obviously, as we return to profitability, we'll be able to start using those benefits, but it was a -- due to -- we had to set up a valuation allowance this quarter because of the 3 years of cumulative losses.

Understood. And then as far as your move into Amazon and walmart.com. I know it's recent, but can you give us any early read on what you're seeing in terms of sales coming through those sites?

So what I would say, it's early days, but it is going quite well. I see the benefit of selling on Amazon and Walmart, not only incremental top and bottom line, which -- I mean, it's a small number, but it is growing very nicely. But the other thing is the best practices that those websites have -- the team is learning those. And as we are learning, we are also -- you are going to see us adjust our websites to better align with best practices these days. So I'm very optimistic about where that is going. We haven't even started to optimize our value proposition, pricing offering. All the team is working on right now is our top sellers are being sold on those websites. And we are seeing early traction. It's actually quite positive from the traffic that those websites have, which is why we're doing this. They already have the traffic. We're putting our value proposition in front of them and conversion happens. So far, so good.

All right. That's good to hear. And my last question before I pass it on to others. Can you also just on the increased commodity costs, what was the impact of that? And how do you see that going forward?

So Anthony, on the commodities, as I mentioned, on a year-over-year basis for the quarter, chocolate is up year-over-year. We also have -- eggs are up slightly on a year-over-year basis. And then the other major commodities are either flat or down with the prior year. So it's a little bit of a mixed bag. So it didn't have a significant impact on our Q1. Obviously, it had more of an impact was the tariffs, but the commodities kind of almost netted themselves out.

And the next question comes from Doug Lane with Water Tower Research.

I want to talk about tariffs and recently, President Trump threatened Colombia with very stiff tariffs because of the drug trade. Can you comment on how that would impact your business? And what would be the workaround if you didn't enact those tariffs?

So as you know, Colombia represents about 60%, 70% of the fresh flowers coming into the country. So it would clearly have a significant impact on the U.S. floral industry. So with that, it would have a significant impact in creating higher prices across the ecosystem. So it does happen, hopefully, it hasn't and he hasn't given a number yet. So -- but clearly would have an impact and most likely would just be an increase because so many of the flowers do come in from Colombia. We would try to offset that with other areas, but it would be very difficult to do that. So it would have an impact on the overall industry, not just 1-800-FLOWERS.

No, clearly, on the overall industry, but what is the practicality of moving your sourcing from Colombia to say, Ecuador or somewhere else in the area?

You can -- we would absolutely try, but everyone would be doing the same thing, right? So I mean there's -- we can move some of it. Obviously, you could try to change arrangements and the flowers that are in it, but -- like I said, it would definitely put price pressure on the overall industry.

Yes, clearly. No question. Shifting gears to your pop-up stores. Can you remind us what the -- what you're doing this holiday season with regards to pop-up stores and how that relates to what you did last season -- last holiday season?

So short answer is, this season we are doing 9 different locations, 8 of those for Harry & David and 1 for Things, remember. Last year, we did about the same. The way to think about these pop-ups, it's twofold. One is a nice way to -- yes, drive some sales, but really, I think we would do it for the awareness of the brand and the categories we carry. But the second more valuable reason we are doing this is I have challenged the team to identify a physical retail concept that we can roll out across the country to multiple stores. We have stores that are profitable, our Cheryl's Cookies stores in Ohio are highly profitable. They take in half have the space, I think it's 80%, 90% of the sales. We have so many categories that I do believe that you can find the right combination of categories that we already -- products that we already manufacture and we have with the right combination of branding to truly create a physical retail concept that you can just roll out across the country. So again, it's a few samples, see it as a test. It's only 9 pop-ups. But the real benefit is longer term identifying this physical retail concept that would allow us to profitably grow into physical retail.

No, that makes sense. And you're selling now on amazon.com and walmart.com. And I get what you're doing here, but then the name of the company is 1-800-FLOWERS.COM. So I wonder if there's a rebranding that needs to happen here so that you can expand so you can really be able to benefit from this expanded distribution into multiple retail channels or multiple distribution channels.

I'll say great question. We hire an external marketing and brand consultant to help us answer that question. And as everything you will see us do going forward. We are customer back. So we are going to do whatever resonates better with the customer.

No, that makes sense. And so far, Adolfo I have to say I like what you're doing. And everything seems to be on the table and look forward to tracking your progress over the next several quarters and years.

And this concludes the question-and-answer session. I would like to turn the conference to Adolfo Villagomez for any closing comments.

Thank you all once again for taking the time to join us on today's call and for your continued support on 1-800-FLOWERS.COM. Fiscal 2026 marks a pivotal year of stabilization for 1-800-FLOWERS.COM, during which we are establishing the foundation for sustainable long-term growth. While we are in the early stages of our turnaround, we had 2 significant achievements this quarter. First, we shifted towards prioritizing marketing contribution margin, which is already producing positive results. And second, we identified an additional $50 million in cost savings. We are seeing some early benefits of our turnaround strategy, and I am encouraged by the momentum that is building across the enterprise. We look forward to keeping you updated on our progress. Thank you.