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Operator: Welcome to the conference call on MTU Aero Engines AG Q3 2025 Results. For your information, the management presentation, including the Q&A session, will be audio taped and streamed live or made available on demand on the Internet. By attending in the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are Mr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Thomas Franz: Thank you, Sarah. Good morning, and welcome to MTU's 9 Months 2025 Results Call. We'll begin today's session with our new CEO, Dr. Johannes Bussmann, who would like to introduce himself and share his first impressions. Following that, Katja will highlight the most important developments of the quarter and walk you through the financials, providing a detailed overview of our segment performance and underlying drivers. To close the presentation, Katja will summarize the key takeaways before we open the floor for your questions in the Q&A session. With that, it's my pleasure to hand over to Johannes. Johannes Bussmann: Thank you, Thomas. Good morning to everyone, and welcome to our earnings call. I have been on the Board now since mid of July, so quite over 2 months already, and it was a great pleasure to meet already some of you in person. For those who don't know me yet, let me introduce myself briefly. I've spent nearly my entire career in aviation and hold a degree in aerospace engineering. And furthermore, I was part of Lufthansa Technik for over 20 years. During my first weeks at MTU, I was working closely and intensively with my predecessor, Lars Wagner, to ensure a smooth and collaborative handover and transition. Having been in my role as the new CEO of MTU, it has been really great to dive deeper into the company, our programs and find an inspiring set of people that is well positioned to capitalize on market opportunities. It actually feels like much more than 2 months. I guess the reason is that I worked with MTU for many years as a business partner already and was previously a Supervisory Board member of MTU. My priority is now to get to know MTU really in depth. That is my current visits and journey from the production sites and of course, the shops and different products and people. And I'm truly inspired by the passion the entire MTU team shows on these visits. And you can feel that everyone is really innovative driving and has a great passion for shaping the future of this company. I will be happy to share my insights and key priorities moving forward with you at the full year's release. But today, I also have the pleasure to welcome Dr. Ottmar Pfänder in the team, who will replace Michael Schreyögg as 1st of January 2026. And I would like to thank Michael for his great contribution for over 35 years with MTU, and he did a great piece of work here. Ottmar will take over his responsibilities as Chief Program Officer and has also more than 25 years of experience in the industry and with MTU. As the new Executive Board team, we will continue MTU's growth and transformation course, and I look forward to shaping MTU's future with my team from Katja, Silke and Ottmar and how we are progressing for the first month -- 9 month of this year, Katja will explain to you now. Thanks. Katja Garcia Vila: Thank you very much, Johannes, and a warm welcome also from my side. Let's briefly review our key financials before I move on to the business highlights of the quarter. Group revenues increased strongly by 19%, reaching nearly EUR 6.3 billion, in line with our full year 2025 target. Adjusted EBIT rose over proportionately by 34% to EUR 995 million, resulting in a strong EBIT margin of 15.9%. This performance was driven by a continued favorable mix in the commercial OEM segment and robust profitability in MRO. Free cash flow came in at EUR 279 million, representing a better-than-expected cash conversion rate of 39%, a strong development despite ongoing headwinds from the GTF fleet management program. Additionally, we saw strong cash contribution in the MRO segment and effects from conscious cash flow management. Based on the strong 9-month performance, we expect to achieve 2025 sales guidance in all subsegments and raise our EBIT and free cash flow guidance. I'll walk you through the details in a few minutes. Let us now move on to Page 5. The positive market trends remain intact. We see significant opportunities outweighing existing challenges. Passenger traffic rose by 5% year-to-date in August, reflecting sustained demand across global markets. Cargo traffic also showed a robust performance with a growth of 3.3% year-to-date. For the full year, YATA projects a 5.8% increase in passenger volume, a return to more normalized growth levels following the post-pandemic recovery surge. Over the mid-to-long term, global passenger traffic is expected to grow steadily by 3% to 4%, driving sustained demand for new aircraft and aftermarket services. While the supply chain continues to recover, it still remains below pre-COVID stability. That is why the production ramp-up is slower than needed to meet rising market demand. Consequently, airlines are extending the service life of mature aircraft and engines, which in turn drives strong MRO demand and results in more extensive shop visits. This also keeps demand for spare and lease engines at elevated levels with prices remaining very attractive. Global defense budgets are rising. For MTU, momentum in the Eurofighter program remains strong with new orders from core nations and international customers. Germany confirmed the procurement of 20 Eurofighter, 52 engines for deliveries between 2031 and 2034. In the U.S., demand for the CH-53K helicopter is rising. The Marines have ordered 99 units for delivery between 2029 and 2034. MTU contributes the power turbine to the T408 engine and holds an 18% program share. Recent news flows around aircraft has been somewhat sovereign. Nevertheless, we remain optimistic that governments will find a solution to ensure the program continues, given its strategic importance for future European sovereignty. Additionally, the weaker U.S. dollar-euro exchange rate poses a challenge, particularly for European aerospace and defense companies. We are mitigating this effect through our active hedging activities. In this dynamic environment, MTU remains well positioned to capture growth opportunities across both commercial and military segments. Our diversified portfolio, strong customer relationships and continued investments in technology and capacity enable us to navigate current challenges while driving long-term value creation. Let's now move on to another topic, an update on the current tariff situation. Since our last update on the topic, there has been progress between affected countries and an agreement has been reached. This agreement follows the spirit of previous arrangements in our industry and reinstates a general exception from tariffs for aviation products. This exception does not include other products such as industrial gas turbines. Furthermore, detailed rules for the application of the agreements are still in alignment between the EU and the United States. Beyond that, we are still waiting for tariff clarification for machineries, engine stands and other items. To sum that up, significant progress has been made on the topic. To mitigate these challenges, we are continuously adapting our internal processes to meet all requirements. We analyze on an ongoing basis on how to optimize our part streams to reduce any impact. In addition to that, we are also working on contractual agreements to further reduce our exposure. With that, I will now move on to our key milestones of the third quarter. Moving on to Page 7. Let me now share the key milestones of the quarter. To start with, as mentioned earlier, Germany has now confirmed the procurement of 20 additional Eurofighter aircraft. Including existing orders from the core partner nation, this brings the total firm order book to 160 new Eurofighter engines, which are scheduled for delivery over the coming years. Let's continue with the GTF fleet management plan. We made great progress in the ongoing execution of this program. Essential aspects include the improvement of parts availability, expanded MRO capacity and better turnaround times, all of which are progressing. Additionally, we support customers and airlines by providing spare and lease engines. To summarize, we are on track. Further good news for the GTF program came just last week. In October 2025, the GTF Advantage received the EASA certification. This success is the next step in the process to allow deliveries to airline customers and an entry into service next year. Recent customer orders reflect continued strength in our commercial OEM business. LATAM Airlines and [ Avelo Airlines ] have placed orders for a total of 174 Embraer E195-E2 jets, including options. These aircraft are exclusively powered by the GTF engine, underscoring continued market confidence in our advanced propulsion technology. And our partnership with GE, we also see new opportunities. Together, we are strengthening our industrial gas turbine portfolio with focus on naval propulsion, especially the LM2500 and LM6000. The LM2500 is set to play a central role in powering German Navy's next-generation F127 frigates with growing interest also from other European nations. Maintenance will be carried out at our MTU facility in Berlin, where we're currently investing in a new production center. Over the coming years, we aim to grow our MRO services for industrial gas turbines by around 30%. A key milestone for MTU Maintenance Berlin-Brandenburg was receiving the EASA certification for full MRO services on PW800 engines, which power premium business jets such as the Gulfstream G500, G600 and Dassault Falcon 6X. This makes the site in Berlin the second certified MRO provider for PW800 engines worldwide. As part of Pratt & Whitney Canada's global service network, we are strengthening our position in the fast-growing business jet segment. MTU Maintenance Lease Services has opened a new parts supply warehouse in Zhuhai, China, complementing existing facilities in the Netherlands and the U.S. This expansion strengthens our global logistics footprint and ensures rapid access to serviceable material for CF6-80, CFM56, G90 and V2500 engines across the Asia Pacific region. Now let's move on to the financial overview. Let's take a closer look at our financial performance for the first 9 months of the year. As expected, Q3 could not fully keep up with the extraordinary strong performance from the first half of the year. However, MTU reported record results for the first 9 months ahead of the expectations. Group revenues rose by 19% to EUR 6.3 billion, driven by strong growth in both commercial OEM and commercial MRO segments. In U.S. dollar, total group revenues were up 22%. Commercial OEM was supported by strong spare lease engine sales. Adjusted group EBIT rose over proportionately by 34% to EUR 995 million, delivering a strong 15.9% margin above guidance and above our own expectations. Growth was driven by a higher share of spare and lease engines in commercial OEM and solid spare part sales. Commercial MRO also contributed significantly despite higher GTF MRO share and ramp-up costs at MTU Fort Worth. Net income adjusted grew in line with adjusted EBIT and reached EUR 720 million. Free cash flow came in at EUR 279 million, an improvement of 31% compared to 2024. This figure was impacted by compensation payments related to the GTF fleet management plan. These were partially offset by higher cash contribution from our MRO business and effects from conscious cash flow management. All in all, a great set of results. Let's now take a closer look at our business segments, starting with the OEM business on Page 9. Total OEM revenues rose by 15% to EUR 2 billion, impacted by a weaker U.S. dollar. While commercial OEM revenues grew 20% to EUR 1.6 billion, military revenues declined by 2%, mainly due to delayed deliveries in new engines as well as back-end loaded repair activities. However, Q3 2025 saw a 3% increase. We expect a strong fourth quarter in revenues to achieve our full year guidance on growth in our military business. Adjusted EBIT increased over proportionally by 44% to EUR 640 million with a strong margin of 31.1%. This is higher than initially anticipated, driven by a favorable product mix in new engines and robust spare parts growth. Let me now share with you the organic commercial growth rates. Organic commercial OE revenues in U.S. dollars increased by a high single-digit percentage, driven by GTF and GEnx engines with a strong share of spare and lease engines. Q3 2025 showed similar growth compared to the first quarter of the year, but with a higher share of installed engines. In Q4 2025, we expect a higher output of new engines supporting our full year guidance. Organic spare parts revenues rose by low teens, supported by narrow-body engines and mature platforms. In Q3 2025, growth was up mid-to-high teens, in line with expectations and our full year guidance. Let's move on to the commercial MRO segment. Reported MRO revenues increased by 20% year-over-year to EUR 4.3 billion, while U.S. dollar revenues were up 24%. Major revenue drivers were narrowbody engine programs, mature widebody platforms and our MLS leasing and asset management business. The GTF MRO share reached 40%, in line with our full year expectations. In Q3 2025, we observed an increase in shop visits and higher material content, resulting in a GTF MRO share of 48% for the quarter. Adjusted EBIT increased by 18% to EUR 355 million with a stable margin of 8.3%. The margin was supported by a favorable independent business mix and strong contribution from equity accounted joint ventures and impacted by the higher GTF MRO share and ramp-up costs by MTU Maintenance Fort Worth. So before heading to the guidance, let me share an update on our current hedge book. As you can see, we were quite active in the past quarter, further expanding our currency protection for the coming years. For 2025, we are now basically fully hedged, protecting our results from currency impacts. Also, looking at the following years, we have made progress in managing our exposure in line with our hedging policy. Looking ahead, we are following the targeted hedge coverage rates as set in our hedge policy. In addition to that, we are currently updating our exposure assumptions to have the latest developments incorporated into our hedging strategy. After that, we are now coming to the outlook for the year 2025. We are upgrading our outlook based on the strong performance of the first 9 months. The Q3 results and the strong outlook for the current quarter allow us to lift our EBIT adjusted guidance. Coming from an estimate for EBIT adjusted growth in the low to mid-20 percentage range, we are now able to lift that to a mid-20s percentage number. Adjusted net income is expected to grow in line with EBIT. This substantial upgrade in EBIT also translates into a stronger cash flow. We now expect the free cash flow to reach a range between EUR 350 million and EUR 400 million, up from the previous range of EUR 300 million to EUR 350 million. We can reaffirm our revenue outlook with expected group sales between EUR 8.6 billion and EUR 8.8 billion based on an average U.S. dollar exchange rate of USD 1.13 per [ Euro ]. Within this, we anticipate growth in our military business in the mid- to high single-digit percentage range. Commercial OE is projected to grow in the mid-teens. Within that, the share of spare and lease engines is higher than initially anticipated. Aftermarket demand remains in line with our latest expectations, resulting in a revenue growth outlook of up low to mid-teens. Lately, we also reaffirm commercial MRO revenue growth outlook to mid- to high teens, supported by heavier shop visits and rising demand for GE90 engines. The GTF MRO share should remain at around 40% of the segment revenues. This upgrade again highlights the strong underlying business and our ability to generate highly attractive margins as well as our progress in generating free cash flow. Let me summarize our achievements in the third quarter 2025. The excellent first 9 months performance leads us to upgrade our guidance again. Revenues are expected to reach the previously communicated levels even in a weaker U.S. dollar environment. At the same time, we see profits and free cash flow generation well ahead of our previous expectations. The market environment for our industry and MTU remains very supportive and underpins our positive outlook. The impact of the tariff environment has been limited as described earlier, and we continue to adapt to the remaining challenges. Great business in a great industry. And finally, already as a heads-up for next year. We are planning to release our first guidance for 2026 with our preliminary full year results in February 2026. With a couple of market decisions happening towards the end of the year, like the political discussions on FCAS as one example, it will take slightly longer than in previous years before sharing our view on the year in line with most of our competitors. Now this concludes our presentation. We are now happy to take your questions. Operator: [Operator Instructions] Will go ahead with our first question. This is from Chloe Lemarie from Jefferies. Chloe Lemarie: The first one would be on the OEM performance in Q3. So Katja, you mentioned that the OE mix has started to normalize in the quarter. But could you add further color on this? Like how much of the way are we towards a normalized OE mix in Q3? Second part of that question is we've obviously seen record margin in the division this quarter. So could you help us understand the key moving parts driving that? And in particular, because it looks like spare parts accelerated, but probably not enough to explain the 450 bps of sequential increase in margin. Second -- sorry, last question for me would be on the GTF compensation payment. Could you quantify how much was paid in the quarter? Katja Garcia Vila: Thank you, Chloe, for your questions. I will try to answer them exactly as you've posted them. First of all, as elaborated in the Q3, we saw an elevated level of installed engines coming in. We don't quantify exactly the numbers, how much spare and how much installed. Anyway, what I can also state is that we have still seen a reasonable share of spare and lease engines also in the quarter, and we expect that also to move on further. What we have, in addition, seen definitely during the course of this quarter is a strong increase in our spare parts business, and this has also helped and supported the guidance expansion, not the guidance, the revenue expansion and the returns expansion. On the GTF, I can share the figure that we have paid this quarter. It was around USD 100 million for MTU, which has post, so to say, the headwind to our free cash flow generation, but which is in line with expectations. If you remember, we expect for this year in total, a compensation payment quite similar to what we have paid in 2024. That was around USD 390 million. In the first 2 quarters of the year, in total, we had paid EUR 150 million. So overall, we stand at USD 250 million right now, expecting further payments to take place in the first -- in the fourth quarter. Chloe Lemarie: Can I actually follow up on this because on the payment last year, it was all in Q4. So you have a very easy comparison based on Q4 free cash flow. So how should we think of the conservatism based in the upgraded free cash flow guidance? Because on my math, you should be having a pretty significant year-on-year tailwind in that free cash flow performance? Katja Garcia Vila: So we also had some payments during the course of the third quarter last year. I would not consider that to be now a conservative approach. As I said, we will still need -- or we still expect around USD 140 million more or less to be paid in the fourth quarter. And this is what we have also baked in when we provided the upgrade of the guidance. Operator: We will now take the next question. This is from David Perry from JPMorgan. David Perry: Yes. I guess my question was the same as Chloe, so I haven't thought of another one. But I think it is worth just repeating it. As Chloe said, the margin is just exceptional in OEM in Q3. And you seem to have said unlike in Q2, it's not because of the spare engines, but it's because of the spare parts, which is great. But just maybe if you have a bit of color about why the margin on the spares, the spare parts is just so strong in Q3? Or is there anything else at all that would explain the really good performance? Katja Garcia Vila: Thank you very much, David. And as you have stated correctly, the big driver of the margin in the third quarter are not over proportional spare and lease engines, but rather the strong performance on the spare parts. And driving the spare parts compared also to the first half of the year. In the first half of the year, we were at a high single-digit rate, growth rate, now that rate has definitely significantly expanded to a mid- to high double-digit range, which also means then strong impact on the margins. And in addition to that, we also saw pricing effects kicking into place now also in the third quarter. David Perry: I guess if I can just have one follow-up. The obvious question is, do we or don't we extrapolate this forward? I mean, is there some kind of -- is it about maturity of the mix? Is it you're taking more margin on GTF or something? Because clearly, we've never had a margin this high. I don't think you've ever had one that high in a quarter. Katja Garcia Vila: So if you're referring to the overall margin of the OEM segment, I would still not say that this is exactly the new normal that you should anticipate. You remember what we gave as guidance at the Paris Air Show, which is a little below what you've experienced now in the third quarter of this year. So the maturity definitely plays a role with regards to the mix on the spare parts. And what we will also see in the fourth quarter then on the OEM margin overall is that we will continue to see strong new deliveries. Operator: Next question is from Ian Douglas-Pennant with UBS. Ian Douglas-Pennant: I've got a few, but let me prioritize. So about your OEM EBIT guidance, by my math, it implies something like a mid-single-digit growth rate implied for Q4. Can you help us understand any kind of seasonality patterns that we should be looking for in Q4 to explain why the growth rate is going to slow down? Secondly, Pratt & Whitney on Tuesday gave a comments on the call that they revised down their expectation for how many GTF deliveries they're going to make this year. Can you help us understand why then your series growth guidance for this year is unchanged. I've got a few more, but I'll respect the 2-question rule. Katja Garcia Vila: Yes. So far, looking at the sales guidance that we have out, I cannot 100% record how you come to a limited growth guidance now on the OEM program. I think our expectation is that we will have on the OEM segment also a strong sales performance in the fourth quarter, supporting us in our full year's guidance expectations. Looking at the GTF, I think for the GTF itself, we do see better supply chain helping us also to ramp up further new output on new engines. And I think there, we are also making progress supporting also the ramp down of the situation in the market with regards to the GTFs. And also keep in mind, we do provide more than just the GTF engines in the OEM segment. We also have widebody engines where we do see good business moving forward. Ian Douglas-Pennant: I'll jump back in the queue and follow up with IR on the first question. Maybe I made a mistake somehow. Operator: We'll take the next question. Next question is from Robert Stallard, Vertical Research. Robert Stallard: I've got a couple for you. First of all, on engine leasing. This has clearly been doing very well at the moment, but these are particularly unusual circumstances. The market is very tight, very strong. How are you looking to manage this risk going forward when we do see a conditions returning to normal, particularly with regard to residual values? And then secondly, on the defense side of the business, you mentioned the strength in Eurofighter orders and backlog. How do you expect Eurofighter sales to progress and ramp from here? Thomas Franz: Rob, it's Thomas. I'm taking these 2. So engine leasing on the one hand side, yes, the market is very strong at the moment. But as you know, we have not a remarketing risk like other companies in the place that we are having a direct correlation between our leasing business and our MRO business, where we can always move things back and forth supporting the one to the other. So we feel pretty good with the outlook we gave at the Paris Air Show as well as the current situation we're in. On the Eurofighter, that's a little bit of difficult question. Yes, the order momentum is accelerating. We see a high level of interest, and we also hear and discuss with our partners and also with the OEMs, the ramp-up of manufacturing. But at the end of the day, there are some lead times in the programs, and we need to see how we can -- we can develop there further. So this is nothing that accelerates significantly in the next 1, 2 years on a revenue perspective. So we need to see how that plays out in the years thereafter. Operator: We'll take the next question. This is from Ross Law, Morgan Stanley. Ross Law: So first, just coming back on the OEM margin. The implied Q4 step down is quite material. On my math, it's something around the high teens, which would probably be the lowest Q4 margin in OEM for about 5 years. So assuming spare parts don't fall off a cliff in the fourth quarter, is this implied sequential change all driven by this variance in mix? That's the first question. And then secondly, just on FCAS, if this does get canceled, what would be the potential impact to your 2030 guidance? Katja Garcia Vila: Okay. Let me first take the margin question on Q4. As we had said already during our H1 call, we do expect not an as strong spare in these engines business moving forward in the second half of the year. And if you do the pure math there, we do expect some impact also due to the fact that the installed engines are increasing. Now, so that is the reason for the lower expectation on the margin for the Q4. With regards to FCAS, I think we are very confident that there will be a solution found to move on with the program. The politicians at the moment are in talks. So maybe, Johannes, you've been to Berlin a couple of times. Maybe you want to say something about FCAS? Johannes Bussmann: Yes. I think we are in phase IB, which is still lasting until September, so third quarter next year. And that's what we still need to work on and deliver. And that's what we also will do together with our partners in the Engine segment. And the decision time line that we hear from the political side in Berlin right now is still the end of the year. And that's, of course, something we are looking forward. And we as MTU and also with our partners, Safran and ITP are fully committed to extend and continue the program. And if the time line by the end of the year is met, we are in fine shape, and we are concentrating at the moment on delivering on the first parts that we are still working on. Ross Law: Okay. Just a very quick follow-up. Can I just check in your 2030 guidance, is there a contribution from FCAS included in that? Katja Garcia Vila: Yes, there is a contribution of FCAS included in our 2030 guidance. Operator: We'll now take the next question. This is from Sam Burgess, Goldman Sachs. Samuel Burgess: Firstly, just on the stable margin in commercial MRO. There's clearly been a shift to more GTF MRO. But can you just help us disaggregate the drivers there of that stable margin? What was work scope versus pricing versus the MLS contribution? Any color there would be really helpful. And the second one, just on the OEM side, you mentioned the pricing effects impacting in Q3, Katja. Can you just remind us in terms of in 2024, whether those pricing effects impacted at the same point? Katja Garcia Vila: Okay. Let's start with your question on the MRO business and the MRO margin. So as we have elaborated already, in the third quarter, we had really a significantly higher share of GTF MRO works compared to the first half of the year. We were short, so to say, with regards to MRO throughput in the first half of the year also due to missing parts. The supply chain has now stabilized on the GTF materials, and this is why we were able to ramp up the share of work in our shop, which then also will help to drive down the AOG situation during the course of the next coming months. With regards to pricing effect, pricing effect kicked in a little later last year in 