Thank you, Paul. Good afternoon, everyone, and thank you for joining us today.

I'm Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee Inc. Joining me on the call is Iain Carswell, our CFO.

We're here today to discuss our results for the 3 and 6 months ended June 30th, 2026. As usual, I'll give a brief overview of our performance and the operating environment.

Iain will walk through the financials in more detail, and I'll come back with a few closing thoughts before we open the line for questions. This was a very strong quarter for Swiss Water, and with the momentum in the business, including a solid order book, a growing brand, and a rapidly improving balance sheet, we believe we're well-positioned heading into 2027.

Given that improving outlook, we intend to seek TSX approval for a share repurchase program under a normal course issuer bid, or NCIB. We believe our share price could be undervalued over the coming year based on our financial performance and future prospects, and that repurchasing shares alongside continued debt reduction is an appropriate use of funds to increase shareholder value.

The NCIB is subject to TSX acceptance, and we will provide an update on that once it is available. For the last several quarters, we've said that when coffee prices came off their highs and the inversion eased, our customers would return to the market.

That's exactly what happened in the second quarter. Processing volumes were up 17% over the second quarter of last year and now 8% year-to-date.

That growth was supported by strong demand from our established customers, solid spot order flow, and incremental volume from new customers. Our production lines operated at very high levels of capacity utilization throughout the quarter, and our forward order book is as strong as we've seen it, with customers booking well into the first quarter of 2027.

That's a very different picture from a year ago. Last year, the NYC was running up sharply, the futures curve was deeply inverted, and customers stayed lean because they didn't want to carry the cost of that inversion.

Roasters kept their forward coverage short and purchased largely for immediate needs. This year, with a strong Brazilian crop and the market well off its highs, that inversion has corrected substantially.

When that happens, customers refill pipelines and extend their order horizons to a degree, and that's what we're seeing in our order book. The market is still volatile and the trade is still cautious, but the direction is becoming clearer.

The NYC averaged US$2.78 per pound in the quarter against US$3.59 in the same period last year. That flows straight through our green coffee revenue, headline revenue was down 3% even with volumes up significantly.

As we've been very consistent about saying, we don't overinterpret revenue in either direction. What matters to us is volume, gross profit, adjusted EBITDA, cash generation, and whether we're recovering the cost of carrying coffee for our customers.

On every one of those, this was a very strong quarter. We're particularly encouraged by our trailing 12 months performance.

LTM adjusted EBITDA passed $17 million for the first time in our history. That isn't the result of a single quarter.

We've now improved sequentially for 4 quarters running, and that progress is visible in our cash flow and in our net debt levels. It reflects volume strengthening, our operations maturing, and market conditions moving somewhat back toward normal at the same time.

Our Delta facility continues to perform very well. Both production lines have been running for over 2 years now, and that continuity keeps showing up in quality, consistency, and throughput.

We operated at record capacity utilization this quarter, and given the strength of our order book and the demand we're seeing, we're assessing targeted investments to increase capacity, which we would expect to fund from internally generated cash flow and a little debt. We'll evaluate the timing and scope of that work carefully in the near term.

Interest in chemical-free decaffeination continues to build. Consumers are more label-conscious than they've ever been, and regulatory scrutiny of solvent-based processes keeps increasing in both the US and Europe.

Those developments are encouraging more roasters to evaluate chemical-free alternatives, and they support a conversion we have said for years that the consumer wants. It isn't the only factor driving our growth, but it reinforces the value of the process our brand is built on.

We're realistic about the market. Coffee futures are still volatile, inversion is still being priced into both arabica and robusta, and we're watching the US grocery channel closely, where retail prices are still elevated and could create some changes to buying behavior in the back half of this year.

Experience tells us it takes time for lower futures to reach the shelf. Our focus doesn't change: we keep coffee available for our customers, price appropriately for the cost of carrying it, operate reliably, and remain disciplined in our use of capital.

We go into the second half of the year with strong demand, real forward visibility, high capacity utilization, and meaningfully less debt on the balance sheet than we carried a year ago. With that, I'll turn the call over to Iain to walk through the financial results in more detail.

Iain?

Thank you, Frank, and good afternoon, everyone. Just a reminder that all the figures I'm going to discuss are in Canadian dollars unless otherwise stated.