2024. So some of the pricing was a little pre-pulled this year into the third quarter. Samuel Burgess: My question actually on commercial MRO was more about how you've maintained a stable margin given GTF is a significantly bigger share. Can you just help us think through what's been really strong there? Is it just more material intensity on widebody? Any color there would be very helpful. Katja Garcia Vila: Okay. Yes. Sorry, I didn't get that point with my first answer. Yes. So overall, what we do see is that the work scopes on the mature engines are increasing. That is one definite driver for margin expansion in our MRO shops. You know that the airplanes are flown longer. So we have more shop visits and with higher contents in the time. And on the MLS side, you know that we've provided a guidance moving forward to achieve EUR 1 billion in sales until 2030. And this business is continuously expanding also supporting our margin expansion on the MRO segment. Operator: Next question is from Christophe Menard from Deutsche Bank. Christophe Menard: I had two as well. Trying to understand the very strong OE margin in Q3 as well. The question is, is IGT also part of the strong performance? I mean you highlighted this in your presentation. So I was wondering whether that was a contributor to this. And the second question is on GTF Advantage. I mean, you will start delivering by the end of this year, if my memory is right. Has it any impact on the OE margin business first? And the side question is, there is also an upgrade program around GTF Advantage. Are you seeing some customer acceptance of this or interest? And when could it have an impact on your MRO revenues and profitability? Katja Garcia Vila: Okay. Let me take the first part. Let me take the IGT topic. IGT is part of the spare parts revenues. So there, we also do see a good business moving forward. And as I said, we will expand the business going forward in our facility, the MRO work going forward in our facility in Berlin-Brandenburg. With regards to the GTF Advantage, you want to take it Johannes? Johannes Bussmann: Sure Katja. No problem. Entry into services next year, so 2026. We're, of course, happy that we have all the approvals now under our belt and the production is now expanded and entry into service, I mentioned next year and then ramping up over time to the full load that we think is required. And of course, there is interest from a customer side for a better performance and longer on wing time for the engines. So we are quite confident that we achieve the targets and the entry to service level then is increasing, of course, over the time. Operator: Next question is from George Mcwhirter from Berenberg. George Mcwhirter: I've got two, please. The first one is just following up from Sam's question on pricing. How do you expect pricing of spare and lease engines to trend in 2026? And the second question is on the industrial gas turbines business. You mentioned that you plan to grow this business in the coming years. Can you just remind us of how big this business is in revenue terms, please? Katja Garcia Vila: Thank you, George, for your question. So the first question on the pricing, I'm sorry to say that we don't give guidance on these detailed levels and also not for 2026 now. So far, we've seen supportive pricing in the market, which has also helped us this year on the margin expansion. Depending on how the market overall will develop, pricing will be determined. With regards to the IGT, I don't -- I'm not fully aware of a share that was ever to communicated. So this is a business that we find very attractive, and this is also the reason why we are investing in our Berlin-Brandenburg facility to expand our IGT business now going forward. Operator: We'll now take the next question. This is from Rory Smith from Oxcap Analytics. Rory Smith: It's Rory from Oxcap. I wanted to follow up on Sam's question on MRO profitability as well, please, but maybe asking it in a slightly different way, given that you've talked about USD 10 billion to USD 11 billion in MRO revenues to 2030 and then that doubling of the MLS to about EUR 1 billion to 2030. Maybe if you could help point us in the direction of the split in commercial MRO profits in 2030 or thereabouts between those buckets that you've called out today, the narrowbodies, the mature widebodies and the MLS, just to give a sense of direction of travel stepping back from the sort of the particulars of the quarterly movements, that would be really helpful. Katja Garcia Vila: Yes, Rory, thank you very much for the question. So I'm sorry to say that we don't break down individual profitabilities of subsegments like this. What I can say is that we do expect a positive development in all areas of our business. So with the GE90 and also the contracts that we have moving forward, also the GEnx, I think on the widebody side that we do see continuous demand for MRO services. The same accounts for the narrowbody fleet, which still continues to grow and will continue to grow during the course of the next couple of years. And we have provided you at least with an outlook on the revenue side for the MLS business saying that it doubles its contribution to our 2030 sales figures. Rory Smith: And just a follow-up on near term, the ramp-up impact of MTU Fort Worth. Apologies if you've given this already, but have you given a sort of guidance on the dollar impact of that and when that rolls off? Katja Garcia Vila: What we have provided you with was an outlook on the expected investments in PPE that we do see connected to this ramp-up, which was USD 120 million over the course of the next coming years. MTU Fort Worth will have a first induction of an engine by the end of next year. And this will be the LEAP engine where we've invested into the license. There will be another program starting by the end of the decade. But you need to take into consideration that this will not be a material impact, for example, in the near term for 2026 with regards to sales. Operator: Next question is a follow-up from Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: I have a couple of follow-ons, please. So we saw some headlines in the press, I think, from a call that you may have done earlier in the day saying that tariff costs are ahead of your initial expectations. Could you update us on what you think the number is that tariffs will cost you and whether that number has changed since earlier in the year? And my second question is, so this year so far, we've seen 13 A320neos, at least with GTF engines and at least one A220 being retired. And obviously, they're being retired very young. How do we explain that it's A320s with GTF engines and not with LEAPs that are being retired? And secondly, how do we expect -- how do we explain that those aircraft are being retired quite so young at this point. Does this put a ceiling on your ability to increase price at some point? Katja Garcia Vila: Okay. Let me start with the tariff question first. I think this must be a misunderstanding. When we started to talk about tariffs, our original assessment was that we expected the gross impact of tariffs in the high double-digit million range. That was prior to any mitigation measures, which we said we would elaborate on. When we had our H1 call, we spoke about high single to low double-digits impact that we do expect on our EBIT after mitigations. And this is also the figure that we still confirm. So the low double-digit million impact on tariffs this year is what we have currently foreseen. So there is no change in our assumptions with regards to tariff implications. With regards to the retirement rates in general, I would say that we still see very low retirement rates overall in the market. And what we also have is that we do have a very strong order book on the GTF still moving forward, which was also pointed out with the order wins that we had at the Paris Air Show. So I cannot give you a detailed explanation on specific aircraft, I have to admit. But overall, our order book on the GTF remains very healthy, also due to the fact that this engine really performs well with regards to, for example, fuel consumption, which is a significant improvement compared to prior generations. Operator: We will now take the next question. This is from Olivier Brochet from Rothschild. Olivier Brochet: I have a couple of questions, please, for you. RTX indicates that on the GTF the shop visits are heavier in -- as we get closer to the year-end. Am I right in thinking that with the 18% share that you have on the A320 engine, it helps sales, but also profit rate in OE? The second question is on FCAS. Do you have any assets that are at risk if the program is dropped? And then the follow-up on the comment you made, Katja, on the new program in Texas by the end of the decade. Do you expect a material fee to be paid at some point between now and then on that, please? Katja Garcia Vila: Okay. Let me start with the RTX shop visits or heavier shop visits. You're totally right. Our share in the program is 18%. So there might be some impact coming from more heavy shop visits, but that is also what was expected in general during the course of the program that after a certain time, shop visits will become more heavy as we've also moved away now with better material availability from quick turns, which we had to do for a certain period of time now moving to more heavy shop visits with respective impact. Assets with regards to the FCAS program. So what we have done so far in the FCAS program as we're -- and we are still doing as we deliver on the phase IB, which was ordered by the government. And this is what we're currently following on until late Q3 next year, waiting for clarification on the program to move on in the next -- in the next phase by the end of this year. And with regards to fee, Ian, what we have paid was, so to say, the entry fee into the program that was around USD 100 million that was late last year. So that has already been paid. What we have also done is we have put additional payments when the program runs that we have to do into our net debt figure in the second quarter of this year. This was EUR 100 million, but these payments are not due in the near term. They will come when the program will ramp up to certain levels. There will be some more payments. Olivier Brochet: If I may follow-up on the FCAS topic. You don't have any assets that are on the balance sheet and that would be at risk if the program is [ drop? ] Katja Garcia Vila: No, there is no relevant asset on the balance sheet. Operator: We have no further questions at this time. So I will now hand back to the speakers for any closing remarks. Thomas Franz: Yes. Thank you, Johannes. Thank you, Katja. Thank you all for the participation in this call. As usual, the IR team is online for further clarifications or questions for the coming days and weeks. Thank you. Have a great day, and see you next time. Operator: Thank you. We want to thank Mr. Johannes Bussmann and Mrs. Katja Garcia Vila and all the participants of this conference. Goodbye.
Operator: Good morning, and welcome to the investor and analyst call for LSEG's Third Quarter 2025 Trading Update. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to David Schwimmer, CEO of LSEG, to open the presentation. Please go ahead. David Schwimmer: Good morning, everyone. Thanks for joining the call. I'm here with MAP and Peregrine as usual, and we are also joined by Daniel Maguire, our Head of Markets, to talk about the Post Trade transaction that we announced this morning. For this quarter, we're going to take a slightly different approach from a normal Q3 given the intense debate in recent months around our business and AI. I'll cover some key aspects of our AI strategy and the excitement we have about the current opportunities, before MAP goes through the Q3 numbers, and Dan covers the Post Trade transaction. Then, of course, we'll be happy to take your questions. It has been a really busy quarter with great progress on several fronts. Group organic growth continues to be very healthy at 6.4%, with D&A growing at 4.9%, similar to the first half. ASV growth came in at 5.6%, a little better than expected, and we anticipate it being better again in Q4. We're raising our margin guidance to the top of the original range at around 100 basis points of improvement, reflecting strong operating leverage and cost control. As you may have seen, we've launched a number of AI-related partnerships involving our data, which is valued and relied on by partners old and new as industry standard. We've announced an important transaction today that creates a strong partnership and aligned incentives for the adoption of Post Trade Solutions while also increasing our revenue share from SwapClear and extending the profit-sharing arrangement with our partner banks by 10 years. More on this in a few minutes. And on the share buyback that we announced at our half year results, the original intention was to complete that by mid-December, but we've taken advantage of a lower share price and accelerated the GBP 1 billion buyback to finish by the end of this month. And we're today announcing a further GBP 1 billion buyback to be completed by our full year results in February of next year. Our strong cash generation gives us the firepower and the flexibility to invest organically to make important strategic moves and to be active in returning cash to our shareholders. On the next slide, we have summarized our LSEG Everywhere AI strategy under 3 key pillars: trusted data, transformative products and intelligent enterprise. We'll talk more about those second 2 at the Innovation Forum in November. But let me take a minute or 2 to dive into our data and the critical and valuable role it plays now and will play in an AI-rich world. The easiest way to think about our data is that the content itself and access to it is effectively financial markets infrastructure, something we know a lot about. It is industry standard, deeply trusted, embedded in highly regulated customer workflows and supported by processes and infrastructure that are extremely hard to replicate. And we are and always have been open. We deliver data to wherever our customers want it, their screens, their servers, their cloud and, of course, through third-party providers. Let's unpack this over the next few slides. Data & Feeds accounts for a little over 1/5 of group revenues. On this slide, we've broken down these by data type. But before we get into that, I want to remind you of the scale of our data. It is the largest pool in the industry, both in terms of breadth and depth. We have over 33 petabytes of data. That is over 3x the so-called common crawl, the data set formed from the public Internet, which is used to train many LLMs. Let's begin with the 45% of our Data & Feeds revenue derived from real time. This is a business built on physics, not probability. We've built connections to 575 exchanges and execution venues globally with our own infrastructure. In the blink of an eye, we standardize and translate the exchange outputs into a single common language and deliver them directly into the world's financial institutions. Millions of hard facts per second, not probabilistic algorithms. In a nutshell, AI cannot replicate or replace our real-time data. Then we have 25% of our Data & Feeds revenue, which is specialized and enhanced by our own enrichment. By specialized, we mean proprietary. Think Tradeweb fixed income pricing or exclusive like the Reuters News agreement or contributed like our deals database. So an LLM could not access these data sets through public sources. And then on top of that, we are enriching this data with value-added enhancements and augmentation by our data experts. That is our additional value add. And then that all comes with the LSEG curation standards, accuracy, normalization and tagging. So think of this data as protected by 3 moats. It is either proprietary or exclusive. It is enriched by our own intellectual property, and it is curated, applying the LSEG standards, which have often become the industry standard. Let me give you an example to bring this to life. Our deals league tables are highly valuable to banks, advisers and law firms. These league tables are widely considered the industry standard with LSEG data obtained daily from thousands of sources co-mingled with data sourced from nearly 2,000 financial and legal advisers actively contributing their deal flow. We get up to 25,000 of these contributions per month. This input, which is from humans, is crucial to the quality, accuracy and completeness of this data. These contributions clarify and correct deal details that appear in the press. They also add additional information to public deals and supply information on other deals that are not reported anywhere. So a data set built solely on public disclosures would be both inaccurate and incomplete. We further enrich this data with our proprietary calculation of rank value, which sets the standard for deal comps, market share and pitchbooks around the world. We refine this methodology each year through roundtables with advisory firms. So in case anyone is missing the point, no LLM can gather this data from public sources, 3 moats, LSEG proprietary or exclusive data, enriched by LSEG IP and curated by LSEG, applying the LSEG standards. Let's move on to the next bucket, representing 10% of Data & Feeds revenues. It is almost exactly identical to the previous bucket. It is specialized data, proprietary, exclusive or contributed, with LSEG standards applied. So not accessible by an LLM through public sources, our aftermarket research, for example. And to carry on the analogy with the moats, this is data protected by 2 powerful moats. Next is another 10% of revenue from data that is indeed public, but to which we apply our enrichment and analysis, similar to what I was talking about with customer contributions on the league tables. And we also applied the LSEG curation standards. Examples here would be earnings estimates and sentiment analytics applied to earnings calls and other sources. So can an LLM access it? Yes, but the data will be incomplete. Here, it is 2 moats applied on public data. So 90% of our revenue is from data that is nonreplicable by an LLM. That leaves us with the last 10% of Data & Feeds revenue, which represents the data derived from public sources for which we apply LSEG curation standards, data like company filings or economic metrics. This data is rarely sold on a stand-alone basis. Here, there is still one moat, a powerful and important one, and that is our standards, which I will cover on the next slide. Now that we've established that 90% of Data & Feeds revenue is from data that is simply out of reach or inaccessible to an AI model trawling for public data. Let me take a minute to explain very concretely what I mean by that third moat, the LSEG data curation standards. There are 5 major processes in the curation of LSEG's high-quality trusted data, which are simply nonnegotiable for our customers in regulated activities. These 5 processes are the foundations of what we call the LSEG standards. Let's look at them in a little bit more detail. We do not build our data sets on probabilistic models. We have constructed them from decades of hard data, much of which is no longer retrievable. We source them from our customer community with over 40,000 customers contributing regularly. And in many cases, our own analysts and experts generate them internally. So that is sourcing. We then extensively cleanse and validate this data to ensure quality, for example, verifying its accuracy and completeness. Publicly sourced data is not reliable without this step. The third step, normalizing and mastering means creating a single source of the truth, consistent from year-to-year and from security to security, factoring in corporate actions, for example, or restatements or perimeter changes. And then concordance and tagging, which is a critical and differentiated step. This is where the universal symbology of the RIC or Reuters Instrument Codes and our use of perm IDs to tag each piece of data are so powerful. They allow full interoperability across the data estate and create logical semantic relationships between related data, for example, between a company and its directors or a bond it has issued. And the fifth step, distribution. Irrespective of technology platform, data format or channel, the data we distribute to customers is consistent and authoritative. I'll talk more about our distribution strategy in a couple of minutes. So to summarize, for those who think AI models can scoop up so-called public data from the Internet and displace us, that just does not reflect how this industry works and fundamentally ignores the nonreplicable nature of the vast majority of our data. There's also been a lot of focus on our Workflows business. We have driven a lot of change here over the last 4 years and now have our customers on a modern, modular, customizable platform where we enhance functionality week in and week out, and we're doing more and more. As we said at H1, it is not AI or a desktop. It is AI in the desktop, fully embedded in financial markets workflow. Workspace is now integrated with Microsoft Teams. We'll be launching Open Directory in the coming weeks and the full Workspace AI platform in the first half of '26, with Agentic tools coming as well. You'll see all of this at the Innovation Forum in a couple of weeks. So let's look at our Workflows revenue, the same way we did for Data & Feeds. 50% of workflows revenue comes from traders who are deeply engaged with the platform to execute their roles. They need real-time data, a network community and integration with a range of pre- and post-trade tools. Further 20% of Workflows revenue comes from ancillary trading services, such as trade routing and order execution and management. Another 15% comes from investment banking, where we have specialized content across deals, corporate actions and research, as well as integrated productivity tools. That leaves 5% of Workflows revenue from wealth and 10% from investment management. These customers benefit from our unrivaled data, exclusive Reuters News and portfolio analytics. But in these groups, there are lighter users who are mainly doing desktop research and basic charting, perhaps like many people on this call. Whether someone is a power user deep in trading workflow or a lighter user, all Workspace users will benefit from the significant AI and collaboration enhancements coming over the next few months. They will have the full functionality of some of the newer applications out there, but embedded in their existing workflow and based on data they can trust. Now over the last couple of months, you can see the pace of execution on LSEG Everywhere, delivering our data to where our customers are working as the partner of choice for financial markets data. This is no change in strategy. We have long provided data to and distributed data through our customers -- I'm sorry, our competitors and partners. For example, we are the #1 data provider to Aladdin. The industry now has new entrants, building new applications and functionality, which we believe can expand our reach and drive additional consumption of our trusted high-quality data. The economics of these deals support our growth aspirations through data licensing, new channels and the potential for usage-based revenue over time. Rogo is a specialist provider of applications to investment banking and private equity. Customers with Workspace licenses can access certain LSEG data sets through Rogo. The construct with Databricks is similar. These are attractive new distribution channels for our data. Just last week, we took a major step forward in our partnership with Microsoft, introducing certain data sets into Copilot for any Copilot subscriber, and more valuable data sets, both into Copilot and Copilot Studio for LSEG licensees. This will allow customers to build their own agents working with our data. You should expect the list of partners to continue to grow as we look to distribute our data through other major channels. That's the fundamental premise of LSEG Everywhere. A key part of many of these partnerships has been our ongoing build-out of MCP servers as we make more and more data sets available over time. Before I hand over to MAP, it has also been a very busy quarter in other parts of our business. Just to highlight a couple of significant developments. With Microsoft, we have fully replatformed our trade routing network, Autex, in Azure with Autex now connecting 1,600 brokers and asset managers via the cloud. As a result, it's faster, has much greater capacity and is even more resilient. And we have executed the first transaction on our Digital Markets Infrastructure, which is positioned to become an important new capability for trading and settlement. We're preparing to launch our Private Securities Market. More on that at the Innovation Forum. And in Risk Intelligence, we have launched World-Check On Demand with all our critical data and insight now updated in real time. That takes me appropriately to our innovation forum in a couple of weeks. In the first part of the event, MAP and I will cover our unique positioning, our end markets and execution to date. Irfan Hussain, our CIO; and Emily Prince, our Head of AI, will cover our AI strategy and engineering transformation. And then Ron Lefferts and Gianluca Biagini will talk about product strategy and monetization in DNA. We'll then have specific product walk-throughs and demos across the group. We're looking forward to showing you both the present and the future. And just to be clear, this is not a traditional Capital Markets Day. Don't expect any new guidance or anything along those lines. So with that, let me hand it over to MAP to talk about our Q3 performance in more detail. Michel-Alain Proch: Thanks, David. So just a few words on our financial performance. We have delivered another quarter of strong growth across the group. Organic growth for the quarter was 6.4% with all divisions contributing well. We had a benefit of 30 bps from the ICD acquisition of last year and a headwind of 190 bps from FX, which together translates into our reported growth of 4.8%. Within D&A growth of 4.9%, Workflows and Data & Feeds saw very similar growth to Q2 with only a slight impact from the new UBS contract that I mentioned at the H1 results. Analytics continued to grow strongly. The competitive environment is stable, and we are excited about the product pipeline. Our expectation for pricing into 2026 is for the yield to be similar to the last 3 years in the 3.5% range. FTSE Russell, as I indicated at H1, saw slightly slower growth in subscriptions with fewer account reviews in the period. But on the other hand, asset-based fee growth was strong as we lap the loss of a contract last year. Risk Intelligence had another strong quarter, driven by both World-Check and Digital Identity & Fraud. So overall, the subscription businesses delivered 6.5% growth in Q3, ahead of our expectation of 6% for the second half of the year. ASV growth came in at 5.6%, a bit ahead of the 5.4% we had anticipated. Good sales momentum partially offset the expected impact of the final Credit Suisse impact wrapped into the new long-term partnership with UBS. As I have said before, I expect this to pick up again to 5.8% as we exit the year. The Markets business continued to grow well, though at a slightly slower pace than H1 as volatility was lower and comps got tougher. Looking at the 2 main lines, OTC derivative was up 9.2%, driven by continued strength in client clearing volumes in SwapClear, and fixed income was up 9.9% as Tradeweb continued to drive growth through its innovative trading protocols and an uncertain macroeconomic outlook. Elsewhere, we have seen the IPO pipeline pick up in the Equities business with more to come heading into 2026. And we are seeing the final headwinds to growth in Securities & Reporting from the Euronext exit. Moving now to our delivery against guidance. We are absolutely on track and in some respects, ahead of our original plan. Year-to-date organic growth is 7.3%, comfortably within our guidance range, and this remains unchanged. On margin, the natural operating leverage in our business gives us confidence to raise our margin guidance to the top of the range at around 100 bps improvement year-on-year. This is a big step-up for a GBP 9 billion revenue business, and it factors significant ongoing investment in AI and new products. We are very confident of hitting our 2026 guidance of 250 bps over 3 years, taking us to 50% plus, obviously, before the impact of the Post Trade transaction, which I will cover in a moment. On CapEx, we will invest at a rate of 10% of revenue this year as planned and expect that intensity to come down in future years. One or 2 in the market have asked whether we will need to invest more in an AI future. The answer is clearly no. We have been investing at a double-digit CapEx intensity for several years, and we are now switching the mix over time from technology debt payback towards more investment for growth, obviously, including AI. And finally, we have good visibility of hitting our free cash flow guidance of at least GBP 2.4 billion. And finally, let's look at how we are allocating this cash flow. Overall, we are deploying more this year than what we are generating. That reflects the opportunities we see in front of us. So we expect to spend around GBP 3.5 billion versus free cash flow of GBP 2.4 billion. We are financing the difference with new borrowings of GBP 1.1 billion. Total dividends for the year are just over GBP 700 million, representing a 35% payout of adjusted earnings. In addition, we are deploying GBP 700 million net on the Post Trade transaction announced today, where we expect returns to be very attractive. And finally, as David mentioned, you may have noticed that over recent weeks, we significantly accelerated the GBP 1 billion buyback announced with the H1 results, and we have nearly completed it. Given our strong cash generation, low leverage and the enhanced returns we believe we will generate at this share price level, we are today committing to a further GBP 1 billion. This will start shortly and complete by the full year result in February 2026. We plan to execute GBP 500 million of this GBP 1 billion in year. This is a further demonstration of the flexibility and optionality our strong cash flow generation gives us and our very active capital allocation decision-making. Taking all this together, our leverage at the end of this year should be around 1.9x EBITDA, so in the middle of our 1.5x to 2.5x net debt-to-EBITDA range. Let's now look at the rationale of the transaction in our Post Trade business that we announced this morning. First, a group of 11 leading global banks is taking a 20% stake in our Post Trade Solutions business. The perimeter of PTS includes the recent acquisition, Quantile and Acadia, plus businesses we have grown organically, mainly SwapAgent. This transaction deepens our partnership with institutions that can benefit significantly from PTS services and allows them to help share its future and share in its growth. Second, we have agreed to alter the terms of the revenue share paid to the partner banks from SwapClear. Historically and up to 2024, this sat at 30%, reflected in our cost of sales. We are taking this down to 15% for 2025, applied across the whole year and 10% for 2026 and beyond. And finally, we are extending it from 2035 to 2045. Again, this is strategically important, and it improves our economics at a fair valuation and extends the deep relationship with our partner banks into the long term. Daniel will cover the strategic value in more detail in a moment. But the financial effects of this transaction are very positive. The impact of reducing the revenue share from 30% to 15%, which again is retroactive across the whole of 2025, will add around 250 bps to the Markets' divisional EBITDA margin and 100 bps to the group margin this year. While obviously, there are some financing costs, overall, this transaction is 2% to 3% accretive to EPS this year onwards. But beyond these financials and even more importantly, we expect this transaction to accelerate the long-term growth in PTS. Let me hand over to Daniel to recap on the playbook that has been so successful. Daniel Maguire: Thank you, MAP. So I just want to take a couple of minutes now to highlight how and why SwapClear has grown over the last 15 years, and touch on the opportunity we see forward in Post Trade Solutions. So through partnership, both through the shareholdings a number of our key members have held in LCH and the revenue share in SwapClear that continues, we have built a deep and wide global network that delivers significant value to all of its constituents. The scale shift in 15 years is extraordinary. The number of members, i.e., the banks has increased by 3.5x and the number of clients, i.e., the buy-side firms has increased by 200-fold, clearly demonstrating the network effect. Notional value registered per annum is up 10x at nearly GBP 2,000 trillion. And we have become the global destination of choice for interest rate swaps in all currencies for clearing. And this is why we are now inviting our partners into Post Trade Solutions, because we believe we can do the same again, but for the uncleared market. We built a near GBP 1 billion annual revenue business based on cleared OTC instruments across SwapClear, ForexClear and CDSClear, all of which are leaders in their markets and all of which are built on the strong foundations and the model of industry partnership. The uncleared opportunity is basically the same size as the cleared space. Our members and our clients want to manage the whole book in one place, bringing efficiency to their capital, the margin requirements and materially simplifying and standardizing processes. We are uniquely placed to do that given the assets that we've built and brought together under one roof and with our proven track record of delivering real value through long-term partnership. Acadia and Quantile give us collateral and margin workflow tools and compression tools, respectively. And SwapAgent and TradeAgent, both developed in-house, complete the current suite of services we call Post Trade Solutions. And we've got very good momentum to build on. Revenue in PTS is growing at double-digit pace. Volumes are up 70%, and the network is expanding at pace. So bringing these 11 major partners closer and giving them a role in shaping the business as well as a share in its growth sets us up for long-term success. I'll now hand back to David. David Schwimmer: Thanks, Dan. So just to recap, we have had another strong quarter of growth with year-to-date organic growth at 7.3% and all of our businesses performing well. We're executing at pace on our AI strategy of LSEG Everywhere as the AI partner of choice for financial markets data. And we are allocating capital effectively and proactively with an attractive strategic deal in Post Trade and a further big step-up in our buyback program. And now MAP, Dan, and I are happy to take your questions. Peregrine? Peregrine Riviere: Thanks, David. [Operator Instructions] And with that, I'll hand over to Pauly to manage the queue. Operator: Thank you, Peregrine. [Operator Instructions] And your first question comes from the line of Arnaud Giblat of BNP Paribas. Arnaud Giblat: Could I start with the Post Trade Solutions? So banks are paying over 50x EBITDA, 9x sales for their stake. Clearly, as you said, that comes with a significant commitment to put more business through that division. I'm just wondering, I mean, you gave a bit of detail, but if you could flesh out a bit more what sort of commitments, the time frames, what specific milestones we should be looking at for that business to grow, and what perhaps give us an indication of the potential size of that business in the medium term, from a revenue perspective? And my follow-up would be on the distribution agreements with third-party providers. Quite a lot going on there. I'm just wondering how we should think about this? Because clearly, there is a bit of a usage model you've talked about. So probably this increases significant usage and therefore, gives revenue upside. At the same time, if clients are accessing your data through a third-party vendor, then how does pricing in the long term look like if you're being -- I mean, if it interfaces somebody else? David Schwimmer: Thanks, Arnaud. Let me turn it over to Dan to answer the aspects of your first question. We're not going to get into a lot of detail on what the revenue looks like over the medium or longer term, but you can talk a little bit about how we're thinking about the construct. And then I'm happy to talk about the distribution agreements. Daniel Maguire: Okay. Yes. Thanks, Arnaud. Look, we're very strong believers in the industry partnership model, as you know. We've been using that, building that for a number of years on different services, and I think you can see the outcomes of that. Ultimately, we build core critical infrastructure for our major customers here over a long-term basis and around the basis of trust. So we're very, very pleased that we've got our major partners around the table with us and aligned not just on economics, but also on the product road map, the governance and the product adoption, of which we have a pretty high rate of adoption for all the products we build because of this model. I can't really be drawn on revenues. What I can point to is when you look at the -- which we shared in the slide that the gross market values, which essentially is a proxy for the scale of market risk and derivatives, if you look at the -- these numbers come from the BIS independent annual surveys, the gross market value is about [ USD 17.6 trillion ] and just over half of that is in the cleared space, but over half of that is in the uncleared space. So if you think about the level of risk of derivatives being transacted and risk transferred, they are very similar size. So we see the size of this opportunity very similarly as a result of that. And then in terms of milestones, we've got, as you can see from the press release, 11 major firms and important people at those firms making clear commitments to work with us to build out and deliver and adopt those services. So I can't be drawn on specific road maps and revenues today, but very confident that we've got the right support from the right firms and the right people. And the network is much bigger than those 11, and we've already got very good momentum in that. So pretty confident on that. David Schwimmer: And then your question around these partnerships or distribution arrangements. And the first point to make is that we've been doing this for years. And we have been providing our data through partners, and in some cases, as I mentioned, competitors for many, many years. And it's key when we do that, and this is a practice that we will, of course, maintain is that we protect our own relationships with our customers. And so in these kinds of partnerships, basically, the way they work is that although the initial origination of the relationship might come through one of the partners, the customer is then directed to us to establish the direct customer relationship with us. And we do that in a number of different situations and circumstances. So that protects us from being disintermediated through these kinds of arrangements. The other really important aspect that we're very focused on in these kinds of partnerships and distribution arrangements is protecting our data and making sure that our rights, our IP are protected even through any of these distribution channels. So obviously, the AI world is a little bit different, but we're still in a position to protect our data. And let me just give you one specific, I'll say, technical example. When we're distributing our data through an MCP server, because of that construct, we can control and monitor the access to our data. So in that construct, we're not at risk of a customer downloading all of our data, training their models on our data and then not needing us anymore. This MCP server construct allows us to control that in a very successful manner. So maintaining the relationship, protecting our data and data integrity, these are the kinds of relationships that we have managed very successfully for a long time, and it's great to see these new entrants and these new ecosystems, because we think it will actually expand the market and the customer base that we will be able to access our data. So we're really looking forward to this and excited about it. Operator: Your next question comes from the line of Andrew Lowe at Citi. Andrew Lowe: Thanks very much for the color on the revenue split by product in Workflow and Feeds. My question is on the Data & Feeds business. Specifically, how much of the historical revenue growth has been driven by pricing versus volume? Could you please also comment on the historical pricing trends across these different groups? So for example, it would be great to know how pricing growth in real-time data compares to the other segments, including the 10% from public data sources. And it would be great if we could hear a bit more about how much visibility you have on future pricing? And I've got a follow-up, but I'll wait until you've answered. David Schwimmer: Yes. Thanks, Andrew. So I'm not going to break it down product by product. But as we've been pretty clear over the last few years, you've seen our pricing yield on an annual basis be in that sort of 3% to 3.5% zone. And then you've seen our Data & Feeds business grow usually more than twice that. So that gives you a sense of what's going on here in terms of pricing relative to just volume growth. And we've been doing a lot of innovation in this area as well in terms of new products, new distribution channels as well. But hopefully, that gives you a sense on that. Andrew Lowe: Great. Okay. And then as maybe a follow-up to that. So are you seeing a pickup in demand for your tick history now that you've got sort of LLMs which are cheaper and more widespread? And how important is that when you're sort of selling your forward-looking real-time pricing data? David Schwimmer: So interesting question. and tick history, for everyone's benefit, is a great data set that we have that goes back to the '90s and has tick-by-tick history for millions and millions of securities and no one else has it. It was all public data when it was released by the exchanges, but we are the only ones who have stored it, maintained it and made it easily consumable. I would say the technological changes make it easier to consume and access now than it has been over the last 20-plus years. And we certainly expect to continue to see it being a very valuable content set. Historically, it has been mostly used by quant shops back testing their algorithms. But your question is a good one in terms of recognizing that with these models, you could see a lot more potential users accessing this huge data set to look for historical correlations and help that inform their trading on a go-forward basis. Operator: Your next question is from the line of Russell Quelch of Rothschild. Russell Quelch: I'd also like to focus these questions on the Data & Feeds business. Thanks for the extra disclosure on the revenue breakdown. So you disclosed that 55% of the Data & Feeds revenues come from pricing and reference services. And I believe you've gone from #6 player there to #3 player in the last couple of years, just behind ICE and Bloomberg. So my questions are, firstly, number one, how have you done that? And what's your view on the main points of differentiation in your offering, which is helping you to take share? My second question is, do you believe you can be a #2 player here? And if so, how? And the third question is a bit of a follow-on from Arnaud's question, but asked in a bit more of a direct way. Can you talk to your expectations of the size and cadence of the growth uplift from the recent and future data distribution partnerships that you mentioned relating to LSEG Everywhere? David Schwimmer: Sorry, can you say the third part again? Russell Quelch: Yes. Sorry, a bit of a mouthful. So I was thinking about the data distribution partnerships relating to LSEG Everywhere, both the current ones you disclosed and then you said about future partnerships. So I was wondering how we should think about the size and the cadence of the growth uplift that comes from those partnerships, both the ones that have been announced and potential future ones. David Schwimmer: Got it. Okay. So your first question, how have we moved from #6 to #3. It is investing in our content and investing in our distribution. And you have seen us over the last few years do a number of, I would say, pretty significant steps in a number of different areas. So for example, when we took on the Refinitiv business several years ago, it was very clear to us that, for example, talking to customers, they made it clear, fixed income evaluated pricing was a weak area. Corporate actions was a weak area. We have invested meaningfully in both of those areas and addressed those gaps, and we're now highly competitive in those areas. And so that has helped us move up the ranks. We have added new content in terms of a number of different areas, ranging from -- I guess, a good example is our inclusion of Dow Jones content alongside our exclusive Reuters News alongside thousands of other news sources. So constantly investing in content in a number of different areas. And then on the distribution side, over the last few years, we have made our content available through a number of different distribution channels. And whether that's in different cloud providers, whether that is -- there are some of our data sets, for example, they were only available in the U.S. for technology reasons. And we have now made those available on a global basis. So it's a number of things like that. But really, if I boil it down, content and distribution. Could we be #2? Sure. And we aim not to stop there. We're continuing to invest in this business. We have great data, great content, adding to that content, expanding our distribution capabilities. And then in terms of -- I'm not in a position to give you any specific guidance on the growth uplift. What I can say is that we're not done yet in terms of the different partnership arrangements. We think this is a really exciting time in terms of new ecosystems, new AI functionality that will provide lots of distribution opportunities for us. And as I mentioned earlier, into customer segments that might not have otherwise accessed our data. And for those customers that have historically accessed our data, this AI functionality enables them to access it in a, I'll say, a much deeper way. I mentioned earlier the 33 petabytes of data that we have. Historically, our customers have really only scratched the surface of the data and the content that we have. And the AI functionality is much more powerful in really consuming substantial amounts of our data. And then as we shift further down this road, we've talked in the past about evolving our model more towards usage-based and consumption-based pricing. So you put all that together, we are excited about what this opportunity holds. Russell Quelch: Okay. And maybe just as a follow-up to that, you've just seen S&P buy With Intelligence. You've seen BlackRock buy Preqin. You've seen MSCI buy Burgiss. So just wondering how you're thinking about your competitive position in private markets data? And is this something you might look to add inorganically to the offering? David Schwimmer: Yes. So we already have a lot of private market data, and that includes what we have ingested organically. It includes what we provide from Dun & Bradstreet. The Dun & Bradstreet data, by the way, currently available on the Workspace platform, but soon will be available through a feed, which I think is unique in the industry. We have our partnership with StepStone, which is enabling us to create, again, unique private asset product in our index business. And maybe the last thing I would say is we are not done in this space, and there's more to come in terms of our ability to provide incremental value-add and, in some cases, unique private markets data. So I can comfortably say watch this space. Operator: Your next question is from the line of Ian White of Autonomous Research. Ian White: Well, there's been a lot of discussion around the accuracy of general intelligence LLMs in financial services applications. And I guess sort of what advantage can you derive here from your privileged access to your own data when it comes to the training and development of more accurate models? Or kind of put differently, is it realistic that general intelligence tool can match a model that has been trained on your specific data set when it comes to generating accurate results derived from your data? That's essentially my main question. And just as a follow-up, on the Workspace rollout, which is now complete, what's the latest evidence you have regarding levels of customer satisfaction with Workspace versus the legacy desktop products, please? David Schwimmer: Yes. Thanks, Ian. So on the accuracy question, there has been a lot of discussion in the industry about a bunch of the product that is out there really maybe having some nice user interface, but not being remotely close to what this industry demands in terms of accuracy. And so I think that's probably right at this point for a bunch of the products that are out there that we have seen. We expect them to get better over time. I think in terms of our own approach, the advantage that we have is that we have the data. We have the highest quality and broadest data set that allows us to do the necessary training. It is scrubbed data. We're not training our capabilities on the Internet. And so we avoid the garbage in, garbage out problem that you see with a lot of these other models. And this gets back to the point I was making earlier that through the MCP server construct, we are able to control the access to our data. So we sometimes get questions from people worried about the fact that our data will be made too available and others will be able to, without compensating us, train their models on our data. That's not the case in terms of the way that we make this data available for AI usage or AI consumption. In terms of the Workspace rollout, we are very pleased with the outcome there, and this was a big exercise over the past couple of years. So we are seeing really good views on the simplicity, on the kind of change in the user interface, on the speed. And there are some aspects in terms of making some of the charting even better. There are a few different things that we're continuing to work on, as I mentioned earlier, sort of week in, week out. And this is going to continue. And it's one of the advantages of this product and the technology stack that we have moved on to. We've talked about how we've implemented 500 or so changes in each of the last 2 years, and that pace is continuing. So even though we have basically completed the migration, we still have more releases coming. I think we have 2 more releases coming, big broad releases coming this year. Yes, more coming early next year. So it's a continuous improvement exercise, which I think is a great opportunity to continue serving our customers better and better and better. Ian White: Got it. If I could just sort of playback and make sure I understood the first point. If anybody wants to sort of train a model on your data, that's kind of a licensable activity that you can kind of control through MCP and a model that's not trained on your data specifically probably won't be very effective or will be less effective than something that's been specifically curated for that purpose. Is that a fair reflection? David Schwimmer: I think that's fair. I don't want to claim that we have exclusive financial sector -- in other words, I don't want to claim that in the financial markets, we're the only ones who have financial markets data. There is other data available out there. Ours is the broadest, the deepest, the highest quality. And so we are in an advantaged position. But you've seen companies train their models on public data coming off the Internet. That's on the other end of the spectrum in terms of quality and accuracy. And then there are other data sets out there that you can use. They're just not as extensive and high quality as ours. Operator: Your next question is from the line of Mike Werner of UBS. Michael Werner: And just 2 questions here, one main one and then one follow-up, please. I was just wondering, I mean, you talked a lot today and very helpfully about the new partnerships and LSEG Everywhere. Just stepping back and when we think about the partnership with Microsoft and OpenAI and what you guys are doing there, what's the level of that engagement today versus 12 months ago? I think you used to talk about the number of software engineers that were operating on site on LSEG's premises that came from Microsoft. I was just wondering if you can give us an update there. And then as a follow-on to a couple of my colleagues' questions. When we think about these partnerships, particularly with the new ones with the AI engines and AI partners, is there any delta or any difference in how you think about the pricing? I know you said you protect the IP, but when you're thinking about these new partnerships, is there any change in the way that users who want to consume that data, would they see any difference in pricing than your traditional customers? David Schwimmer: Yes. Got it. Thanks, Mike. So in terms of our partnership with Microsoft, if anything, the level of engagement is higher, and I would say meaningfully higher today relative to where we were a year ago. I know what you're referring to. We've talked in the past about having hundreds of our people embedded with their teams and vice versa. That continues and, if anything, higher level of engagement. And we talked today about a few other things that the market hasn't really focused on, but that we're building with Microsoft, our Autex Routing Network, our Digital Market Infrastructure. These are not the areas that the market has really focused on, but we are actively building them with Microsoft. And then, of course, our Data as a Service, our analytics, Workspace being embedded in Teams, all the interoperability with Excel and PowerPoint. We have lots of teams working across a lot of different areas with the Microsoft team. So couldn't be happier about the level of engagement there. And then just with respect to the pricing, in some cases, it's really simple. So for example, we talked about the partnership with Rogo. If you want to access our data in Rogo, you have a Workspace license. It's very straightforward. It can be a little less straightforward if we are providing our data sets, our Data & Feeds data sets through some of these channels, but we have standard pricing for a lot of these. There may always be some negotiations around particular data sets or things like that, but we have standard contractual arrangements for these and standardized pricing for these. Operator: [Operator Instructions] And your next question comes from the line of Hubert Lam from Bank of America. Hubert Lam: I've got a couple of questions. Firstly, on D&A, how should we think about revenue acceleration in the next year? So just given the upward momentum on ASV, should we think 6% or more could be achievable for revenue growth in D&A next year? Second question is, I guess, last results, there was concerns about intensifying pricing competition from a couple of your biggest competitors. Just wondering if you've seen any normalization in terms of pricing? Or was the competition we saw a few months ago a bit of a one-off? David Schwimmer: Sure. MAP, why don't you take the first question? I'm happy to take the second one. Michel-Alain Proch: Yes, sure. So on D&A, we indeed forecast a revenue acceleration next year. We haven't given precise numbers, but we have given one precise number, which is for our subscription business altogether, reaching 6.5% -- circa 6.5% next year. And obviously, D&A in this number is playing its part, and it will be accelerating '26 and '25. David Schwimmer: And then on your second question, Hubert, first, just to remind people, when we talked about some of the competition dynamics at the half year, that was a very small number of cases, a couple in each of the different business areas. And I would say where we are today, we're not seeing that kind of dynamic. It feels a very stable market environment at this point from a competition perspective. Operator: Your next question is from the line of Ben Bathurst of RBC Capital Markets. Benjamin Bathurst: My questions are on Post Trade. Firstly, could you help us better understand how interrelated the 2 transactions announced this morning are, if at all? For instance, how different is the list of the founding members of SwapClear from the investing banks in Post Trade Solutions? And then secondly, how significant is the decision to extend the revenue surplus share from 2035 to 2045? Was there always a presumption that, that would be extended? Or was that kind of an incremental sweetness in the deal? Daniel Maguire: Thank you. Yes. So in terms of the construct of the overall deal, there are 13 banks involved in the swap business today. And in the investment in PTS, there are 11 investing banks, just to be clear around that. Decisions to invest in the new business ventures very much down to sort of individual circumstances of each of the banks there. So