As Frank mentioned, the second quarter reflected a significant acceleration in volumes, stronger profitability, and continued improvement in cash generation and the balance sheet. Total processing volumes increased by 17% in the quarter and by 8% for the 6 months of 2026 when compared to the same periods last year.

Capacity utilization was very high during the quarter, supported by strong demand from established customers, solid spot order flow, and incremental sales to new customers. Looking at volumes by customer type, shipments to importers, those customers who resell our coffees to roasters where and when they need them, were up 26% in the quarter.

Shipments to roasters, those customers who roast and package coffee to sell to consumers in their own coffee shops or for home and office consumption, were up 5% in the quarter. Looking at customer channels another way, specialty volumes were up 17% in the quarter.

These accounts serve the out-of-home consumer, primarily in cafes and restaurants in our key geographic markets. Commercial volumes were also up 17% in the quarter.

Q2 revenue was $66 million, down 3% from $67.7 million in Q2 2025. Revenue for the first 6 months was $123.4 million, down 5% from $129.9 million in the same period last year.

The primary drivers of the decrease were the lower NYC coffee futures price and reduced tariff costs passed through to customers, partially offset by the increase in volumes. As we've said consistently, we're careful not to overinterpret movements in revenue because the value of green coffee flows through both revenue and cost of sales.

In this quarter, the material increase in volumes largely offset the impact of significantly lower NYC. Moving on to our costs, Q2 cost of sales was $55.8 million, down 11% year-over-year.

The decrease was primarily driven by lower NYC coffee futures prices, the elimination of US tariff expense, direct labor efficiencies, and lower utility usage and rates. These factors were partially offset by the increase in volumes and higher activity in green coffee logistics and storage services at our subsidiary Seaforth.

Certainly. I could certainly pick up if we need be.

I'll pick up on our cost structure right now. Moving on to our costs, Q2 cost of sales was $55.8 million, down 11% year-over-year.

The decrease was primarily driven by lower NYC coffee futures prices, the elimination of US tariff expense, direct labor efficiencies, and lower utility usage and rates. These factors were partially offset by the increase in volumes and higher activity in green coffee logistics and storage services at Seaforth.

As for green coffee costs, the NYC averaged US$2.78 per pound during the quarter compared with US$3.59 per pound in Q2 2025, a decrease of 23%. For the first 6 months, the NYC averaged US$2.97 per pound compared with US$3.66 per pound in the same period last year, a decrease of 19%.

Customer purchasing behavior continued to improve during the quarter as coffee futures prices declined from their late 2025 highs and inversion substantially corrected. Customers accelerated the replenishment of inventories and extended their purchasing horizons to a degree.

We continue to see caution because the futures market remains volatile, but the ordering environment is much stronger than it was throughout 2025. Exchange rates between the US and Canadian dollar continue to influence our reported results and cash flows.

As a reminder, most of our revenues are earned in US dollars, while a meaningful portion of our costs are incurred in Canadian dollars. We also carry US dollar receivables and payables on our balance sheet and use hedging tools to manage our underlying currency exposure.

In Q2, the US dollar averaged $1.38 Canadian, in line with Q2 2025. For the first 6 months, it averaged C$1.38 compared with C$1.41 in the prior period.

Q2 gross profit was $10.2 million, up $4.9 million or 94% year-over-year. Gross profit for the first 6 months was $18.1 million, up $5.6 million or 44%.

The improvement was driven by higher volumes, improved recovery of inversion expenses, direct labor efficiencies, lower utility usage and rates, and a reduction in foreign exchange losses compared with Q2 2025. Turning now to operating expenses, Q2 operating expenses were $5.9 million, up 53% over last year, led by administrative expenses at $4.4 million, up 47% year-over-year.

The increase was primarily driven by higher non-cash share-based compensation associated with a higher share price, as well as higher professional fees due to timing of the activities. Sales and marketing expenses were $1.5 million, up 70%, primarily reflected the early timing of sales and marketing activities in 2026.

Q2 net income was $1.9 million compared with a net loss of $400,000 in Q2 2025. Net income for the first 6 months was $3.3 million compared with $100,000 in the same period last year.