not really appropriate to speak on behalf of those in the 13 that aren't in the 11. But what I'll say is super strong engagement across the industry, level of participation in this and interest is very material from all the material players there. So we're very, very happy with that. And in terms of the extension that you asked about, yes, I think may be different opinions on whether that would have been extended or not, but the fundamental point is this is something that's been in place since 2001. We're here in 2025. It was rolling to 2035. And as part of the overall structure, those 11 banks that are investing in PTS will be extended for a further 10 years to 2045. So a 44-year enduring partnership between the major players in the OTC derivatives space on the sell side with ourselves there. So I think it's part of the overall construct rather than breaking it down into the exact sort of elements of the negotiation. Benjamin Bathurst: Okay. Great. So if I understand it rightly, it's just those that are participating in Post Trade Solutions that will have the extension for 2035 to 2045? David Schwimmer: That's correct. Daniel Maguire: And just to be clear, '25 to '35 remains already existing 13. So existing 13 until the maturity of the existing arrangement and the extension of 10 years is to the 11 that are also investing in the Post Trade Solutions franchise business. Operator: Your next question is from the line of Julian Dobrovolschi of ABN AMRO. Julian Dobrovolschi: I have 2. Maybe the first one regarding the Microsoft product development such as Open Directory and Analytics API and some other things that you're trying to roll out together with Microsoft. Just wondering, are they offered broadly across all the tiers or restricted to premium users and as such as an upsell vector? And then the follow-up is on ASV growth. Just wondering how confident are you regarding the, let's say, reacceleration of this in the Q4? I think you've been hitting towards 5.8%. And can you please elaborate on the impact of the UBS multiyear contracts and the Credit Suisse revenue crystallization? And perhaps if you can see some leading indicators suggesting a bit of a rebound in ASV growth in the Q4. David Schwimmer: Thanks, Julian. So I'll take your first question, and MAP can touch on your question on ASV. So on each of these different products, some of them -- the different products that we have built in partnership with Microsoft, some of them are separate products that have separate pricing, separate licenses, separate arrangements. Some of them are embedded in existing products. And so if we talk about Open Directory and we talk about what's coming in Workspace, you'll see us charge for that over time really through price realization in the core product. I think then in some of the products that we have rolled out in analytics, the Analytics API, for example, that's a new product, and there's separate charging for that. And we've seen some of that in the uptick in the growth rates in analytics, for example. And let me just -- I'll mention one other example where you can see this very clearly. The arrangement that we announced with Microsoft 1.5 weeks, 2 weeks or so ago, where we are making our data -- we are making some of our data sets available to all users of Microsoft Copilot. So if you have a Copilot license, you can be outside the financial services sector, you have a Copilot license and you're doing something in Copilot, you will get access to certain of our data sets. And that's an arrangement that we have with Microsoft. And then we have other data sets that you can license directly with LSEG and then have access to them through Microsoft Copilot and Copilot Studio, if you are building, for example, agents using our data. So that gives you an example where some of them are embedded -- some of the pricing arrangements are embedded in existing products. Some of them are new, and we are charging incrementally for them. Let me turn it over to you, MAP. Michel-Alain Proch: Yes, sure. So first of all, before addressing your question, I'd like to point out that we have outperformed our previous guidance on ASV. And remember, in H1, we were expecting that the Q3 ASV would fall to 5.4% with 40 bps of impact of UBS. So excluding UBS 5.8%, so comparable to Q2, and we posted 5.8% in Q2, 5.4% was what we were expecting in Q3. We actually outperformed this to 5.6%. So ex UBS, 6%, an acceleration from the 5.8% we were at the end of Q2. And when I look forward for the end of this year, we're very confident into accelerating again to 5.8%. And here, it's the same thing. It's 5.8%, including of the 40 bps for UBS. So actually, excluding it, 6.2%. So 5.8%, 6%, 6.2%. That's basically the message today. Operator: Your next question is from the line of Enrico Bolzoni of JPMorgan. Enrico Bolzoni: I wanted to ask you, you now revised your EBITDA guidance a couple of times, even excluding the newly announced deal. So I just wanted to ask you, what are you doing particularly well or better than you expected that basically drove the consecutive revision in guidance? So that's my first question. And partially related to that, just some small clarification. So one, you are clearly now spending just over GBP 1 billion to in-source this additional revenue from SwapClear. Can you just clarify whether this will be capitalized and whether the amortization of that will be above or below the line? So that's one question. And another related question to numbers. You're clearly issuing some debt, you're guiding for EPS accretion in 2025. What about 2026? I know you talked about margin expansion for EBITDA in 2026. Can we say that we will also see a similar EPS uplift for next year? Michel-Alain Proch: All right. So I begin with EBITDA margin. So yes, just to remember for maybe those of you who didn't see it, we began with 50 to 100 bps of EBITDA margin guidance for this year, we then improved it to 75 to 100 bps. And finally, we are now confident to reach 100 bps. It's really an acceleration. So what we have implemented in the last 2 years at LSEG is a full cockpit of cost discipline, addressing all the different components of our cost base. So mostly people, we're talking a lot of people, obviously, but it's true for cloud costs, on-premise costs, travel expense and so forth and so on. And basically, this acceleration is coming from the fact that what we have put in place is more efficient and is producing more results and quicker, if you want, than what I expected at the beginning of the year. The second reason, which is maybe -- so that's an acceleration. Second reason which is more structural is -- and maybe you remember what I was telling you at the earnings of 2024, the different automation solution that we have put in place at different places in the company. So in QAS, meaning our customer service, in our content ingestion, we were putting it in place, and I was expecting to see the first materialization into savings next year. And actually, it's happening as early as this year. So that's the combination of the 2. Now to answer your second question about the GBP 1.15 billion, that represents the alteration of the SwapClear revenue share. So we're considering this as an acquisition. So we are creating an intangible asset exactly as we would do as a traditional acquisition. And we are going to amortize it over 10 years below the line as the rest of our acquisition. And then your final question, which is the accretion. So accretion of 2% to 3% in 2025, because I want to be clear on the fact -- I hope I was clear in my script that this revenue share alteration is retrospective to the 1st of January of '25, okay? So it means that we benefit from the full accretion in terms of EBITDA margin that I have mentioned of 100%. And in terms of EPS taking into account the financing cost. We said 2% to 3% in '25, and we'll have pretty much the same thing, 2% to 3% in '26. Operator: And your next question is from the line of Tom Mills of Jefferies. Thomas Mills: I think we've skirted around it a few times on the call. I just wanted to clarify that you are sort of reiterating you're expecting to deliver around 3.5% price increase on the 1st of January is kind of [indiscernible]. Michel-Alain Proch: Absolutely. Absolutely. We've just sent -- the price letter was sent in September. On the basis of the first reaction from this price letter and our experience, we are confident we will derive the same type of yield around 3.5% in '26 as the one we had this year in 2025. Operator: And your next question is from the line of Oliver Carruthers of Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Thanks for a lot of the incremental KPIs around D&A. I just have one quick modeling question on the FTSE Russell subscription revenues. I think you're calling out the more modest growth in subscription growth here in Q3 was to do with this mandate renewal cycle that you think is going to normalize next year. So just what's reasonable to assume in terms of the pickup in growth rate? I think you're running at around 5% on a constant currency basis year-over-year for Q3. And the reason I ask is if we go back to 2024 levels of around 10%, on my math, this adds something like 70 basis points to your ASV. So just any parameterizing of that would be very helpful. David Schwimmer: Yes. Thanks, Oliver. So you're right. This year, a much quieter period in terms of renewals during which we would typically see incremental revenue associated with either regular price rises or bigger, broader business relationships and broader engagement. I think hard to give you specific numbers as to what that's going to look like in '26 and beyond. You've seen how this business has performed in years past in that kind of higher than mid-single-digit zone. So I think I'm probably pretty comfortable, and MAP, feel free to weigh in here as well. I think we're pretty comfortable in that zone, but I don't want to be giving you any sort of specific guidance on what that looks like at this point. Operator: And there are no further questions on the conference line. I will now hand the presentation back to David Schwimmer, CEO of LSEG, for closing remarks. David Schwimmer: Great. Well, thank you all. Thanks for joining us today. As I said upfront, a little bit more substance in this one rather than a typical Q3 update. We hope you all have found it useful. And if you have any questions, you certainly know where we are. We'd be happy to take any further questions through Peregrine and the team. Thanks again.
Jutta Mikkola: Hello, everyone, and welcome to Stora Enso's Third Quarter Results Presentation. I'm Jutta Mikkola, Head of Investor Relations, and I'm joined today by Hans Sohlstrom, our President and CEO; and Niclas Rosenlew, our CFO. The theme for today is good progress in a challenging market environment, which indeed we have done. We'll start with Hans, who will walk us through the key highlights and strategic focus areas. After that, Niclas will take you through the financial performance, and we'll wrap it up with the main takeaways and key focus for the rest of the year '25. Once we are done, we'll open the floor for your questions. Thank you for being here with us today. Hans, over to you. Hans Sohlstrom: Thank you, Jutta. In the third quarter of 2025, despite ongoing challenging markets and subdued demand, we remain focused on the areas within our control, driving progress where it matters most. However, before looking more closely at the third quarter highlights, I would like to announce changes in Stora Enso's Group leadership team. Micaela Thorstrom has been appointed Executive Vice President, People and Legal, General Counsel, as of 1st of January 2026. Micaela has been part of our group leadership team since 2023, serving as Executive Vice President, Legal and General Counsel. Furthermore, Niclas Rosenlew, our Chief Financial Officer, will assume additional responsibilities and represent the Communication and Brand organizations on top of his current duties. I want to congratulate both Micaela and Niclas for their new and extended roles. Then we are ready to look more closely at the quarterly highlights. We have taken important steps to build a stronger and more competitive Stora Enso. A major milestone in the quarter was the completion of the divestment of approximately 175,000 hectares of forest land in Sweden, representing 12.4% of our total forest holdings in Sweden. The transaction with an enterprise value of SEK 9.8 billion, equivalent to approximately EUR 900 million and in line with forest book value, strengthens our balance sheet and improves our financial flexibility. The deal includes a long-term wood supply agreement to Stora Enso. This strengthens our cash flow and reduces net debt, which is a key priority for us. We also made progress on the strategic review of our remaining 1.2 million hectares of Swedish forest, including the assessment of a potential demerger and public listing. This review is central to unlocking further value for our shareholders, as well as strengthening our growth and business focus in both forest and renewable packaging businesses. We'll share updates as that process moves forward, aiming at Capital Markets Day later this year on November 25. On profitability, we continue to act proactively to improve margins. These measures are essential as we navigate challenging market conditions and subdued consumer sentiment. Adjusted EBIT for the quarter was EUR 126 million. Excluding the EUR 45 million impact from the Oulu consumer board ramp-up, profitability would have been comparable to the same quarter last year, reflecting a stable underlying performance despite persistent market headwinds. And finally, on sustainability, we launched a science-based framework together with IUCN to advance nature-positive forestry practices. This is an important step towards our long-term environmental goals. As we all know, market conditions have been challenging. Therefore, we have intensified our actions to improve profitability. But it's important to emphasize that these efforts are not new. We have been acting on these priorities for a good while now. Since 2023, we have been very clear on our strategic focus; improving profitability, driving performance and shaping the portfolio for long-term strength. This has been our new way of working proactive, not reactive, so we can stay ahead of market turbulence and rapidly changing global trends. On fixed cost reduction, we launched significant cost-saving programs in 2023 and 2024, totaling over EUR 230 million of savings. These include structural efficiency measures, site closures and divestiture across business areas and the group. Operational efficiency has been another key focus. We have implemented FTE reductions, cut external spend and driven value creation initiative across the whole company to streamline processes. Building a strong performance culture has been critical. More than 4,000 improvement measures have been identified with around 800 initiative team leaders, meaning that thousands of our employees are actively driving continuous improvement and cost savings initiatives across the company every day. We have also strengthened cash flow and working capital discipline, reducing operating working capital by about EUR 700 million and improving cash flow from operations. Going forward, we remain committed to disciplined capital allocation. Finally, on portfolio actions. On top of earlier closures and divestments, we completed the sale of 12.4% of our Swedish forest assets and continue the strategic review of the remaining assets in Sweden. At the same time, we are ramping up Oulu consumer board line and De Lier corrugated site to secure cost efficiency and competitiveness. This approach gives us resilience and flexibility. By acting early and decisively, we have not just reacted to market challenges, we are shaping our future and positioning Stora Enso to thrive in a rapidly changing world. And with that, let me give you an update on the Oulu consumer board line ramp-up. Stora Enso's new consumer packaging board line at the Oulu site in Finland has entered the production ramp-up phase earlier this year. While the project remains on track in terms of its original time line and the EUR 1 billion budget, the ramp-up process has progressed slower than initially anticipated, resulting in production volumes somewhat behind the original schedule. Nevertheless, we remain focused on reaching EBITDA breakeven by the end of 2025, which continues to be an achievable target. However, due to the slower-than-expected ramp-up, the EBIT impact for Q4 is now projected to be higher than previously anticipated, estimated at about EUR 15 million to EUR 35 million. Consequently, the full-year EBIT impact is expected to be in the range of EUR 120 million to EUR 140 million. It is important to emphasize that the Oulu investment is a long-term strategic move that will deliver substantial value for Stora Enso over time. This transformation of the Oulu site into a state-of-the-art consumer board production facility is a cornerstone of our strategy to lead in renewable packaging. This investment is not just about near-term volumes, it is about building a competitive platform for the next decade and beyond. As the ramp-up continues, we remain confident that Oulu will become a key driver of profitable cost competitive growth and a benchmark for sustainable packaging innovation. This year, we have seen some remarkable recognition for our design and innovation. Winning the Red Dot Design Awards 2025 underscores our ability to combine aesthetics, functionality and sustainability in everything we create. Our craftsmanship was showcased on the global stage at the World Ski Championships where we designed official medal boxes crafted from renewable materials, fully recyclable and even featuring braille for accessibility. This is not the first time we have been recognized by Red Dot. Earlier this year, we also received the award for our collaboration with Marimekko on a scalable, recyclable gift packaging portfolio. One of the most exciting milestones is our contribution to Atlassian Central in Sydney. Once completed, it will be the world's tallest hybrid timber tower, and the heart of this achievement is massive timber solutions. It's a powerful demonstration of how engineered wood can transform urban skylines while reducing carbon emissions. Closer to home, October brought us the Finlandia Prize for Architecture for our new headquarters at Katajanokan Laituri in Helsinki. This award celebrates not only architectural excellence, but also our leadership in sustainable building practices. Together, these achievements highlights how innovation and responsibility go hand-in-hand in shaping the future of construction. That concludes our review of the key highlights for the quarter. And I'll hand over now to Niclas, who will take you through our financial performance. Niclas Rosenlew: Thank you, Hans, and hello, everyone. During the third quarter, as Hans already mentioned, our own actions resulted in good progress in a market with subdued demand and low consumer confidence. Delivery volumes were relatively low, particularly in containerboard and biomaterials. Sales increased by 1% to EUR 2.3 billion, mainly due to the contribution of the Junnikkala acquisition and the consumer board line ramp-up at the Oulu site. While market conditions continues to be volatile with low demand, we focused on the areas within our control. On that note, adjusted EBIT for the quarter was EUR 126 million. And as Hans mentioned, excluding the EUR 45 million impact from the Oulu ramp-up, profitability would have been comparable to the same quarter last year, reflecting a stable underlying performance despite persistent market headwinds. This we can see clearly when looking more closely at the EBIT bridge for Q3. Overall, adjusted EBIT decreased by EUR 49 million compared to last year, primarily due to the ramp-up of the new line in Oulu. As said, Oulu had a negative impact of EUR 45 million. In the other bar, where you can see the Oulu impact, you can also see the absence of a EUR 10 million insurance compensation that was received last year in the Wood Products segment, along with some other smaller movements. Looking at the other components, the picture is relatively stable. Given how volatile the markets have been, we are quite pleased with this, as it reflects the result of disciplined execution of our strategy and profit improvement actions. Price/mix contributed positively with EUR 12 million, partly offset by a smaller negative impact from lower volumes. Variable costs were flat as higher fiber costs were offset by lower energy and chemical costs. Fixed costs decreased by EUR 30 million, driven by strong cost control and lower maintenance compared to last year. And FX had a negative impact of EUR 20 million. If we then turn the focus to cash flow, despite the challenging market environment, we managed to safeguard profitability and improve cash generation. Cash flow after investing activities turned positive as expected, following the gradual completion of the investment phase in Oulu. I want to note that in this picture, which shows the operational cash flow after investing activities, the proceeds from the Swedish forest divestment, so the 12% divestment are not included. These proceeds were received in Q3, but they are recorded further down in the cash flow statement under divestments. And on that note, let's take a look at the net debt. Net debt decreased by almost EUR 800 million to EUR 3.2 billion during the third quarter, reflecting the positive impact of the forest asset divestment. The ratio of net debt to the last 12 months adjusted EBITDA is now at 2.7x after being above 3 for most of the past 2 years. As the intensive strategic CapEx phase of the last 2 years nears finalization and profitability gradually improves, net debt levels and the ratio are expected to improve further. Operating working capital to sales was around 8%. That is at similar levels to the last few quarters. We intend to keep operating working capital at these lower levels and decrease it when possible. So, let's move on to the segment performance. Starting with Packaging Materials, where we continue to implement value creation actions during the quarter to mitigate the impact of the challenging market conditions. Sales declined mainly due to slightly lower consumer board prices and adverse currency effects from a weaker U.S. dollar. Adjusted EBIT decreased year-on-year by EUR 37 million, primarily due to the adverse impact coming from the Oulu ramp-up. In addition, fiber costs remained high and logistics expenses and trade tariffs increased, adding further pressure on profitability. These headwinds were, as said, partly offset by value creation initiatives. As order inflow weakened further during the quarter, we continued to manage capacity and cost levels in line with demand. In Packaging Solutions, we had a similar development, with market headwinds being offset by own actions. Sales increased slightly, with improved product mix offsetting a small decline in volumes. Adjusted EBIT increased year-on-year, supported by higher sales and improved margins driven by value creation initiatives. Despite persistent overcapacity, actions to enhance product and customer mix, combined with continuous cost efficiency improvements helped protect margins. So moving from packaging to Biomaterials. In Biomaterials, market conditions stabilized at low levels during the third quarter. Demand for hardwood pulp strengthened in both Europe and China, while softwood pulp demand in Europe remained weak. Sales decreased driven by lower prices and adverse currency movements, somewhat offset by higher volumes. Adjusted EBIT decreased year-on-year, primarily due to lower prices, but as said, stabilized at low levels. Cost reduction measures also helped mitigate part of the negative market impact. If we then move on to Wood Products, protecting margins has been a key priority mitigating the increase in raw material costs. Sales increased, driven mainly by higher prices and stronger volumes for sawn wood. However, EBIT declined, primarily due to increased sawlog costs in Central Europe and the absence of last year's EUR 10 million insurance compensation, which affects comparability. That said, price increases and value creation initiatives helped cushion the impact and protect margins. The construction market remained weak overall, but we did see improved demand for both traditional wood products and building solutions compared to the previous year. In Forest, sales increased, driven mainly by higher volumes and wood prices. However, EBIT declined slightly due to slightly higher costs. So in sum, Forest continued its stable and strong performance. I'll now hand it back to you, Hans, for the key takeaways and our focus for 2025. Hans Sohlstrom: Thank you, Niclas. Today, we have focused on profit, performance and portfolio, 3 pillars that guide our actions as we navigate a challenging market and position Stora Enso for long-term success and improved profitability. Profitability and cash flow remain top priorities, supported by company-wide initiatives in sourcing, operational efficiency, commercial excellence and cost optimization to ensure resilience and agility. We are finalizing the strategic review of our Swedish forest assets, including evaluating a potential separation and public listing to unlock value and sharpen our focus on core businesses. At the same time, we are ramping up production and leveraging the EUR 1 billion investment in new packaging board line at our integrated mill in Oulu, Finland, strengthening our competitive position in renewable packaging and advancing our ambition to lead in sustainable solutions. These actions are critical steps towards delivering shareholder value and navigating in tough markets. We look forward to sharing more at Capital Markets Day on the 25th of November in London. Thank you for listening. And we are now ready to take your questions. Operator: [Operator Instructions] Our first question will come from Cole Hathorn with Jefferies. Cole Hathorn: Could I start with the cost positioning that you -- well, the improved costs in the Biomaterials and Packaging Materials division. The cost per tonne has come down. You talk about efficiencies. Are we right to assume that this is your internal actions that have supported the lower cost per tonne rather than lower pulpwood or wood costs feeding through into the business sooner? So that's just the first question, if it's internal actions. The second one is around the Packaging Materials business and particularly consumer board. We've got a lot of oversupply in the market. And I'm just wondering how Stora Enso is thinking about that strategically. You are the market leader. How do you think about improving operating rates as you ramp up Oulu versus the price dynamics of the market? Are you still considering, or are you evaluating capacity out in the industry? Hans Sohlstrom: Yes. Thank you very much, Cole. So first of all, about the cost improvement actions, they are internal actions throughout the whole company. And we have started this very proactive systematic work on reducing our cost base, both variable as well as fixed cost since 2 years back. We are going to give some updates about this in the CMD on the 25th of November, some tangible examples of the way we are working, but it's significant cost reduction results throughout the whole company. And this is not a project. This is our new way of working. This is a continuous improvement work. It's our new culture where basically we have identified over 4,000 profit improvement actions throughout the whole company in every unit, every middle, every single part of the organization. And we have 800 project initiative team leaders working on these. So, we have thousands of people actually actively working on cost improvement actions and profit improvement initiatives as we speak. It's not a project. It's our new culture, and it's a continuous way of working. When it comes to your question, Cole, about consumer board, we know that there is in Europe alone, 1 million tonne of higher cost consumer board capacity than our most expensive, most highest cost line. We also know that we have in consumer board, the most cost-efficient capacities in Europe today. So currently, we don't have any plans to consolidate or close capacity. I'm sure there is considerations in our industry for those who have negative cash flow, for instance. Cole Hathorn: Then maybe just as a follow-up. I'd like some color on what are you seeing from a demand and order book perspective? And could you give some color between containerboard? And then within consumer board, what you're seeing the difference in kind of the traditional folding boxboard as well as your liquid packaging? Hans Sohlstrom: Yes. So first of all, year-to-date, we