Aside from the items we've discussed, the improvement in net income reflects lower financing costs. It also reflects the elimination of the embedded option revaluation following the repurchase and cancellation of Mill Road warrants in 2025.

Prior year quarter included a gain on that revaluation, which was not present in 2026. On risk management activities, we've recorded a loss of $1.1 million in the quarter, in line with Q2 2025.

For the first 6 months, the loss was $1.7 million compared with $3.9 million in the prior year period. These losses reflect the realized cost of operating in an inverted coffee futures market, along with mark-to-market movements in commodity and foreign exchange instruments.

The market was substantially less inverted in 2026, particularly compared with the first quarter of 2025. As we've consistently said, we price to recover the costs of inversion as the associated coffee is shipped and invoiced, although there can be a timing difference between when those costs are recognized and when they are recovered from customers.

Net finance expense was $1 million for the quarter and $2 million year-to-date, representing decreases of 28% and 25% respectively. The improvement primarily reflects lower average loan balances and more favorable variable interest rates.

Q2 adjusted EBITDA was $5.3 million, up $3.5 million or 191% compared with $1.8 million in Q2 2025. Adjusted EBITDA for the first 6 months was $9.6 million, up $5.8 million percent dollars or 151%.

The improvement was primarily driven by the increase in gross profit and materially lower year-to-date losses on risk management activities, partially offset by higher operating expenses. On a trailing 12-month basis, adjusted EBITDA was $17.1 million, the highest in the company's history.

Turning now to inventories, our inventory balance decreased by $10.5 million or 23% from December 31, 2025. The decrease primarily reflects the decline in the value of the NYC, together with a reduction in pounds held.

We remain committed to carrying sufficient spot inventory to ensure that coffee is available for immediate customer needs, and we expect inventory volumes to remain at or close to current levels in the near term to support continued spot demand. We will also continue to charge for the carry costs we incur in holding and hedging those inventories.

At quarter end, Swiss Water held $5.9 million in cash compared with $6.6 million at year end, and net working capital was $34.1 million compared with $42.3 million. Net cash generated from operating activities was $10.7 million in the quarter and $16.2 million for the first 6 months compared with $2 million generated in Q2 2025 and $9.4 million used in the first half of 2025.

The improvement was driven by higher net income and favorable changes in working capital. During the first half of the year, we repaid $12 million on our operating credit facility, $2.8 million of construction debt, and $500,000 on the EDC credit facility.

The outstanding balance on our operating credit facility was $27.5 million at June 30th, down from $38.4 million at December 31. We also extended the maturity of the operating credit facility to June 23, 2028.

We were in compliance with all financial covenants at year end. Our focus remains on using the cash generated by the business to reduce debt, lower interest expense, and improve financial flexibility, while retaining the ability to support future growth initiatives.

With that, before we open the line, I'll share a few closing thoughts. Like I said, this was a very strong quarter.

It reflects the work that has been building for some time. Volumes are growing, our facility is running at high utilization, our order book extends into 2027, and we have now improved sequentially for 4 consecutive quarters.

That consistency, more than any single quarter, is the better measure of the progress we've made. Some of that reflects a market that has moved in our favor, but a great deal of it reflects the decisions we made through 2025.

We kept coffee available when others stepped back from holding it, we priced for the cost of inversion, and we remained disciplined on capital while we did it. The steps we're taking on capital, including the NCIB I mentioned earlier, speaks to our confidence in where the business is heading.

Our focus from here remains on what we can control: we'll support our customers, operate Delta reliably, evaluate the capacity investments this business needs, and continue reducing debt. We believe Swiss Water is well-positioned in the back half of '26 and heading into 2027.

With that, Paul, can we please open the line for questions?

Thanks. Good afternoon, everyone, and congratulations on the results.

I wanted to dig in. You touched on several times talking about how capacity utilization is high, and it seems like there's more appetite from your customers to take on inventory.

Clearly, it seems like there's a channel fill opportunity here. My question is twofold.

First, you talked about incremental investments in order to support that volume growth going forward. When might you expect to be able to deploy dollars related to that?

What can we expect as far as incremental volume growth? Then secondly, just in your estimation, and I realize it's probably different by channel and by customer, but how long is the runway for this channel fill opportunity?