have increased our top line by 5%. So, we are growing as a company. And also in the last quarter where demand was rather subdued, we grew 1% and we are quite determined to continue growth. We have invested in growth in the Oulu consumer board line, as well as also we have the De Jong corrugated site, which is in a ramp-up phase still. So, thanks to earlier investments, we have cost competitive state-of-the-art capacity that we are ramping up in order to ensure also continued growth for the future. And when it comes to consumer board versus containerboard, I would say that our operating rates in containerboard are quite high. And as you also know, from a global supply and demand perspective, especially kraftliner, which is our strength, our core area in containerboard, that is actually a market where the global supply and demand situation is the best. The market is the tightest. And when it comes to consumer board, we have very cost-efficient, high-quality capacity that we are currently utilizing and then also ramping up in Oulu. Operator: Our next question will come from Andres Castanos with Berenberg. Andres Castanos-Mollor: Can you please help me understand why did you book a gain of EUR 140 million with the forest asset sale, if this was a sale that was done in line with book value? And also, what is your current view about the deferred tax liabilities associated to the historical appreciation of the assets that you sold? What will be the treatment in your view? Niclas Rosenlew: Sure. And it is a bit of a complex accounting issue, but the sale of the 12% was in line with book value. And there was a portion in the book value, which is deferred tax liabilities. As you said, the sale was tax-free according to local tax rules. We sold the company, not the assets. And therefore, from an accounting perspective, we then kind of canceled the deferred tax liability and that portion was then going into the P&L. So it's more of an accounting technical topic. Operator: Our next question will come from Charlie Muir-Sands with BNP Paribas Exane. Charlie Muir-Sands: There's been quite a lot of talk in the industry about falling pulpwood prices and some mixed messaging around log pricing. I just wondered what you're seeing specifically yourselves at the moment and how soon you would anticipate it manifesting, in your opinion, if there are movements? Secondly, I appreciate you're going to give us an update on the possible forest spin-off at the Capital Markets Day. But can you share any early thoughts on what you see as the relative pros and cons of making such a transaction? And then just on De Lier finally. The ramp-up there, you haven't quantified what the profit drag is unlike Oulu. I wondered if you could put any numbers around that? And also, is the constraint for the De Lier ramp-up technical? Or is it that it is constrained by market demand conditions? Hans Sohlstrom: Thank you very much, Charlie. So first of all, wood costs have come down in the Nordics, both in Finland and Sweden since the peak in the summer. However, before they are visible in our P&L, there is a time lag. And actually, in the beginning, there is a negative impact because the inventory values of our wood inventories comes down. But there will be with a time lag of a few months, there will be, of course, a positive impact of lower wood costs in the Nordics. Concerning the forest, the Swedish forest spin-off, 1.2 million hectares in total. I would say that the clear plus is -- and that's also one of the main objectives, shareholder value creation. I mean, we clearly see that now after the sales of 12% of our Swedish forest land, the total value of all our forest holdings is EUR 10.50 per share. And the whole idea here is to unlock value for our shareholders, as well as also being able to focus on the very different businesses of creating value and profits in a forest business, as well as creating value and profits in industrial activities, renewable packaging and biomaterials businesses. Regarding the De Lier markup, the bottleneck is the market. So it's demand. We are gradually increasing volumes there. But of course, in an oversupplied market, it takes time. Charlie Muir-Sands: Got it. So far, you've not identified any cons in terms of the possible price spinoff. Hans Sohlstrom: Can you think about any, Niclas? Niclas Rosenlew: I can't immediately at least. We'll think about it. Operator: Our next question will come from Pallav Mittal with Barclays. Hans Sohlstrom: Very quiet. Maybe we take the next question then. Operator: Our next question will come from Andrew Jones with UBS. Andrew Jones: Can you hear me okay? Hans Sohlstrom: Yes. Andrew Jones: Excellent. A few of my questions have already been answered, but just a bit of color on 4Q first of all. You mentioned that the fixed costs were down EUR 38 million in 3Q, mainly on seasonality. I'm curious like how much of that should come back in 4Q? And taken together all the other moving parts on costs, I'm guessing that the wood costs don't make that much of a difference in the 4Q given the lag. But can you talk us through like wood, energy, some of the other moving parts as to how you see costs evolving into the fourth quarter? And then separately, I've just got a question on FBB sales to the U.S. I mean, is that profitable now? Like how should we think about margins on sales there? Have you changed your sales mix as a result of the tariffs and the currency moves? Like how are you looking at the different markets for your boxboard at the moment? Niclas Rosenlew: All right. Andrew, I'll take the first one. So fixed costs, very much as we said and we've said before, I mean, we are working a lot on cost scrutiny. And this is nothing new. We've been on it for some time, but there's still a lot to do. So, not commenting specifically now on Q4, but even kind of further out. And that absolutely will continue. Specifically in Q4, we continue with the normal maintenance. Maintenance stops should be roughly similar cost to Q3. And then on wood cost specifically, very much, as Hans said, we have seen some downward trend. And now we talk about the Nordics, Finland, Sweden. It's different in Central Europe. But again, very much as Hans said, it comes with a delay and we talk about a quarter or 2 or so. When it first goes into the inventory valuation, inventory value actually goes down. It has a slight negative impact on the short-term result. But then, of course, over time, it should start to help the result. So in that sense, it takes a while and don't expect any major impact or positive impact in Q4. Well, I mean, logistics has gone up a bit, chemicals down a bit, energy down a bit. So it's a bit more of a mixed bag. Andrew Jones: So flattish sounds like the interpretation. Niclas Rosenlew: Flattish, yes. Well, again, not commenting specifically on Q4, but more what we've seen up until now and in Q3. Hans Sohlstrom: And when it comes, Andrew, to your question about folded boxboard and the U.S.A., I mean, we have been increasing prices in folded boxboard sales to the U.S. We have been able to compensate a clear majority of the 15% import duty. But on the other hand, of course, also, as we know, during this year, the U.S. dollar has weakened against the euro quite significantly. We are making positive margins on our business to the U.S., but very thin margins. That's where we are today. However, having said that, I do want to underline that if you consider our packaging materials, our board grades, our main board grades, so consumer board various grades as well as kraftliner and then I exclude recycled fiber-based testliner because that's a very local business. But if you look at consumer board and kraftliner, it's good to remember that the U.S.A. is a 4 million tonne net exporter around the world of these products. So if profitability of sales to the U.S. is challenged, there are also other opportunities around the globe to develop businesses. So, I think one of my favorite sayings is that every challenge is an opportunity. You need to also find the new businesses and the new opportunities, but we have not given up on the U.S. We continue to develop our business there. But of course, in order to improve margins, we need to increase prices further. Operator: Our next question will come from Linus Larsson with SEB. Linus Larsson: First, just to double check here, so we're not missing anything on Biomaterials. It was sequentially somewhat better in the third quarter, although prices were lower and I think your volumes were lower as well. So if you could just maybe elaborate just a little bit about what happened in the third quarter? I think we may have touched on part of it already. And just to make sure that we're not missing anything, any benefits which might not be there in the fourth quarter, please? Niclas Rosenlew: Yes, I'll start at least, Linus. And I mean, what we saw in Q3 was a stabilization at low levels and so stabilization. So, I would say no major movements there, volume, price that I can think of at least in terms of what to miss now going forward. Hans Sohlstrom: If I can build on that, Linus, so I think it's important when you consider our Biomaterials business. So, our market pulp business, we have -- the majority is cost-efficient eucalyptus from Veracel and Montes del Plata, as you know very well. And they are among the world's most cost-efficient pulp mills in the first quartile when you take, for instance, Safra's cost competitive -- cost capacity competitiveness considerations. So, great cash machines in every situation. And then the market pulp mills we have in the Nordics, so Skutskar in Sweden and Enocell in Finland. They are producing specialized niche pulps. So Skutskar, the majority is fluff pulp, where we are clearly the largest producer in Europe. Most of the fluff pulp in Europe is imported from the U.S.A. So it's a specialty pulp grade. And also in Enocell, we are gradually increasing the amount of specialized pulp grades, among others, unbleached kraft pulp for electrotechnical end uses and other special niches where you can get a better price compared to the volume grades. So, that perhaps also explains somewhat our position in Biomaterials. Linus Larsson: And if you compare the various units within Biomaterials, is there a material profitability difference in, say, the third quarter? Or are they all doing pretty well? Niclas Rosenlew: Again, we haven't really split out the profitability of every mill. I mean, as we've commented before, I mean, we very much look at -- I mean, each and every component, mill needs to be profitable, goes without saying, deliver positive cash flow. But of course, as Hans said, I mean, the South American operations are kind of absolute cost leaders. So no answer, Linus. No direct answer, at least. I hope it's okay. Hans Sohlstrom: Building on that, I would say that based on this product differentiation and specialization in the Nordics, I'm pretty sure that there are lots of pulp mills in the Nordics producing standard volume grades that are not doing as well as we are doing. Linus Larsson: That's helpful. And then just one more follow-up on Oulu. And maybe if you could just briefly touch on or give an update on your commercial plans for the output from Oulu, 750,000 tonnes, that's a big amount of paperboard. Where will you allocate those volumes? And have plans possibly changed from your original plans? Hans Sohlstrom: Well, Linus, first of all, I think it's important to remember that the line will be, as we have said from the beginning, fully ramped up and in full capacity in 2027. So also next year will be a year of gradually increasing production and sales volumes. Quality is good, really good. We have received very good customer feedback. It's also important to remember that that Oulu is not producing only folded boxboard. It's also producing CKB, for instance, where there are only 2 producers in Europe. We are producing CKB on 3 production lines, and then there is a competitor producing on only one small production line. So it's not only folded boxboard. We also have some other consumer grades in the Oulu production unit. Then also, I want to remind everyone that Oulu is not only for us an increase in carton board capacity because we are also transferring carton board volumes from our liquid packaging board mills, for instance, Skoghall into Oulu, which gives us an opportunity to grow in liquid packaging board. So basically, Oulu is providing opportunities for us to grow in all the product areas we have within consumer board, both carton board, liquid packaging board, food service board and so on. And when it comes to our sales plans, so, of course, I mean, our job is to maximize profitability. Our job is not to follow a certain plan, but to maximize profitability in every situation. And therefore, as we discussed before, it's clear that the margins in the U.S. because of the 15% import duties are thinner than what we anticipated before the tariffs came in place or the plans for import tariffs came in place. And we are actively looking to maximize profitability by optimizing our market mix and our customer mix as well as product mix. So, we really look to place those volumes wherever we can maximize profitability and value. Niclas Rosenlew: So it's not any board, it's the best board. Hans Sohlstrom: Well said. Thanks, Niclas. Operator: Our next question comes from Pallav Mittal with Barclays. [Operator Instructions] Pallav Mittal: Can you hear me? Hans Sohlstrom: Yes, we hear you, Pallav. Good to hear you. Pallav Mittal: Sorry about that. Some technical issues at my end. A couple of follow-ups on some comments that you've already made. So firstly, on Oulu, I appreciate all the commentary that you have made and clearly, volumes you have highlighted are currently running behind schedule. So, what gives you confidence that you are still on track to reach full capacity by 2027, especially given the overcapacity issues in Asia? And then secondly, in the third quarter, EBIT, you have almost 30 million-odd fixed cost savings, and these are your cost savings program over the last couple of years. Can you help us understand how much of those 2 programs is already in the numbers so far? And how should we think about further improvement in Q4 and also in 2026? Hans Sohlstrom: Yes. Thank you very much, Pallav. So if I take the first question and Niclas, the second one. So first of all, Oulu, I mean, we are ramping up. And I would say that especially the last months have been very encouraging in terms of optimizing the production processes there. And that gives us really confidence that we will be able to reach the full capacity from a production perspective in 2027 as we have forecasted. Then, of course, with a relatively weak oversupplied market that also, in a way, restricts the speed of ramp-up and ramping up the volumes. Then you mentioned China. We were just last week in China. We know that what is happening in China is that, for instance, there is a lot of the local folded boxboard, which is called Ivory board, taking market share from higher cost recycled fiber-based grades, so what they call Duplex there, which we call testliner in Europe. We can see similar trends in Europe, folded boxboard, virgin fiber-based top quality carton board, taking market shares from recycled fiber-based white-lined chipboard. You can, for instance, with our folded boxboard, you can basically with 30% lower basis weight, you get better characteristics, product folding characteristics, printing characteristics, a cleaner sheet, better looking board than with white-lined chipboard. So, we see also migration there from the European 3 million tonne annual white-lined chipboard market into carton board. And in China, there is a 6 million tonne of white-lined chipboard or Duplex market that is gradually being substituted with the local folded boxboard. So, we cannot only look at the specific product segments as such. There is also important movements happening between these product categories. But now over to you, Niclas, for the second question. Niclas Rosenlew: On the costs, so what comes to the previous programs, more than EUR 200 million, they are done. But as I said earlier, we are very active in terms of looking at our competitiveness, our cost base throughout. So, we'll continue with scrutinizing fixed costs. We'll continue with scrutinizing variable costs. We have, as discussed earlier, we have the programs with more than 4,000 initiatives, 800-plus initiative owners and they continue. And they are now -- it's not a program. It's more of a culture. And that we intend to keep up and if anything, speed up. At the same time, -- as you know, we made a big organizational change in the summer, 1st of July. We have 7 P&L responsible BAs, 22 P&L responsible BUs. And then we moved some of the functions to cut across the company. And now there, we are taking the next step and looking at how do we make this new kind of construction to make all it so more efficient. And there's been some articles or some press picking up on some of our actions we are doing across, but that's just some of the actions we are doing a lot under the hood. And that's the whole idea. These are not programs per se, but we are day in, day out looking at how we make sure that we are competitive and create value for our customers. Operator: Our next question comes from Lars Kjellberg with Stifel. Lars Kjellberg: I got thrown out earlier due to power cut. Not helpful, but back on again. So essentially, a couple of questions for me still. Coming back to wood markets. Obviously, there's been an exceptionally tight market now in the Nordics. Now the industry certainly from the pulp and paper industry is not running full. Prices are starting to get a bit. But what is your thinking in an upturn in this market again in terms of the wood supply that is available? And in that context, coming back to what you said earlier, Hans, about maximizing profitability. can you operate everything, including your new assets from a wood supply standpoint on a competitive level? The other thing that you mentioned earlier was disciplined capital allocation going forward. I just wanted to understand what does that mean? You put in a lot of money on growth. You continue to talk about growth. And if I'm looking at some of the markets you serve, in particular the consumer packaging, there's no growth in this market since 2016. The volumes are the same. So, how should we think in that context, your focus on growth versus what's happened in the market and in the context of capital discipline what does it really mean? And the final point then. Holmen earlier today talked about stable generally prices on consumer boards for the contract business. But if you try to go after new volumes, there's a tremendous amount of pricing pressure. So the question is, what are you finding on that incremental volume that you're trying to place relative to the contract business in terms of pricing pressures? Hans Sohlstrom: Yes. Thank you very much, Lars. I'll let you take the second question, but a couple of comments. First of all, starting from your last question about pricing, yes, we see consumer board prices or board prices in general, stable. When we are now introducing our own new volumes to the market, very much we gain business, we gain volumes with yield advantage. Our folded boxboard, for instance, from Oulu has a 30% to 40% yield advantage compared to white-lined chipboard or SBS, some of the other board grades. So also with a higher price point for folded boxboard, you can basically prove to customers that the total cost of ownership goes down when they move to our grades instead of what they are using currently. Then regarding -- and also one point on growth. If you look at Stora Enso during the last 10 years, you will notice that our core packaging business has been growing an average 5% per year. That's the growth we can demonstrate since 10 years back in our packaging business. So yes, our top line has been about unchanged, around EUR 10 billion, but we don't have basically any printing papers anymore and we have a significantly bigger packaging business. So, 10 years ago, packaging and printing papers were roughly equal size, representing almost 40% of our total turnover each. And today, packaging is representing 60%, whereas printing paper is almost 0. When it comes to the wood costs and the supply and demand situation for wood in the Nordics, I think that we have seen here this year that the wood costs have reached the pain point, the pain levels. There has been significant curtailments in pulp capacity without mentioning any names of our competitors, but there have been very long curtailments, showing that when you are producing standard volume bulk pulp grades, it doesn't make sense to run at these higher wood cost levels. So, I think the proof is in the pudding, and we have seen that these levels basically forces the volume producers of pulp to take curtailments and shutdowns, extended shutdowns. And as I said, since the summer, we have seen wood costs now moving downwards. But then over to you, Niclas, for the other part of it. Niclas Rosenlew: Yes. So Lars, on capital allocation, and this is something we'll come back to as well in the CMD, but as we all know, I mean, we've had over EUR 1 billion CapEx now for a couple of years. This year, we'll go down to some mid-700s and likely down from there somewhat. We've done a lot of work internally, thanks to great efforts by the team to kind of create -- really kind of categorize our assets, run for cash assets, key growth assets and so on. And we see that we can become more disciplined by just doing internally being very structured, having criteria, return criteria, of course, but also other criteria for where to allocate the capital when talking about CapEx. So, there has been a lot of work going on recently on this, and we'll come back and explain a bit more what it means in detail. But CapEx is now on a downward slope. And as Hans said here earlier and as you know, we have made quite significant investments. Oulu is one, of course. De Lier, De Jong is another. And now going forward, we, of course, need to show the results of these and reap the benefits of them. So, essentially kind of no major CapEx kind of initiatives here in the near horizon. We have what it takes essentially to -- sorry, we have what it takes to grow essentially. Lars Kjellberg: Yes. So in '26, what does that mean for CapEx? What do you think you're going to land roughly? Niclas Rosenlew: Let's come back to that. As you know, we are typically in the beginning of the year in connection with Q1. We'll give an idea of next year, but down from where we are this year. Operator: We have reached the end of the time for the Q&A session. I shall now hand back to Hans Sohlstrom and CFO, Niclas Rosenlew, for closing remarks. Hans Sohlstrom: Well, thank you very much for your attention. Thank you for joining this call. And just -- we are powering ahead. We are focusing on profit, performance, as well as our portfolio to maximize shareholder value. That's our ultimate goal to create the best possible value to our shareholders. Thank you very much. Looking forward to meet with you then in the next quarter. Bye-bye.
Henrik Sjölund: Good morning, and welcome to the interim report presentation for the Holmen Group. Today, it's me, Henrik Sjölund and Stefan Loréhn. We will go through the presentation, and then we're happy to take any questions you might have. I know it's a busy day for you, so a special thank you for taking the time also to discuss with us. Well, the third quarter, challenging market conditions, a bit the same message as we actually had after the second quarter, this quarter, well, low demand for wood products. We also have -- despite low utilization rate and very expensive wood, we have, again, a very good result from wood and paper. All in all, a bit over SEK 700 million, a decent result when it comes to Holmen. If you look at our industry, not only wood products, but also wood and paper together, so far this year, during the first 9 months, we've been able to deliver 15% return on capital employed. And if we look at our financial position and what we have done, Stefan, we have distributed a bit over SEK 3 billion in dividend and buybacks during January to September. And if you look at 5-year period, we have roughly the same debt-to-equity ratio today as we had 5 years ago. We have distributed SEK 13 billion in total during the 5 years. Changing subject to forest and wood market. This time, we do see that pulpwood prices start to decline due to lower activities from the mills. We don't see that sawlog prices still or have started to come down. On this chart, it looks like they have. But in our case, it's because we -- there are also big differences in price still between southern parts of Sweden and northern parts of Sweden. And when we buy less in South and a bit more in North, then it has an effect on the graph, which is what we mean by mix effect wood cost. Pulpwood, on the other hand, the prices are going down. In our case, it's a lag before lower cost reaches our industry and our P&L sheets. Prices are high, Stefan? Stefan Lorehn: Yes, they are. And the result from the Forest division was SEK 538 million during the third quarter. That is an increase by some SEK 20 million compared to second quarter and some SEK 50 million compared to the first quarter this year. The gradual higher profit is due to price increases during the year. Looking at the harvesting levels, we harvested 660,000 cubic meters during the third quarter this year. That is approximately 100,000 cubic meters higher than the corresponding period last year. Year-to-date, the harvesting levels is still 100,000 cubic meters lower than what we saw last year at this point in time, but we anticipate that we will be on par with last year when we closed the books for 2025. Henrik Sjölund: So back on track soon. Stefan Lorehn: Hopefully. Henrik Sjölund: All right. Changing to renewable energy. A very special situation or we've had this situation for quite some time now where we see that prices in northern parts of Sweden, where we have not all, but almost all our production of electricity, well, prices are simply very, very low. And it's not easy to make money when prices are that low. And I think we can just -- well, we know that electricity is locked in, in the northern parts of Sweden, and there is a lack of transmission capacity. How long it will be like that? That's difficult to answer. There are so many things affecting whether the price should go up or if it will stay where it is, tables to, for example, Finland, Norway, et cetera. Stefan, we have said that we have produced with premium to market price. Does it help? Stefan Lorehn: Not that much when we have these low prices in the northern part of Sweden, as you mentioned, Henrik, but still we got some premium above the market price. Maybe we can also comment on the wind power production that we have curtailed during the third quarter, and that is due to the low prices that we see and also the high risk for imbalancing costs. So when we add up the financials, we are still loss-making in this segment, and it's, of course, due to these low prices that Henrik mentioned. Can also comment on the hydropower station in Junsterforsen that is now back into production after the rebuild that we have done there. Henrik Sjölund: Yes. Thank you. Okay. Moving on to Wood Products. I said in the beginning, weak demand, and that's obvious when we look at some charts. If you look at U.S., it's not picking up. It's quite weak. China, very clear, even going down, I would say. And if you look on the production side, well, especially Western Canada, producing less, Eastern Canada, more or less on the same level. Germany coming down quite a lot after we have the spruce bark beetle infestation that had an effect on how much that was produced a couple of years ago, but now on quite low levels. It's only one place where people seem to run the sawmills more or less full still, and that's in Sweden or in the Nordics, but especially in Sweden, but not in the southern parts of Sweden where we have our sawmills, we have curtailed production, especially at the Braviken sawmill. And I think that part of Sweden has also been the most affected by, well, the drought we had and also later on, the infestation from bark beetles. Tough situation for sawmills in south of Sweden, and I think especially where we are. Price-wise, well, in the beginning of the year, as it normally happens, prices went up a bit during spring time. And now when we came into the third quarter, we see that there is price pressure and prices are down some 5% to 10%, depending on which market you look at. And as we speak, it's still some price pressure on wood products prices. A lot of negative things, Stefan. Stefan Lorehn: Yes. And it can also be seen in the result, which