All right, Luke. Couple question there.

I'll try to unpack it as best I can. We saw some additional fill in in Q2.

I think overall, what's happening is that roasters, at the very back end of 2025, started to figure out that, gee, importers, decaffeinators are going to price this inversion and build that into their 2026 plan. They became overall more comfortable with the elevated NYC, they built that into their plan, and they had built in kind of these additional inversion costs.

That helped them walk into 2026 feeling more comfortable, somewhat more comfortable to build out their inventories. They aren't at full inventory.

I would not say that they're there at all. I think that there is still room to go.

I think that they waited into the market more aggressively when the C dropped basically through Q2, and we saw that. I think overall, the super, hyper-cautiousness of 2025 is kind of relaxing in 2026 as roasters have gotten their price that they need to maintain margin on a macro basis into the marketplace, and they are surviving and if not almost thriving now, as opposed to being in a world of hurt in 2025.

That's that. The entire coffee market industry, the trade is still expecting a significant, somewhat significant decline in the C in the back half of this year, maybe after we get past frost, maybe we have to get past first notice date, which is coming up shortly.

There's no absolutely crystal ball in this, of course, but there's a lot of coffee in Brazil, and there's a lot of coffee that's being held there. At some point, there should be a decline, but we don't know.

That would again help roasters fill in their needs going into 2027. Like I said, I think that roasters have figured the environment out into 2026 and are more comfortable with slightly more coverage.

A big drop in NYC would probably change that. As far as additional capacity, yeah, we're evaluating that, basically over the back half of this year.

When we're operating at kind of peak instantaneous capacity like we've been operating for the past 4 months, that isn't your kind of full annual capacity, but we're certainly operating at kind of peak instantaneous capacity. That has you review alternatives to add additional capacity so that you're prepared to find additional volume.

That's what happens with heavy-capital industries is first you got to put the capacity in place to be able to go get the volume. Going and getting that volume isn't just, well, gee, I've got capacity, therefore I have volumes.

No, it's one before the other. We're at that point now where we're evaluating that, and we'd probably be looking at something if we were to execute into Q2 of next year, and that would probably bring 5% to 10% approximately additional available capacity on an instantaneous basis if we execute.

That enables us to service markets that we are aggressively trying to develop, and also volume will come in chunkily and we can be surprised with volume upside. We want to be prepared to have that additional kind of instantaneous capacity when we become successful.

Sometimes we don't know exactly when we're going to become successful because we're operating on so many fronts all at once. Hopefully, that answers your question, Luke.

That does. Very comprehensive.

Thanks for that. My second question here is just on your inventory as well.

It was very much a working capital tailwind during the quarter to the extent that your free cash flow conversion was well north of 100%. I guess a similar line of questioning.

I'm curious to know how much more there is to come on that front, recognizing, yes, there's a channel fill opportunity, but also with the NYC inversion being a little bit less than what it would have been before. I imagine there's just purely we'll call it an average cost per pound relief that you're getting there.

I guess the question is how much visibility do you have on there being more working capital tailwinds for the balance of the year?

I'd be cautious on that one, Luke. The reason is, we kind of talk specifically in this conference call to a June 30th.

If we look at what's happened with the C the past 5 weeks, it has run back up, and so, we could see mark-to-market increases in working capital. It's quite possible.

We're maintaining inventories. Q3, I wouldn't be racing to say that that's going to be the kind of same tailwind.

Like I said, this entire industry has been talking about the size of this Brazilian coffee crop, and it isn't just Brazil as well. Every origin is seeing these prices, and supply and demand still works.

Microeconomics still happens. Growers are growing more coffee and trying to export it.

They're just trying to get the prices that they kind of become used to. At some point, there can be a decline.

When there's declines, increases kind of follow after that. It's always a volatile industry when you're talking overall commodities.

I think we're going to be maintaining our overall inventory pound levels where we're at right now. We're reasonably comfortable, maybe a small uptick because we are seeing increased demand.

That's, as I pointed out, roasters aren't loving the idea of institutions or governments reviewing methods for decaffeination. They don't love the scrutiny on methylene chloride and start to question what their supply chain pattern.

We've had additional questions, maybe not conversions, but interest from major roasters talking about, gee, where is your overall capacity? Where are you sitting?