deteriorated to SEK -91 million during the third quarter. That is due to the lower selling prices that Henrik mentioned. They are down 5% to 10% quarter-over-quarter. That also meant that we needed to adjust the value of our finished good stocks, which had an impact on the result by some SEK -30 million during the third quarter. Henrik Sjölund: Thank you. Clear. Changing to Board and Paper. Finally, something positive to talk about, Stefan. Now to be honest, if you look at demand, it's not so rosy. We are hovering on a level where we are quite far below actually where we were during the pandemic, and we are still below where we were before the pandemic. And also at the same time, we know that there is more capacity in the market. So it's quite challenging when it comes to board. In this case, it's board. We take paper afterwards. When it comes to prices, well, they are always stable, at least in our segment, we used to say, of course, there are changes over time, but it takes time to change the price. In this case, prices are stable. But when you look for marginal volumes to fill up your order books, then there is quite a lot of price pressure. In our case, our order books are -- they are okay, but not even we are running absolutely full. We take some market-related downtime and in line with most players in the market right now. And as I said in the beginning, cautious consumers not spending to fill up order books in the industry. Paper, we have been used to a low utilization ratios. They are really low in board now with all the new capacity. But here, we have been more -- we talked about it for so long. Capacity has been partly closed and converted, but still also here, it's quite a lot of overcapacity. We have been doing well in this market for a long time. Also now we are doing, I would say, really well. We are not running full. The idea is not to run totally full either, but maybe 80%, 85% suits us better given the situation with very volatile electricity prices we think we use to our favor as well. Prices also here, roughly the same, fairly stable. But when you look for marginal volumes, there is a lot of competition for the volumes and some price pressure in the market. Stefan? Stefan Lorehn: Yes. The result for the third quarter were on par with what we reported in the second quarter. In Q3, we had the annual maintenance shut in the Iggesund mill that took a toll on the result by some SEK 150 million. Despite a small increase in energy cost, our energy cost in the division is still very much lower than normal this quarter, and that is due to our ability to adjust to the volatility in the electricity market, as Henrik mentioned. We also had some tailwind from seasonally lower personnel costs in Q3. Henrik Sjölund: And given the circumstances, a really good result, I must say. All right. Just remember what kind of a company we are. We are a forest-owning company or land-owning company, and we do everything we can in order to extract as much value as possible from the land we own in different ways. Thank you. And by that, we are happy to take on any questions you have. Operator: [Operator Instructions] The first question comes from the line of Charlie Muir-Sands with BNP. Charlie Muir-Sands: I had a few short ones. Firstly, on the timing of the pulpwood costs coming down, can you just clarify, was that a -- that was clearly a headwind to profitability of the Forest segment. Was that already simultaneously a tailwind to profitability in the consumption segments like board and paper? Or does that come through with a lag? And can you give any sort of quantification for what you're seeing kind of right now on a kind of year-on-year basis, for example? And then secondly, you mentioned on board and paper, lower energy costs. Can you just clarify, were you talking both year-on-year and quarter-on-quarter? And then just finally, on the tax ruling, can you clarify, would that create a cash inflow? Or does that just release a provision for you? Henrik Sjölund: I think it's all questions for you [indiscernible]. But maybe the first one, yes, there is a lag when pulpwood prices come down. It takes like 6 months before it reaches the industry. Stefan Lorehn: Yes. And if we take the other one when it comes to our lower electricity cost, it's approximately in Q3, SEK 250 million lower than normal. In Q2, we had even lower electricity cost than we had in Q3, but still much lower than normal in Q3. Regarding the tax item, we anticipate that, that will turn into cash flow during the fourth quarter. Charlie Muir-Sands: Okay. Great. Sorry, just going back to the first one. So you said a lag when prices come down on pulpwood but you already face that headwind in the forest segment? Or there's a lag -- further lag and those further headwinds come in the forest segment and further tailwind in the industrial segment? Stefan Lorehn: The prices are moving quite slowly in the forest segment as it does for the industry, as Henrik mentioned. So we have not seen that kind of headwind yet in the forest. How it will turn out, we'll see going forward. Charlie Muir-Sands: Okay. And yes, is there any quantification you can put around the scale of the movements you've seen so far? Henrik Sjölund: Maintenance? Stefan Lorehn: No, I think it's too early -- the wood cost. I think it's too early to comment on and quantify the effects going forward. We've just seen that the pulpwood prices are starting to come down, and we need to come back on the quantification in the next quarter, I think. Henrik Sjölund: But there is quite a big difference how you -- how the market feels when it comes to pulpwood and sawlogs where it's still quite a lot of competition, as you saw on the slide for sawlogs in Sweden. But pulpwood definitely on its way down. Operator: Mr. Linus Larsson with SEB, can you hear us? Linus Larsson: I can hear you now. Could you please dissect the Wood Products result in the third quarter that you already mentioned the SEK 30 million of impairment? And also what to expect in the fourth quarter in terms of product price and sawlog cost delta and other moving parts, please? Henrik Sjölund: Can you take... Stefan Lorehn: The first one with the write-down of the stock, maybe didn't catch you right there, Linus. But we did a write-down of SEK 30 million in the third quarter, and that is due to the lower prices that we've seen in the market. Then we needed to adjust the stock value. So it's as simple as that. Henrik Sjölund: And when it comes to the pulpwood prices and the sawlog price, as I said before, pulpwood prices, well, they are on the way down. But remember, it takes some time before we get a lower cost in our industry. And we buy roughly half of what we make use of comes from our own forest. But also remember, we have a lot more forest up in the north where prices are, especially for sawlogs, they are lower than in the south of Sweden. But also when it comes to sawlogs, still a lot of competition. And so far, prices have not come down, at least not as we see it. Linus Larsson: Okay. So I mean, in terms of direction for the fourth quarter compared to the third quarter, are you still expecting higher sawlog costs and lower finished product prices? Or what's the direction, if you don't want to quantify what's the direction of the both? Henrik Sjölund: Sawlog prices are more or less flat from where we are now. Stefan Lorehn: And selling price is hard to comment, but the market is quite soft. So we need to see where things are going when we sum up the fourth quarter, Linus. Henrik Sjölund: Wood Products in general, still, Linus, it's -- I'd say it's price pressure in the market. Linus Larsson: Right, right. Okay. And maybe a similar question for Board and Paper, what you're seeing in terms of delta Q4 and Q3 in terms of price and cost, at least directionally? Stefan Lorehn: It's -- we don't comment that often going forward, Linus. What we had in Q3 that is exceptional is, of course, the maintenance shut in the Iggesund mill and as always, lower personnel cost during Q3 that will increase then quarter-over-quarter when we look into Q4. But comment on pricing and other cost factors we did. Henrik Sjölund: It's always more difficult to fill up the order books at the end of the year when the new contracts are being negotiated at the same time. Normally, demand is a bit lower, but that you know from before. Linus Larsson: And any initial thoughts on price negotiations going into next year? Stefan Lorehn: No. We don't comment on that, Linus. But as I said before, both when it comes to Board and Paper, our prices are fairly stable. But when you look for new volumes that you don't have a contract with right now, then also now we feel a bit of price pressure. It's not easy to get marginal volumes. Regarding discussions for next year, it's too early. We'll see what happens. Linus Larsson: And maybe just one final on the market dynamics and pricing and like we've now been discussing geopolitics and tariffs for the past couple of quarters. What's the latest on that in your market segments? And how are you seeing that? And how are you feeling that? Henrik Sjölund: If you take the tariff question, I think you already know. But for wood products now, there is a 10% tariff on wood products going into the U.S. And for Board and Paper, it's 15%. We don't have that much volumes going to the U.S. And of course, it's also an ongoing discussion who should take the cost, the one selling into the market or the one importing to the market. And right now, in board, it's roughly 50-50 and paper roughly the same. It's something that's ongoing. Linus Larsson: Got it. And also like dynamically in terms of trade flows, et cetera, are you seeing that whole discussion impacting supply-demand balances in your various segments? Henrik Sjölund: If you look at indirect effects, for example, Chinese board coming into Europe, we cannot see it yet. Might happen, but so far, we don't see any drastic or big volumes coming into Europe. Operator: The next question comes from the line of Ioannis Masvoulas with Morgan Stanley. Ioannis Masvoulas: Three questions left from my side. The first, when it comes to the graphic paper segment, we've seen several curtailments across the industry in Europe year-to-date, but mostly on the mechanical grades, less so on chemical grades. Can you talk about the dynamic? What do you think is driving that? Is it more of a different demand dynamics between the 2? And also, can you talk about how you see that materializing, whether we're going to see more capacity cuts in the coming months or majority of what you expect in the short term is already announced? And then secondly, again, on Wood Products, which was, I guess, the main weakness on the results today, you've only trimmed deliveries by 2% quarter-over-quarter. Is that a function of potentially destocking and production is actually lower? And how should we think about deliveries going into Q4 and early '26? And lastly, you mentioned curtailments on the wind side, given the challenging margin dynamics. Can you give an indication on maybe the yield that your wind mills are running at or maybe a mix between wind and hydro generation and how that's evolved over the past 12 months? Henrik Sjölund: So let me start with paper and graphic papers. We are in the mechanical segment, but we also compete with wood-free paper with some of our products. So we see everything from newsprint to wood-free uncoated more or less as one market when we look into the business we do. It's overcapacity. Demand is dropping. You are absolutely right. There are some capacity taken out. Whether there will be more taken out in the future, we don't know. We only look at what has been officially stopped, taken out or at least announced. And to have a good balance, we need to do, but the market need to take out a lot more capacity, a couple of more million tonnes, to be honest. But on the other hand, it's also -- as we have -- we are quite flexible and we have learned to also operate in an environment where you can't run absolutely full. Nobody can run absolutely full. You have to be a bit more flexible today. So I think the rules of the game have changed a bit as well. But we need to take out more to have a good balance. That's clear. And we are fairly happy with our operating rates, slightly higher than average in the market at least. Stefan, next one... Stefan Lorehn: Trying to remember them. I think it was about the delivery volumes from the Wood Products segment in Q3. Yes, there is a destocking, but that is mainly due to seasonality, lower production in Q3 during vacation periods. If we look at production volumes so far this year compared to last year, we are down some 10%, which partly is explained by the rebuild in the Iggesund sawmill that we did in the first quarter. But also, as Henrik mentioned, we've taken down production in the southern part of Sweden due to the high log cost that we see there. Then I think it was curtailment on wind towers. We have used our wind power turbines to approximately 50% during the third quarter, and that is due to both low prices in combination with high risk for imbalancing cost when you run the wind farms. Hydropower stations, we run as normal, try to maximize the profit we can get from them producing when the prices are as high as they can be for the moment and reduce production when prices are low. Henrik Sjölund: Which wasn't very high. Which wasn't very high. No. Stefan Lorehn: No, I think it was -- hopefully, Ioannis. Did we catch it all? Ioannis Masvoulas: Yes. That was very clear. Maybe a quick follow-up on the graphic paper side. So you mentioned the SEK 250 million, again, gain from better electricity management and therefore, lower power costs. If we were to add it to assume that you didn't have that gain, can you talk about profitability in the graphic paper segment for Q3, like leaving boards aside, just looking at graphic, would it be EBIT positive? And would it be EBITDA positive? Just to get a sense on the underlying profit trends. Henrik Sjölund: Yes, it's -- the underlying business is EBIT profit, even if you extract the effect from the electricity. Stefan Lorehn: Maybe we would have been running it slightly different, but yes. For sure, profit. Operator: The next question comes from the line of Lars Kjellberg with Stifel. Lars Kjellberg: Most of them have been answered, but I just have a couple of follow-ups. On China specifically, of course, we have a significant excess supply, and I appreciate your comments about not reaching European shores. But we did see, for example, Brazil now asking for tariff protection from China. So I guess, directly for the European perspective, how are you seeing the Asian markets in general as an export destination? You do have some volumes going into that market. And I can only assume it's not great. So are you seeing sort of repatriation of tonnes back to Europe and equally so, given the tariff situation and weak demand in the U.S., is that an issue with, again, repatriation of tonnes that normally would have been exported from Europe? Is that a topic that you're seeing in your business and in general for the industry? The last point is really on sawlog pricing. You've commented many quarters now, of course, that they're insanely high relative to the underlying demand trends and pricing for wood products and the pressure is pretty acute as we can tell from your numbers. So what does it take for this market to give on the log price side? Henrik Sjölund: So we start with geopolitics and how it affects our business. You almost answered the questions, I think. Yes, it's much more difficult to sell into Asia, especially for marginal business to find add-on business, so to say, because it's a lot of competition. If you compare to a number of years ago, we have had capacity in China for a long time, but they are both good, and it's more now than before. And the market is not picking up, as we have said. So that's more difficult. When it comes to how much of the volumes that will come into Europe, according to statistics I see and when I speak to our people, I don't see a big change, at least not yet. But you're right, there is a risk, of course, that it could be shifts in volumes between different parts of the world. And then with U.S., you are right again, yes, we are a bit dependent as Europeans on exporting not only to Asia, but also to the U.S. to have a decent supply-demand balance. Roughly 20% when it comes to board should be sold somewhere else than in Europe. That's kind of the European business idea. Second? Lars Kjellberg: And on the specifics around European volumes returning, you can't sell it abroad. Does that put incremental pressure on Europe? I can only assume that the pricing still is better in Europe than it would be overseas. Henrik Sjölund: So far, not much has happened, but there is a risk that, that could be the case, absolutely. But we haven't really seen it yet, to be honest. I think the big issue here is whether we can export as much as we need to export to different parts of the world because the total capacity in Europe is simply too big for Europe. It needs to be shipped both to the U.S. and to Asia in different ways. We ship more to Asia than -- let's say, we do the business in the U.S., for example, but we've shipped the volumes to Asia to be converted, et cetera. So it's different kind of business also in Asia. Not all of them are up to competition with the Chinese producers. Stefan Lorehn: Second question about the sawlogs and the dynamics, I think it was what needs to be -- to happen to the sawlog prices to come down. Well, we have done what we can do so far. We have taken down production in the southern part of Sweden, where the log costs are simply too high for us to get the financials in line with our expectations. How other people will treat their sawmills, we will see going forward. Not much we can do about it in the short term. Henrik Sjölund: Normally, the sawmills when they -- you need to come down quite a lot in profitability also to variable cost more or less before they stop. That's what has happened in the history. And then the wood market changes, sawlogs become cheaper. But obviously, right now, they are simply too expensive and prices for wood products is under pressure. So very tough situation. Different though in northern parts of Sweden, where sawlogs are cheaper. Lars Kjellberg: There's no downward pressure on logs today at all. Henrik Sjölund: Of course, all of us try to get it down. But so far, we haven't seen it happening, to be honest. That's what we had to. That's where we are right now. And in our case, to take down production if it's too expensive, that's the first thing you do. Operator: The next question comes from the line of Christian Kopfer with Handelsbanken. Christian Kopfer: Just 2 questions from my side. Firstly, you talked a little bit about the power prices, the big differences in the North versus the South and maybe it has been even more substantial differences in the last couple of quarters. From your perspective, I mean, you are active in both areas, especially in the North and maybe [ Area 3 ], right? So the big differences, are those only driven by the bottlenecking in transmission? Or what do you see? Henrik Sjölund: That's the main cause. But also, we have seen quite a lot of water in the system up in the north that have put pressure to produce hydropower during the first 9 months of this year. Now the situation is a bit more normal when we look at the levels in our reservoirs at least. Stefan Lorehn: Yes. But if you look at third quarter, I think you answered the question more or less because if there would have been sufficient transmission capacity, situation would have been different as well with lower prices in SE3 and higher in SE2 and 1. That's clear. Christian Kopfer: Has it been bigger differences with the new flow base, you think? Stefan Lorehn: It's quite a short period of time, and it's a combination of factors when it comes to cables being out of operation, lots of water in the system. So it's quite early to say that it's the flow base that has created this situation. Also, when you have revision of nuclear, you have to take down the transmission capacity a bit, which has had an influence, that's clear. But exactly, there are so many different factors now to understand how things are going to be. So let's wait and see a bit. Christian Kopfer: And then we heard from another paper producer or packaging business this morning mentioned that they start to see some, call it, light in the end of the tunnel when it comes to customer behavior, not exactly for Q4, but maybe a little bit better on the demand side going into next year. Is that something that you start to see on your customer base as well? Henrik Sjölund: You mean consumption in general for forest industry products? Christian Kopfer: Yes, demand from your customers -- starting to be a little bit better or how do you see it? Henrik Sjölund: It could be. But if you look at the statistics so far, what has happened and also if I look into our order books, I can't really say that things have changed. I'd say that we have more overcapacity, especially in board than what we have been used to for many years. So demand really needs to pick up quite a lot before we get a healthy demand -- supply-demand balance again. I think it will take some time. Operator: The next question comes from the line of Cole Hathorn with Jefferies. Cole Hathorn: Just a follow-up on the pricing commentary being stable. I mean we're seeing a lot of the folding boxboard price indices and graphic paper price indices decline. So I'm just wondering how Holmen sits within that. Could you talk a little bit around on the paper side, the book paper business, which I imagine is kind of longer contracts and slightly different to the index pricing? And then on your folding carton business, could you just remind us how much is more premium longer-term contract versus traditional folding carton of your business? And when you look into 2026, you talked about spot pressures, but should we be assuming that some of the annual contracts, there will be a little bit of pressure on those into 2026? Henrik Sjölund: Would you like to start? Stefan Lorehn: I leave that to you, Henrik. Henrik Sjölund: First of all, when it comes to negotiations for next year, we don't want to comment that. We are starting to negotiate soon. But -- and when it comes to prices in Europe in board, as I said, especially you mentioned folding boxboard, and we are a lot -- we have bigger volumes in solid bleach board where you are even more into a niche where prices tend to be very stable over time. They do change, but it takes time. And that's the case also right now for us that most of our business, they are stable when it comes to board, slightly more pressure in general in folding boxboard than a solid bleached board. The challenge is more when you need marginal volumes to take on new business, then there is price pressure. What that means for next year, it's too early to say. And then it was how many of our contracts are longer term for 2, 3 years, et cetera? Stefan Lorehn: It's a mixture. Some shorter ones, some 1- to 2-year tenders. Henrik Sjölund: We have some slightly longer contracts, but not that many. And when it comes to paper, we don't have any long-term contracts, maximum 1 year. It's gone the other way, some contracts quarterly or half year as well. Book paper is a good segment where we've been extremely -- we have done well, and we are doing well. Prices have been a bit more stable than graphic paper in general. But also there, a lot of contracts will be renegotiated from 1st of January and second quarter, et cetera. It's no big difference in that sense, but a more stable segment, both when it comes to demand development and also pricing and fewer producers, of course. Cole Hathorn: And then maybe just a follow-up on the Canadian producers in wood products. They're under a lot of pressure considering the duties that have impacted them, and you've showed some good charts on wood staff, particularly around British Columbia sawmills coming down. Are you starting to see better ability to compete with the Canadians in the U.S.? Or any commentary you can provide on the Canadian sawmill side and how that's impacting your business? Henrik Sjölund: Normally in the U.S., they consume like 100 million cubic meters. 20 of those come from Canada and roughly 5 from Europe. And now when the Canadians have 35%, 40%, 45%, well, they have a different wood cost as a base. So it's not really comparable to tariffs we have with 10% in Europe. But normally, when you have increased tariffs and you have that much of import into U.S., you would see prices going up in the U.S. But so far, we haven't seen much of that. And if you look at the future prices, well, they go up and down quite a lot week-to-week almost. Right now, if I would say something, I would say, well, they are up 5% something, but that's last week, et cetera. So, so far, demand and the balance in the U.S. has not made prices come up to cover for the tariff cost, not for the Canadians, not for the Europeans, not to be fully compensated. No, it hasn't happened yet. Cole Hathorn: Fair enough. So in absence of housing demand, is it really kind of sawmill closures in Canada, which might be the supply trigger? Henrik Sjölund: Supply is down, but not enough. Demand is even lower as it looks right now. Operator: The next question comes from the line of Pallav Mittal with Barclays. Pallav Mittal: Most of my questions have been answered. A couple of follow-ups. So firstly, can you comment on the number of transactions in the Swedish forest and how our transaction pricing looking this year because last couple of years, it has been flat to down. So any comment on that would be helpful. And then secondly, can you just talk about the profit split for the Board and Paper business? Is it still broadly 50-50? Stefan Lorehn: Well, if we start with the forest transaction market, most of the transactions are being done during the second half of the year. There's also a lag in the system when they are to be registered, et cetera. So it's quite limited of transactions so far this year as we can see. So it's hard to draw the conclusions for the full year already now. But what we have seen so far is no major changes in the property prices in Sweden. The next question is the split of profitability between Board and Paper. Well, board is heavily affected by the maintenance shuts that we have had both in Q2 and Q3. So it's hard to comment on the exact numbers in Q3. Henrik Sjölund: But both profitable. Stefan Lorehn: Both profitable, of course, yes. Operator: [Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to management for any closing remarks. Henrik Sjölund: Thank you very much for good questions, good discussion. Look forward to see you soon again. Thank you.