Over time, those things more often than not at some point turn into volume. We want to be prepared.

Got it. Thanks a lot.

Last one and then I'll pass the line. Just on that topic then of free cash flow conversion.

Recognizing inventory maybe we shouldn't be as aggressive there and as far as how it relates value during the quarter, but maybe just the cash taxes that you guys pay is close to de minimis. You guys have pretty sizable balance when it comes to tax loss carryforwards.

If we're just thinking about this for our models going forward, what would be a realistic timeline in your view that you'd be able to use these tax loss carryforwards?

I don't have the exact length of time, but it's somewhere between 3 and 5 years, if not more. It's a pretty positive outlook as it relates to forward tax.

I think Iain could probably fill you in more specifically. Unfortunately, he had his feed dropped off here, he would have a better view, but I'll kind of go with the conservative 3 to 5 years.

Got it. Appreciate it.

Thanks so much.

Absolutely. Thank you.

Thank you. One question which is a follow-up on some of what was just discussed during the Q&A.

The volume increase in the quarter was actually very strong. It's consistent with what you've been telegraphing for several quarters in terms of when NYC futures prices were lower.

It's consistent, but it was a very strong volume increase number. Based on your conversations with both existing customers and prospective customers, you had said in the past that, given the caution that you had seen in 2024 '5 with many customers drawn-down inventory, what is your sense right now in terms of where some of the key customers are in terms of returning to normalized inventory levels and in terms of what that means going forward for the delta in terms of volume growth that we should expect on a quarterly basis?

Obviously, I'm not looking for exact numbers, but should we be thinking that it will be at the same level or this was just a very unusually strong volume growth quarter? Yeah.

I think I like the year-to-date number. That's, quarters do have, of course, greater volatility.

I like the year-to-date number, that 8%, not forecasting that, but, yeah, Q2 was pretty firm, and that was basically customers, like I'd said to Luke, making decisions kind of late 2025 when they were getting comfortable with their capability to price properly into '26, that would have been coming through in our Q2. The NYC moving down through Q2 just gave them enough confidence to add coverage.

I don't think they're all the way there, but I'd be surprised at another big Q2, but like I said, I like our year-to-date number, and I think that's a good indication. As I also mentioned in the prepared remarks, I do see a strong order book.

Customers still are making decisions in terms of exactly what to do at the back half of this year. We're going into the heavy roasting season, but with our order books in the shape that they're in, we're reasonably confident for a pretty good year.

Okay. Thank you.

There was a lot of discussion about crop conditions in Brazil and other countries of origin. I think you had talked about how you were looking to evaluate expanding your supplier chain.

Is that something that you're still thinking about, or is it a process that you've started? How should we think about that?

We are continuing to build out how we execute into basically the kind of the three key origins that drive a lot of our customer demand: Brazil, Colombia, Peru. In each of those, we are slowly, diligently expanding how we operate in those markets so that we can, a, have better control and better visibility on the flow of coffee.

It's super important to us. We run a 24/7, 365 plant, and it's very, very important that we have a very consistent supply of coffee so that we are feeding that big machine that needs to run, and that we're managing, of course, the end-roaster demand.

Improving and expanding the organizations that we do direct business with is certainly a broader industry trend. We aren't trendsetters at all in this.

We are doing the work that many other roasters themselves Although we aren't a roaster, we can act like a roaster and look towards more direct purchases, although that wouldn't be our entire position. It does help us build margin, which is something that we're always trying to do.

Great. Thank you.

I have one last question.

Go ahead.

Thank you. You noted in your prepared remarks a couple of times that tariffs have had an impact, comparability this year versus last year.

There's been a lot of noise around tariffs for the past, I guess, 2 years. I think that the current administration in the US has calmly started talking again about tariffs.

Can you give us clarity here on how we should be thinking about tariffs and positions at the moment, or it's not even expected to be an issue?

Tariffs are something that our organization was hyper-engaged with at this time last year, and at this point, we really barely talk about them. That's primarily because the US administration, thankfully, has essentially given a pass to green coffee.

They recognize that coffee is something that has a super high consumer engagement with and use for, and so they gave coffee a pass, I think, in Q3 of last year. In addition, as it relates to being a Canadian entity, thankfully, decaffeination is not seen as a transformative process.