Operator: Good morning, and welcome to Dover's Third Quarter 2025 Earnings Conference Call. Speaking today are Richard J. Tobin, President and Chief Executive Officer; Chris Woenker, Senior Vice President and Chief Financial Officer; and Jack Dickens, Vice President of Investor Relations. [Operator Instructions] As a reminder, ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir. Jack Dickens: Thank you, Chloe. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through November 13, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Rich. Richard Tobin: Thanks, Jack. Good morning, everybody. Let's get started on Slide 3. Overall, we are pleased with Dover's third quarter results. Revenue was up 5% in the quarter, driven by broad-based shipment growth in short-cycle components, continued strength across our secular growth end markets and very encouraging results from recently closed acquisitions. Order trends continued to positive momentum in the quarter, up 8% all in year-over-year or 4% organically, providing good visibility for the remainder of the year and into 2026. Margin performance in the quarter was excellent with a record consolidated EBITDA margin of 26.1%, up 170 basis points over the comparable period as a result of positive mix impact from our growth platforms, solid execution and our rigorous cost containment and productivity actions, all 5 segments posted margin improvements during the quarter. All in, adjusted EPS was up 15% in the quarter and is up 17% year-to-date. Capital deployment remains a key driver of our double-digit earnings growth. This year, we increased our investments in high ROI capital projects focused on productivity and capacity expansions as well as targeted footprint optimization. Our balance sheet strength is an advantage that provides flexibility and attractive optionality as we pursue value-creating bolt-on acquisitions and opportunistic capital return strategies. We have a constructive outlook for the remainder of 2025 and into '26. Despite some macroeconomic uncertainty, underlying end market demand is healthy across much of the portfolio and is supported by our sustained order growth. As a result, we are increasing our full year adjusted EPS guidance from $9.35 to $9.55 to $9.50 to $9.60. Let's go to Slide 5. Engineered Products revenue was down in the quarter on lower volumes in vehicle services, partially offset by solid performance in aerospace and defense components. Despite the organic volume decline, absolute segment profit improved in the quarter on well-executed structural cost management, product mix and productivity initiatives. Clean Energy & Fueling was up 5% organically in the quarter, led by strong shipments in clean energy components, fluid transport and North American retailing, fueling, software and equipment. Our recent acquisition of Site IQ, a provider remote site monitoring of fueling sites is off to a good start. Margin performance, as expected, was solid in the quarter, up 200 basis points on volume leverage and a higher mix of below-ground fueling equipment and restructuring benefit carryforward. Imaging & ID was up 3% organically in the quarter and growth in our core marking and coding business and in serialization software. Margin performance remains very good in the segment at 29% adjusted EBITDA margin as management actions on cost to serve and structural cost controls continue to drive incremental margins higher. Pumps & Process Solutions was up 6% organically with growth in single-use biopharma components, thermal connectors for liquid cooling and data centers and precision components and digital controls for natural gas and power generation infrastructure. SIKORA, which we acquired at the end of the second quarter is significantly outperforming our underwriting case. Segment revenue mix, volume leverage drove margin improvement on solid production performance and volume in secular growth exposed end markets. Revenue was down in the quarter in Climate & Sustainability Technologies and comparative declines in food retail cases and engineering services, which were collectively down 30% year-to-date. Industry-wide shipments of door cases are at a 20-year low in part because of tariff uncertainty has caused customers to delay maintenance and replacement upgrade spending. These projects cannot be delayed indefinitely and encouragingly, we saw a material acceleration in booking rates in the quarter, which signals volume improvement moving forward. Meanwhile, the segment had record quarterly volumes in CO2 systems as well as double-digit growth in heat exchangers and accelerating demand for liquid cooling of data centers and improving sentiment in European heat pumps. Despite the lower top line, the segment posted 120 points of margin improvement on productivity actions and a higher mix of U.S. CO2 systems and brazed plate heat exchangers. I'll pass it to Chris. Christopher Woenker: Thanks, Rich. Good morning, everyone. Let's go to our cash flow statement on Slide 6. Year-to-date free cash flow was $631 million or 11% of revenue, up $96 million over the prior year has increased year-over-year operating cash conversion more than offset an increase -- an expected increase in capital spending. Free cash flow generation accelerated in the third quarter, in line with our expectations and with historical trends, and we expect a further step up in the fourth quarter, which is historically our highest cash-generating quarter. Our guidance for 2025 free cash flow remains on track at 14% to 16% -- on strong conversion of operating free cash -- operating cash flow. With that, let me turn it back to Rich. Richard Tobin: Okay. I'm on Slide 7. Let's provide a little more detail on the bookings in the third quarter. Q3 consolidated bookings were up 8% in total and 4% organically from the prior year. I call out the 25% bookings growth in Climate & Sustainability Technologies a welcome sign as we expect the segment to return to growth in the fourth quarter on broad-based volume demand. On Slide 8, we highlight several end markets that are key drivers of our revenue growth in 2025 and beyond. We are benefiting from major investments in power generation, electricity infrastructure and artificial intelligence across multiple businesses. We are directly exposed to data center build-out by hyperscalers and the secular shift from air cooling to liquid cooling of new chip technologies. Between our thermal CPC connectors, which primarily connect to the back of the server rack manifolds and directly to the chip as well as our large and XL heat exchangers from SWEP that are key components in cooling distribution units and chillers, we expect to generate over $100 million of revenue in this year alone. Our recently closed SIKORA acquisition expands our exposure to electricity infrastructure through measurement and inspection control solutions for high-voltage polymer coated wires and cables, a direct beneficiary of growing electrification trends and demand for customers for product quality assurance and improvement. All this electricity has to come from somewhere and natural gas remains the most viable option for scalable, reliable energy for the foreseeable future. Our Precision Components and OPW Clean Energy businesses participate across several points of the natural gas infrastructure value chain, including gas and steam turbine components, midstream gas pipeline, engines and compressor infrastructure and valves and vacuum jacketed piping used in liquefification and gasification of LNG. End market data and customer discussions indicate a very bright future for these businesses. Our single-use biopharma components platform has returned to its long-term double-digit growth trajectory on volume demand and new product launches. Continued advances in biological drugs and therapies, coupled with an industry shift towards single-use manufacturing processes are fueling sustained high-quality growth for our products. In CO2 refrigeration, we maintain a clear market leadership position in the U.S., supported by a fully platformed product portfolio and a retrofitted plant in Conyers, Georgia that provides strong competitive moats in product performance, lead times and scalability. Economic and regulatory tailwinds are driving the transition to CO2 systems as large national retail chains accelerate their adoption with a line of sight of continued double-digit growth into 2026. A significant majority of the acquisition capital deployed in the past 5 years has been directed towards these high-end growth markets, which remain top priorities for continued investment. Collectively, these markets now represent roughly 20% of our portfolio and are contributing meaningfully to our margin expansion. Moving to Slide 9. Our investments in center-led functions and ongoing focus on productivity improvement are key drivers of our margin expansion. We have made significant progress building out our shared back-office services, digital capabilities and internal engineering services through the India Innovation Center. These center-led functions enable our operating companies to concentrate on what matters most: serving customers, driving new product development, and responding to market-specific needs while leveraging Dover's global scale and balance sheet. This structure remains a core competitive differentiator of our operating companies, and we extract cost synergies from our existing and acquired portfolio companies. Our Dover Business Services, Dover Digital and Innovation Center are now fully developed and integrated across the organization. With these operations fully built out, we expect meaningful scale and scope benefits as we continue to grow organically and through acquisitions, further reducing average transaction costs and driving attractive margin accretion. We believe that our shared back-office services will be the largest nonproduct beneficiary of artificial intelligence implementation. An important part of our business model is to drive productivity through targeted efficiency and fixed cost reduction programs. On the right are some of the key ongoing projects that we had highlighted in previous quarters, including our recently announced transition of the Anthony Glassdoor manufacturing from Sylmar, California, into our existing Hillphoenix refrigerated case facility in Richmond, Virginia, a move expected to deliver significant [indiscernible] these initiatives are projected to contribute $40 million in incremental carryover benefit in 2026 with additional benefits extending into 2027. Let's finish up on the outlook Slide #10. We expect Engineered Products to improve sequentially in the fourth quarter on double-digit growth in aerospace and defense components and improving market trends and competitive dynamics within vehicle services. Our outlook in Clean Energy & Fueling remains solid across most of the businesses. North American Retail Fueling is starting another capital deployment cycle and the outlook in Clean Energy components is positive as well. Vehicle wash continues to experience some headwinds, although we would expect that to recover in [indiscernible]. Imaging & ID should continue its long-term steady growth trajectory given its significant recurring revenue base and solid underlying demand with an additional upside from serialization software. We forecast this segment to continue its double-digit or its single-digit organic trajectory. The outlook for Pumps & Process Solutions is strong and broad-based with attractive top line forecast across single-use biopharma components, thermal connectors for liquid cooling and data centers and precision components for natural gas infrastructure. Bookings and backlog trends in our long-cycle polymer processing signally improving conditions and the business should return to growth in the fourth quarter for the first time in over 2 years. And finally, Climate & Sustainability Technologies should grow in the high single digits organically in the fourth quarter on continued strength in CO2 refrigeration systems and heat exchangers as well as growth in refrigerated door cases from improved booking rates. The full year guidance is on the left. We expect acceleration in our top line in the fourth quarter, driven by our secular growth businesses and sequential recovery in certain capital goods end markets. We are well positioned as we begin to transition into 2026 and our advantaged balance sheet provides attractive optionality to selectively play offense to continue driving shareholder returns. I'll pass it back to you, Jack. Jack Dickens: Okay. I guess, Chloe, before you get to the script on questions, if I could just interject quickly. We've had a lot of pickup in our analyst coverage over the last 12 months. So if we could please limit the Q&A to just 1 question, we would greatly appreciate that. I'll turn it over to you, Chloe. Operator: [Operator Instructions] We'll take our first question from Andy Kaplowitz with Citigroup. Andrew Kaplowitz: Rich, you mentioned an improving sequential outlook in vehicle services, improved booking rates in refrigerated door cases. But did you see improving bookings cadence across Q3 for the company? And would you expect book-to-bill over 1x in Q4? And then do these improvements and relatively easy comps set you up for better organic growth here in '26, at least closer to that algorithm that you've given out of 4% to 6% over time? Richard Tobin: That's about 5 questions, Andy, but let's -- I know where you're headed. Look, the year-over-year reduction in refrigeration on the basic retail refrigeration equipment, has cost us about 1.5% to 2% of organic growth on a full year basis. So the good news is that we've been able to cover that largely because of our growth platforms and the margin improvement over year-over-year. And the good news also is, which I called out in the press release is that because booking rates have accelerated, particularly in there, and we will do quite well on the comparative top line in that business that we're looking at close to $140 million, $150 million revenue headwind that we absorbed this year. So do we get it all back next year? We'll see, but I think we're going to get a significant portion of it back if the Q4 trajectory holds as we go through the end of the year. Operator: And we'll take our next question from Steve Tusa with JPMorgan. C. Stephen Tusa: It sounded like Andy was mowing the lawn there or something. I have surmised me of back-to-school, one question in 32 parts. But the -- just the implied organic in the fourth quarter, I mean, you have a pretty wide range there, but the low end of that range seems to be in and around the mid-single digits for the fourth quarter? And then totally unrelated follow-up to that. Are you guys thinking about buying back stock? I mean you guys have a ton of cash and you sold probably a subpar asset for a multiple that's now above where your stock is trading. So any thoughts around a potential buyback as well? Richard Tobin: Yes. I think if you go back and look in the transcript, you'll see the corporate speak for, we think our shares are cheap, and we're likely to intervene, number one. And number two, yes, I think that from -- on an organic basis, Q4 should be our highest quarter in the year. Operator: We'll move next to Jeff Sprague with Vertical Research. Jeffrey Sprague: Rich, just back to the sort of the restructuring. Is this the totality of sort of what you foreshadowed for us on the Q2 call? Or are there sort of other actions in place that could then even be additive to this? Or is this pretty much in flight what we should expect for 2026? Richard Tobin: We had a big debate in here whether to not... Jeffrey Sprague: I don't know if that was my... Richard Tobin: No. All right. I'll answer it again. That is -- look, we had signaled that we were going to give an update in Q3. So that's where we are in Q3 right now. I expect that number to increase as we close the year. It's just going to be a question of the timing, whether it's '26 or '27, but that number should go up. Operator: And we'll take our next question from Nigel Coe with Wolfe Research. Nigel Coe: I promise I'll keep this just to one question. So -- I promise I'll try... Richard Tobin: Nigel, we get complaints for cutting people off despite the fact we have the longest conference call. But anyway, go ahead. Nigel Coe: No, I know. I know. I know. You got a lot of -- you're a popular company. Any initial thoughts on '26? And I'm not asking for a range here, but it just seems that a lot of the business that are dragging today could well be meaningful tailwinds in '26. And if these secular growth businesses continue, then '26 organic could be quite acceleration. So just any thoughts as you see things right now for '26? Richard Tobin: Yes. I mean we like the setup. In a strange way, we took the headwinds that we had not forecasted in Refrigeration based on our discussions with customers. But because of rollover restructuring and a lot of productivity and some really healthy mix, we've been able to absorb it this year. So the good news is that the setup comparatively looks good there. I'm not aware of any business within the portfolio that's forecasting down revenue for next year. Now clearly, somebody will get it right and somebody will get it wrong, but it's not like the situation that we had with Maag in the past where it was cyclical and we knew it was going to come down. The rest of it, I think that we can look at the trajectory in Q4. If you put on just regular seasonality next year, I think the setup looks really good. Operator: And we will move next to Amit Mehrotra. Amit Mehrotra: Congrats, operator. That's a pretty good attempt on my last name. I appreciate it. Rich, if we go back 6 months, it feels like kind of a millennial ago, but you were kind of pressured by lapping $100 million in the back half kind of right off the top, and it looks like that's kind of been absorbed. As you think about rolling up the plan for '26, I mean, are you -- do you see the same -- I guess the macro backdrop has gotten better, but do you still kind of feel like that kind of conservatism is appropriate as you think about '26? And then just related to that, the margins have been incredible this year, I think all-time record in the third quarter. It feels like margins can move up again in '26, just given all the restructuring you did, but I just want to understand kind of you're starting off of a very high base and would love to get your thoughts on margin progression into '26. Richard Tobin: Sure. I'll deal with the margin one first. You do have an amount of mix effect within the segments. So I think we'd have to consider that to a certain extent, but absolute profit will be fine. I don't think that we're overearning from a margin point of view right now. If I look at each individual product line, there's nothing esoteric in there that said, yes, well, we really killed it here. So I don't expect them to come down. Look, the fact -- our business model, if we do things correctly, always has rollover restructuring and productivity. We don't -- that thing -- we can do this every year for multiple years. And that's always a little bit of a hedge that we have for either volatility in the top line or kind of a negative mix change. So that's positive. So to the extent that we get the product mix that we like and we're rolling forward another $40 million, that's positive to margins overall. So I think that we're good there. In terms of the setup, I think I answered it before. We took a pretty big headwind in Refrigeration here. It's almost twofold percent points of growth of organic growth, we're at a 20-year low in terms of unit volume into that space this year. I mean, do we come all the way back. But again, I think that let's -- we've got a pretty heady number in terms of organic growth for Q4. Let's get that under our belt and let's see where bookings are and everything else. But like the setup, as I said before, we like. Operator: We'll move next to Scott Davis with Melius Research. Scott Davis: Can you guys give some context to your data center exposure and kind of terms maybe around content per megawatt or opportunity per megawatt? I mean, do you look at it that way or... Richard Tobin: No. I mean, look, we have people that try to look at that way, but let's -- I mean, to be honest, in terms of participation, it's meaningful for us in terms of the volume and the margin. But in terms of the entire ecosystem and the billions of dollars being spent, we are who we are. Our focus is more getting the spec on the reference products for the reference customers. And that, I think that we've been highly successful in doing that on both the brazed plate heat exchanger side and the thermal connector side. So to the extent that the market grows the way we see it, we don't see a change in the competitive stack in those particular product lines. So if it grows, we'll get our fair share. Operator: We'll take our next question from Joe Ritchie with Goldman Sachs. Joseph Ritchie: Rich, can you just give a little bit more color on that SIKORA acquisition? I think you said that it was significantly outperforming. So that's great to see. And then maybe just give us an update on your deal pipeline and the potential to do more in the next 12 months? Richard Tobin: Yes, sure. SIKORA, I think that we had a head start there because we had been working with SIKORA with our Maag polymer processing equipment business on our own for our own uses, and then we got to know each other. So we were able to close that because as we learned about the company, not only for our own particular use, but what they were doing and where their exposure was, we really liked it. And knock wood, it's really done fantastically in Q1, significantly better than our deal model would have incorporated for the base year. We are in the process of integrating SIKORA. So if you take a look at that back-office slide that we put in there, in all 3 areas, we're working [indiscernible] of assembly operations pretty much done. So we're going to take what was a single site manufacturing site and probably expand it at least in 2 other different geographies over the next 24 months. So that's great. In terms of the deal pipeline, if you look at the overall stats on M&A, it looks like M&A is up significantly, and it is, but it's really very large deals and corporate breakups and a variety of things. The mid-market where we kind of play has been slow. We -- in terms of pipeline, we got an interesting pipeline there. In terms of valuation, valuations, I think they're trying to find its footing, and that's reason [indiscernible] so we're being selective as usual. But we've got enough in the pipeline that I would expect that we'd close on a couple of things over the next 12 months. Operator: We'll move next to Chris Snyder with Morgan Stanley. Christopher Snyder: I wanted to ask on orders. So a positive update here in Q3, up 8% or 4% organic. But could you provide some color or thoughts on the order to revenue, I guess, conversion for the company? Because you've had pretty good orders for a while now, and it hasn't really converted to the top line to the same degree that we've seen in orders. So I guess, any kind of thoughts on that? And it seems like going forward, you do expect better conversion, whether it's into Q4 or '26. Richard Tobin: Yes. I mean the amount of intention that orders get in organic orders and extrapolate that into revenue is one of the great mysteries in life. But we continue to give the data [indiscernible] that is more reflective than to me than orders kind of in terms of trajectory and everything. But you're right. I mean, look, at the end of the day, we would have liked organic growth to be higher this year. I think it's been really isolated in 2 particular businesses. We had an inkling on the vehicle services. We would probably have a challenging year. We missed it on refrigeration, clearly. The good news about that is we don't believe that, that has lost revenue. It's just been pushed largely into '26 now, although we'll get a nice uptick next year. So orders are up. Portfolio is in pretty good shape. I mean if you see segments, we see it down to the individual operating company basis. As I mentioned on an earlier -- to an earlier question, we don't see a cyclical decline in any portion of the portfolio rolling into '26. And that's probably the first time that we can say that in a couple of years. Operator: We'll take our next question from Joe O'Dea with Wells Fargo. Joseph O'Dea: Rich, you made the comment about how you're not aware of any businesses in the portfolio that are forecasting revenue down next year. I guess I'm curious about which ones you're most excited about the growth potential, just when you think about coming off of the Maag, SWEP, Belvac kind of situation last year and now you get sort of cases and doors in the vehicle lift side. And so just thinking about what could be poised to sort of deliver kind of growth that you're getting excited about next year? Richard Tobin: Sure. We highlight the growth platform. So I think you can go take a look at that. We think that we are in what should be a 2- to 3- to 4-year CapEx cycle in the fueling business overall, inclusive of the cryogenic components and everything that we bought in that space. So I think what was our growth this quarter like 5% organic, which is pretty good overall. And we don't see that slowing for the foreseeable future for a variety of reasons, whether it's customer CapEx or regulatory and everything else. Refrigeration, I think we've beaten that one to death at this point. We don't -- Belvac is growing this year. We -- I think it will grow some next year, but that's not going to move the needle in comparison to refrigeration and what's happening in brazed plate heat exchangers. Vehicle services, we'll see. I mean it's been a tough year because a lot of that is exposure to Europe. It's a little bit early to make a call on Europe, but I don't expect it to decline going forward. And actually, the management has done a really great job on the cost structure. So even despite the top line headwind that you see this year [indiscernible]. Joseph O'Dea: You cut out at the end, on me, but I heard through management doing a great job on cost structure and vehicle lift. Richard Tobin: Yes, yes. So what I'm saying is if it grows a little bit next year, the incremental margin should be positive. Operator: We'll take our next question from Deane Dray with RBC Capital Markets. Deane Dray: On Imaging, can you expand on the point about serialization software, kind of size what the opportunity is in some context, please? Richard Tobin: Sure. It's 16%, I guess, of the total revenue of the space. Christopher Woenker: Yes. It's about $60 million, $70 million. Richard Tobin: Anyway. Yes, it's levered almost exclusively to pharma. So as pharma builds out production lines, that's when we sell the software and the recurring revenue associated with it. I think that everybody is pretty well aware of what's going on in kind of incentivized reshoring of pharma. And I think that we'll get our fair share of that. Operator: We'll take our next question from Julian Mitchell with Barclays. Julian Mitchell: I just wanted to understand, Rich, a little bit better sort of how you've seen the demand environment play out because your tone is quite upbeat on the top line, but the revenue guide is reiterated. And so I guess to put a finer point on it, I wondered if any of the segment revenue assumptions for this year have changed since the figures you guided for in July and whether there had been anything in the bookings that had surprised you positively the last few months or so? Richard Tobin: Sure. Clearly, we missed on retail refrigeration, by a significant amount. All the customer information that we were getting, it was on the come. I think some of the commentary that we gave intra-quarter when we can see that it wasn't coming, we were like, okay, now it's not coming, but we're chasing our tail a little bit. So the quantum of that loss on a full year basis is 1% or 2% of organic revenue growth that we had. Now it's going to flex now because the orders popped. So at least optically, we'll have a good look in Q4 [indiscernible] $130 million, $140 million of revenue that we've got to make up year-over-year -- we'll take half of that growth for next year, Julian, at the end of the day. The balance of the businesses, the trajectory is fine in terms of orders. We always have to be a little bit careful in Q4 because we're guessing about our customers' behavior on their own inventory at the end of the day. But I think that someone asked earlier about -- someone did the math on the squeeze for revenue growth in Q4, and that's fair. So it stays within our window. It gives us a little bit of cushion just in case December is light in terms of shipments. But overall, there's really the only significant change is that biopharma hung in there because there was some thought about well, was this restocking? And clearly, it's not. We've run the numbers on that. So it's been pretty consistent in terms of demand and should be consistent in Q4. Same thing with Thermal Connectors. So overall, there's a little bit of cushion on the revenue side in Q4, but the trajectory and the only thing that's changed is we lost basically a quarter of retail refrigeration. Operator: And I would now like to turn the call back to the presenters for any additional or closing remarks. Jack Dickens: No, Chloe, you can wrap up. Operator: Thank you, everyone. This concludes our question-and-answer period and Dover's Third Quarter 2025 Earnings Conference Call. You may now disconnect your line at this time, and have a wonderful day.