In fact, when we decaffeinate a Colombian coffee, it still goes to our customer as a Colombian decaffeinated coffee. The origin is still Colombia; it doesn't become Canadian.

That avoids that particular issue. Roasters may be a different issue.

Canadian roasters have a kind of a much more difficult path, but as far as a decaffeinator and in the green coffee space, it really has become a significantly less burdensome issue.

Okay. Thank you.

You're welcome.

Oh, hi. Yes, great quarter.

I just wanted to raise something that hasn't been raised so far. I'm just curious about the size of the buyback, when you'll be able to first start repurchasing, and why you chose a buyback instead of a dividend, which obviously the company a long time had.

Just curious on the thinking to do with that. Thank you.

Thanks, Richard. Okay.

As I've said, we are seeking TSX approval, we do not have approval yet, although I think we would expect it. The maximum size of the buyback is something that we would apply for, and that would be 600,000 shares, although I don't know if we're going to be chasing that number down.

I think that what we'll start to do is, given approval, start to move into the marketplace and understand what the market looks like, it's difficult to say exactly how that is going to turn out. We will be, when we see opportunities and we see undervaluation, as I'd mentioned, that's when we'll pursue.

I'm not going to say kind of what the budget is that's in our mind, but there is a kind of a capital cost budget that Iain and I have worked out, and that's what we'll be pursuing, and that helps us maintain essentially how we want to manage our cash flow going forward, knowing that we're also looking at a capacity expansion, as I had mentioned. Relative to a buyback versus a dividend, a buyback is controllable.

It has an on and off feature, and at this juncture, yes, we're super confident in terms of where the business is. Our view is that we did not want to step into something that was permanent, given that for the future, we have to make other capital decisions.

Like I said, also the capacity expansion, and there might be other opportunities that we don't want to be in a situation where we need to walk back from. We like the on-off feature of an NCIB.

Okay. Yep, that makes sense.

Just a follow-up really. Just seems that, as we've discussed before, quite a lot of interest in non-chemical decaffeination in the United States, and particularly California.

To what extent are you targeting that? Also could that be coordinated with financing efforts to develop a better market for the company stock in the United States?

Could you comment on that?

I'll do my best. Where we sit in the industry is is we have a we have a view in terms of where consumer preference is, and consumer preference has continued to change and desire better transparency and overall better better-for-you food and beverages.

We participate along with that growth. It doesn't necessarily behoove us to to to overly and overtly drive that, because a lot of our customers still need to use methylene chloride.

They they they cannot instantaneously be one or the other; only small organizations can. Larger organizations that we want to continue to do business with need kind of an orderly change and and an orderly pathway through to change as they seek out better-for-you and consumer-preferred foods, beverages, decaffeination processes.

We, of course, follow it very, very closely. I would not say that we are are drivers of of any of those initiatives.

We don't need to be. We've been kind of on a on a on a meta basis a driver for 30 years of belief that consumers want to know what they're buying with their food and want transparency.

That's that's one piece. In terms of access to the US markets, I think we've looked at that several times.

I don't particularly love trying to go down the path of additional costs for that expansion. We've done quite well the past year with doubling our share price here in in Canada, and we do know that there's access by Canadian sorry, by US investors into the Canadian market.

There are pathways. That's kind of the way that we see it right now.

In terms of what's in front of us and what's super important for us to make sure that we're doing, which is driving our our our our volume, driving our capacity, I kind of see trying to get a a US listing or sub-listing or whatever it's called as a bit of a distraction.

Okay. Just a final follow-up.

Just going back to the buyback, as we all know, the stock is still pretty thinly traded, and maybe a flip side of the buyback is that will maybe further reduce liquidity. Just wondered what you and Iain have thought and discussed about that.

It is thinly traded, to be sure. I don't really know.

I think it's too early to say what exactly will happen. We've done our calculations in terms of what our budget would take, what the maximum would take in terms of reducing the float, but how is that going to change liquidity, I don't know.

It is thinly traded, and I just don't have the calculus on that.

Okay. Yep, that's it for me.

Thank you.

Thank you, Richard. Appreciate it.