Ulrika Hallengren: Welcome to the presentation of Wihlborgs' 9-Month Report 2025. There's an old saying when you think you can see the light at the end of the tunnel, beware, it could be an oncoming train. We never know what will happen ahead, and we try to be prepared for whatever we can think of. But let us be clear, we see some glimmer here and there, maybe not the full ray of light yet, but nice glitters in the horizon. It's a very busy report week for all of you, so I will try to be short and precise. That means standard procedure about the last results of our continued growth and some new records, but also some figures regarding loyalty among our customers, how we can calculate retention rates and not at least our view on future occupancy. We start with a summary of the quarter, July to September. Rental income up 6%, a new record at SEK 1.101 billion; income from property management, plus 11%; net letting positive at SEK 6 million; net EBIT to EBITDA at 10.3x, good access to financing. And as said many times before, but this still stands, demand remains for good quality in good location, and we are proud to be able to continue with the project investment that gives continued good potential for growth. Looking at the whole period, first 9 months, rental income up to SEK 3.243 billion, plus 4%. The operating surplus increased to SEK 2.334 billion and income from property management increased by 12% to SEK 1.482 billion. The result for the period amounts to SEK 1.370 billion, corresponding to SEK 4.46 per share and EPRA NRV has increased by 10% to SEK 96.23 per share adjusted for paid dividend. A comparison of the rental income first 9 months '24 and first 9 months '25. Indexation gives plus SEK 30 million; acquisition, plus SEK 90 million; currency effect, minus SEK 21 million; additional charges, plus SEK 21 million; and completed projects, new leases and renegotiation plus SEK 8 million. And here is also a new higher property tax of approximately SEK 15 million included. So higher vacancy today than a year ago, but small improvement since last report and during 2026, the improvement from new leases will show. And the streak of positive net letting continues, plus SEK 6 million in the quarter, plus SEK 65 million for the period and in total, new leases at a yearly value of SEK 300 million signed in the period. For the third quarter, the volume of new leases of SEK 66 million is good. And maybe I expected the net letting to be a bit better than SEK 6 million, but we got a late termination of SEK 16 million from a tenant who I'm not sure if they really want to move or just renegotiate. Discussions are ongoing, but the total termination is registered. So a possible upside ahead, 42 quarters in a row with positive net letting. Here are some of the tenants that we have signed during Q3, a combination of expanding tenants and new tenants from many industries, health care, insurance, biomaterials and a company that manufactures equipment for land-based fish farms as examples. And here, we have the net letting in a historical perspective, lettings in green, termination in light blue and dark blue stacks are the net letting. And as mentioned, quite high volume of new leases for being a third quarter. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 23% of total rental income. Rental value as of 1st of October is SEK 4.889 billion per year, plus 7.2% and rental income, SEK 4.379 billion, plus 4.6%. Effects from acquisition, indexation and higher willingness to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2.4% and rental income is down 0.8%. The growth in the rental market is supported by indexation of 1.6% in Sweden and approximately 1% in Denmark last year. Indexation ahead in Denmark expects to be a bit higher, and that will be reflected in the rental levels for 2026. I think the September number was 2.3% or something. Lower rental income in like-for-like is an effect of higher vacancy than a year ago. And at least, it's encouraging to see that vacancy appears to have bottomed out in several areas. More on that topic later. Changes in the market value of our properties. We started the year with SEK 59.168 billion in accordance with the external valuation of 100% of our portfolio. We have made acquisition, which adds on SEK 2.552 billion; in investment, SEK 1.911 billion; divestment, minus SEK 114 million; changes in valuation, plus SEK 450 million. And together with currency translations of minus SEK 500 million, that summarizes to a value of SEK 63.457 billion. The valuation this quarter have no changes in valuation yields, indexation or other underlying parameters. Expectation ahead is more likely to be positive, if I may guess. These figures, the running yield show how we actually perform in relation to the valuation, so not the valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.326 billion, that gives a running yield of 5.6%. Fully let, the portfolio would give a running yield of 6.4%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Occupancy is slightly up looking at the decimals since the last quarter and at least that is in the right direction. In the office portfolio, the market value is SEK 50.394 billion with an occupancy rate of 91%, 92% in Malmö, improved to 90% in Helsingborg, 90% in Lund and 92% in Copenhagen. The improvement has started and will be clearer during 2026. Operating surplus from offices summarized to SEK 2.755 billion and running yield of 5.5%, 6.2% fully let. The demand for logistics and production continues to be good in Malmö with an occupancy of 93%, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 87% occupancy rate as a whole with a running yield of 6.4%, 7.5% fully let at a total value of SEK 8.988 billion. As mentioned before, we continue to see harder competition in the third-party Logistics segment with very quick changes in needs. That also means that occupancy can improve quickly when the market changes. But I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover that would take a number of years. But as mentioned before, still a decent running yield of 6.4% even with the high vacancy and the market as such continues to be interesting. The development of our total portfolio running yield, 5.6% brings stability, not least since the portfolio overall has a high quality and good location. As noticed before, a high increase of the running yield since 2021. Some sustainability highlights from Q3. We have been appointed as Global Sector Leader by GRESB, completed a battery storage in Lund and actually one in Helsingborg as well. We have signed more sustainable -- sustainability-linked loans, also including Scope 3 carbon dioxide performance, and we continue to reduce our energy consumption. As a new example, we have reduced the electricity used for heating and cooling by 50% at Ideon Gateway in Lund, including both offices and hotel. New cooling technology and of course, the Janne solution is the answer. And something about what our customers think about us. Our latest customer satisfaction index from now in September shows an index of 79 and a loyalty score of 82, very high numbers. Tenants are especially happy with our personal service with 88% satisfaction, our competence scoring 86 and accessibility score 85. Let me just say that I totally agree with our customers. I'm also very satisfied with my competent and service-minded colleagues. I give them 100 out of 100. A catalog of our value and properties in our 4 cities in Q3, 39% of the value in Malmö, 23% in Helsingborg, 17% in Lund and 20% in Copenhagen. The region and especially these 4 cities continues to be of high interest for future growth, both in population growth forecast, which will otherwise be a challenge in many places and in a number of new workplaces. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika. Looking at the income statement for the third quarter isolated. Are we on the right slide? There we are. Thanks. Rental income grew by 6% to SEK 1.101 billion, and operating surplus increased by 4% to SEK 790 million. There are a couple of things to bear in mind looking at those 2 numbers. First of all, we've been through a new property taxation, and we got the new taxation values this summer. The taxation values are higher, which means that the property tax also is higher. The property tax -- the new property tax is applicable from 1st of January. So we have, you could say, a catch-up effect. So we -- the changes for all 3 quarters are accounted for in the third quarter numbers. That means that on the rental income line, as Ulrika mentioned, that has been affected with plus SEK 15 million from increased property tax, and on the operating cost side, our operating surplus has been affected with minus SEK 20 million from the increased property tax for the first 3 quarters during this year. So the ongoing -- or the future effect of the increased property tax will be smaller on a quarterly basis than you can see in the Q3 numbers. It's also important to bear in mind that on the rental income line, we've had a negative effect from currencies of minus SEK 7 million, and that same currency effect on the operating surplus line has been minus SEK 5 million. The income from property management amounted to SEK 495 million. We've had a small positive impact there from FX since we borrow a lot in Danish kroner as well. Income from property management up 11% versus the same quarter in 2024. We had positive value changes in the quarter of SEK 103 million. And all in all, a profit for the period of SEK 487 million. Looking at the balance sheet. The value of our property portfolio is now SEK 63.5 billion, up SEK 5.6 billion versus 12 months previously. Equity stands at SEK 23.5 billion, up SEK 1.2 billion versus 12 months previously. And during that time, we have, as you know, also paid approximately SEK 1 billion in dividends to our shareholders. And our borrowings are SEK 33.2 billion, SEK 3.5 billion higher than 12 months previously. Translating that into key numbers, our equity assets ratio now stands at 36.2%. The LTV has gone down from the last quarter to 52.3% and the interest cover ratio for the period stands at 2.8x. Looking at some per share numbers, I'd just like to highlight the EPRA NRV value at SEK 96.23 per share, which is up 10% adjusted for dividends versus 12 months previously. On the next slide, you can see the historic development of EPRA NRV, a stable growth over many years and the average annual growth adjusted for dividend is actually 15%. Moving on to the historical development of our financial ratios. The equity assets ratio at 36.2%, as you can see, is well above the 30% that we have set as the minimum level for ourselves and also on decent levels in a long-term historical perspective. The loan-to-value in the perspective of approximately 10 years has come down from around 60% now to 52.3%. And the interest cover ratio, as we've talked about before, has been very variable, especially during the special period when we had almost 0 interest rates when we had an extremely strong interest cover ratio. The rate is now stabilized and 2.8x is a quite decent level to be at. On the next slide, you see the net debt in relation to EBITDA, also that's in a long-term historical perspective. The ratio stands at 10.3x. It varies with a couple of decimals up and down, but being at 10.3x is a comfortable level for us. Looking at our sources of financing, we still have approximately half of our loans from bilateral bank agreements with Nordic banks, about 1/3 from the Danish rail mortgage system and 17% from the bond market. I would say that the banks are definitely more proactive in their lending efforts than they have been for many years actually. And we do see bank margins gradually moving downwards. The bond market has also -- as we noted already in the Q2 report, the bond market is a lot stronger than it was a year ago, and we can issue unsecured bonds at quite attractive levels in this market. The structure of our interest rate portfolio, you can see on this slide. The average interest rate is 3.29%, 3.33% if you include costs for unutilized credit facilities. We have both in the past quarter, but also if you look over the coming couple of years, we will have some effects of attractive interest rate swaps expiring, but we also see an effect of the margins that we pay to banks and in the bond market coming down somewhat. So overall, over the coming few quarters, I would expect the average interest rate to be reasonably flat. And yes, we can move to the next slide and see the development of the fixed interest period, which has gone up a touch in the quarter. It's now 2.7 years. And the average loan maturity in the loan portfolio is 4.8 years. And lastly, from my side, looking at available funds, we have unutilized credit facilities plus liquid funds of SEK 2.9 billion at the end of the third quarter, which gives us, in our view, enough financial flexibility to manage operations and seize opportunities in a good way. With that, I hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And an update on our investment in progress and a quick overview of our largest project. During the period, we have invested SEK 1.911 billion, and it remains SEK 2.730 billion to invest in approved projects, good volume in all our cities, a reasonable yield on cost with 6% or a bit above 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. Let's start in Copenhagen with our project at Ejby Industrivej 41 in the beginning, planned as and decided for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and yield on cost a bit above 6%. Completion is planned to February 2026. The large project at Amphitrite 1 in Malmö has started off really well, a bit about 20,000 square meters for Malmö University at a 10-year lease. We have started at site with deconstruction. And during September, we got the building permission from the municipality. Completion is planned to Q4 '27 and procurement will be completed shortly. In Malmö and Hyllie, we continue with Bläckhornet 1 VISTA, an SEK 884 million investment. The mobility hub has already been completed and the office will be completed in Q1 '26 and during '26. Yield on cost, 6.2% and today, approximately 40% pre-let. The best possible product and low competition from new build in the area, but we still need more activity and more decisiveness from our customers before we are satisfied. An example of top-level refurbishment in Malmö is Börshuset 1. This is an almost iconic building right beside the train station, 6,000 square meters, offices, restaurant and co-working and absolutely top rents in a Malmö perspective. Completion in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmö, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meter zoning plan approved and completion is expected to Q3 '27. Public procurement act starts now. And at Sunnanå 12:54, 17,000 square meter logistics, 100% pre-let in a 15-year lease will be completed 1st of December '25, SEK 280 million investment and yield on cost close to 7%. In Lund, we are building a new modern office right beside the Central Station, Posthornet, phase 2, 10,100 square meter, yield on cost, 6.5% and completion Q2 '26. Pre-let, a bit above 40% today. But together with ongoing discussions, I believe we can reach approximately 70% before year-end, keep our fingers crossed, and very attractive product. And at Vätet 1, also in Lund, we continue with refurbishment and adding on areas for our new tenant, Arm, 5,700 square meters and a 7-year lease, investment SEK 145 million, excluding value of the land, and yield on cost a bit above 10% and over 6.6% yield on cost, including ingoing property value. In the southern part of Lund, we continue to develop of Tomaten. This product for BPC, completion Q2 '26 and investment SEK 79 million, 3,600 square meters and yield on cost 7%. Next to that, at former Stora Råby 32:22, now named as Surkålen 1, we have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases. In total, 14,500 square meter completion in Q2 for Note and Q4 '26 for Lund University. Investment, SEK 260 million and yield on cost 9.2%. In Hörsholm, Copenhagen, we invest in a new school for NGG, 25-year lease, 11,600 square meter and investment SEK 390 million. Completion in Q1 '26. And at Giroströget in Höje Taastrup, the refurbishment for Novo continues, 62,000 square meters. Our investment is limited to SEK 423 million and completion is expected in Q1 '26, but Novo also pays rent during the refurbishment period. That was some of the ongoing project and just to touch on future possibilities as a repetition. 4 possible projects in Lund and Helsingborg, where we can develop some 70,000 square meters in the future. Zoning plans are approved for the first few projects and ongoing at Västerbro in Lund and some of the office possibilities in Malmö in the area of Nyhamnen and Dockan. High interest for the future, of course. If you should ask me which projects of these will be the next one, my best guess today is that will be none of these. The Ideon site in Lund is developing very well, and we have building rights there that might be of high interest for the growing defense and tech industries. Early volume studies have started, but nothing I can show yet. And the summary of Q3 again. Rental income up 6%; income from property management, plus 11%; net letting positive, net debt to EBITDA at 10.3x and good access to financing. And we will continue with a focus on cash earnings and future growth. We have been able to grow every year during different economic environment since 2005. We know how to adapt, find new ways and we will continue with this knowledge and ambition. Growth and cash flow is our passion and the compound interest effect of stable growth is hard to beat from SEK 7 billion to SEK 63.5 billion without any new equity from our shareholders. We have been able to grow, thanks to continued investments. They contribute to upgraded attractiveness and new demands and what comes first, higher rents or investments, have no answer, but these factors have a relation. Here is a graph showing the market rents for prime offices in Malmö and our quarterly investments during the same period from 2010 to present. The green bars represent our investment and the green line represent rent levels. And finally, a market outlook. Employment growth in our region continues. Office rents show long-term growth. Wihlborgs' project investment increase over time. Tenants on average, stay in the premises for 14 years, which support the strong customer satisfaction score. And if we just take the largest leases we have signed, we have a volume of some SEK 320 million moving in from now until end '27 and during the same period, terminations of some SEK 190 million, a good gap. So possibilities for growth is in sight. And with that, we are open for questions. Operator: [Operator Instructions] The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So firstly, on projects. The 2 projects completed in the quarter, Galoppen and Kranen, how much did they contribute in the quarter? And how much should we expect into Q4? Ulrika Hallengren: They didn't contribute in the quarter, but will contribute for the full Q4. Oscar Lindquist: And then on the Sunnanå project, from when should we expect contribution from that project? Ulrika Hallengren: Also from 1st of October. No, 1st of December, sorry. Oscar Lindquist: 1st of December. Okay. And then the Börshuset project was moved to Q1. What's the reasoning? Ulrika Hallengren: The tenant will start moving in there. So there's no delay in the project, but it's a difference between when the building is completed and when tenants moving in. So I think the -- we will have a ceremony there in February, but the rent will be started to pay in Q1. Arvid Liepe: However, everybody does not move in Q1 of the signed leases. Ulrika Hallengren: Correct. we have moving in during the whole '26. Oscar Lindquist: Yes. And then if we move over to net letting, you mentioned a late termination of SEK 16 million in the quarter. When do you think you will know if they terminate or extend their contract? Ulrika Hallengren: We have calculated as terminated and discussions are ongoing. So I guess now during Q4, there will be a decision if they stay or... Oscar Lindquist: Yes. And if they terminate the impact would be in 9 to 12 months or what's fair to expect there? Ulrika Hallengren: Just a minute. 2027, from 1st of January 2027. Oscar Lindquist: Okay. And then -- so if we adjust for that termination, net letting was positive SEK 22 million. What's the mix here between projects and existing properties? Ulrika Hallengren: In the quarter, I don't have that figure right away. But I think actually that the existing portfolio contributed very well this year and also in the quarter and also good contribution from all our cities, at least for the 9-month period. So I would say that we see positive signals in all our 4 cities. Oscar Lindquist: Okay. So effectively [indiscernible] Arvid Liepe: It's -- in the quarter, I would say, without -- I don't have the exact figure either, but I would say that more existing properties than projects during this quarter in the net lettings. Oscar Lindquist: Okay. Perfect. And then if we look on the Bläckhornet project and the Posthornet project, how is discussions going there? You improved the occupancy slightly in Bläckhornet now in the quarter. What's your sort of ambitions closing in on completion? Ulrika Hallengren: Our ambition is to improve, of course. It's a very good product. And -- but the volume is quite large. So something tends to take longer time when you can choose of good things in many levels, so to speak. So I can't give a figure when I think it's -- but I think we will continue with the work for letting also during 2026. That's reasonable to think that. But let me also mention that we see a good -- we have signed new leases in [indiscernible] in the same area. And also, actually, we -- the portfolio we bought 1st of April, there was some vacancy at [indiscernible], for example. And that is now, I think, 20%, 30% vacancy, and that is now fully let. So there is definitely activity out there. Oscar Lindquist: And would you say sort of the outlook or discussions with the tenants has improved in the quarter and going into Q4 or... Ulrika Hallengren: Yes, I think so. But it depends. One day, you think it's slow and one day you think it's very active. So -- but overall, I would say that there's more positivism out there. Oscar Lindquist: Yes. And then on occupancy, it's essentially flat Q-on-Q, and you sort of alluded or guided to improving occupancy in the second half. Could you quantify what you expect in -- or what we could expect in Q4? Ulrika Hallengren: I especially guided on occupancy in offices in Helsingborg, and that have improved 2% during the year. And otherwise, I think that we will continue to have some improvements, but not quick improvements since we also have -- I mean, for example, SAAB will move out the 1st of January '26, and that will take some time before we have entering new tenants there. But a very good example of that is that we have already signed new leases for that building with new tenant moving in a year. So only 9 months for refurbishment. And I... Arvid Liepe: For part of the building. Ulrika Hallengren: Yes, for part of the building. So they take -- yes, [ they'll likely ] take one part of the building, and we also have good discussions for more areas there which might also end up in moving in, yes, I mean, October next year or so. So quite quick period between moving out and new tenants moving in. And not for the total volume, but at a good part of it. So... Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: Just one question from me. So on rental growth, your chart clearly shows there's prime rental growth, but can you comment on the more secondary assets? What's the rental growth you're seeing there? And is there any negative re-leasing on those poorer-quality assets? Ulrika Hallengren: I mean, of course, when you look into the absolutely best location and top rent levels, that is one area. If you just take a small step from that and still good location and good quality, the rent levels continue to develop well. If you go to more poorer area, we have not a large amount of equity there. So I can't really give a good guidance. But of course, it's harder to find higher levels of rents in poorer area. There will be a larger difference there in the market as it is today. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: I'm a bit late into the call. So cut me off if I ask a question that somebody else has already asked. But I have a follow-up on a question I heard, and that was about the occupancy rate, once again, flat in the quarter. Just to be clear, I mean, you have some 6 projects or so being completed in the first quarter of '26 and then you talked about that SAAB moving out. But based on what you know today, has the occupancy rate bottomed out? And at what point in time do you expect it to improve, at what stage in '26? Ulrika Hallengren: I would say that for the whole portfolio, I think the vacancy has bottomed out, but we can see for a shorter time or period, higher vacancy in some areas, for example, when SAAB moves out and before we have new tenants in place. But we meet that well with new rental agreements. So yes, I think we have bottomed out and will improve, but the improvement isn't a quick shift. It will take some time. And especially during 2026 and end of 2026, as mentioned before, we have a quite large volume coming in. But also now in Q4, we have good volumes coming in from Galoppen and Sunnanå, for example. So yes. Of course, we want the occupancy to be even higher, but still, it's good to see that we have flattened out and are on the up-going way on the occupancy again. Lars Norrby: Second and final question. 2025 has been a year where you're growing through projects, but also through a quite substantial acquisition. Looking ahead, '26, '27, is it very much all about projects? Or are you considering adding additional size of any magnitude through acquisition as well? Ulrika Hallengren: I expect that we will see a combination. It's good with the project volume because you can manage that and plan for that. And acquisition is harder to plan for. But we continue to be active and trying to find the best premises for us. And of course, it's an interesting period we're in. Lars Norrby: And just a quick follow-up on that. In what geographic area? Are we talking primarily about Copenhagen then? Or is it more likely to be in Sweden? Ulrika Hallengren: I think there is interesting things going on both in Sweden and Denmark. So we try to be active on both places, both countries. And as mentioned, I mean, you can't plan for transaction if you want them to be the best things for you. So of course, you can be aggressive and try to buy whatever, but we will continue to be picky on what we want to go into, of course. Lars Norrby: Sounds good. I hope you don't buy whatever. Ulrika Hallengren: We will not. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So I just had a follow-up question on the property tax you mentioned weighing on the NOI margin. So the effect in this quarter was SEK 5 million, as I understand it. Is that correct? Arvid Liepe: On the operating surplus line, yes. A negative effect of SEK 5 million. Oscar Lindquist: Yes. But going forward, will you be able to sort of pass on the full increase in property tax to tenants? Arvid Liepe: Not 100%, but the very largest part. I mean, we do have some vacancies, for example, and we have a very small proportion, but still a few inclusive contracts, so to speak. Oscar Lindquist: But then significantly lower than the SEK 5 million we saw this quarter? Arvid Liepe: Yes. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Perfect. Thank you. Have we got any written questions as you can... Arvid Liepe: Let me double check. Not that I can find. No. Ulrika Hallengren: No? okay. So of course, you're welcome to come back to us whenever with whatever asked questions. Thank you for this. Arvid Liepe: Maybe we should conclude. This may actually have been a record quick presentation. Ulrika Hallengren: Definitely, 42 minutes. It's our quickest [ version ] , I think. We try to be precise and quick, but that was part of it. Arvid Liepe: Thank you, everyone, for listening in. Ulrika Hallengren: Thank you.
Operator: Welcome, everyone, to Telia Company's Q3 2025 Results Presentation. And with that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, Jen. Welcome, everyone, to the call. We have our CEO, Patrik Hofbauer; and our CFO, Eric Hageman, in the room, and I hand over the word to Patrik. Please go ahead. Patrik Hofbauer: Thank you, Erik, and good morning. Q3 was, in many ways, an important quarter as it confirms that we are doing the right things for our customers. Our group-wide NPS, so Net Promoter Score, continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI. And in both Finland and Norway, we had strong outcomes in the EPSI surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter. And as we talked about already 3 months ago, it was an eventful M&A quarter. The closing of TV and Media transaction strengthened our balance sheet further. In July, we also signed a memorandum of understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year-end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. And finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong CapEx discipline. And we are also now changing our full year outlook for booked CapEx from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights. Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was as expected, a bit below the ambition for the full year, but not too much, and with both Sweden and Finland continued to perform well. CapEx continued to be well below our SEK 14 billion limit. And even though we expect a seasonal pickup in Q4, we are already comfortable -- we are very comfortable, sorry, to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media divestment resulted in a lower leverage, and we ended the quarter at 1.93x. Moving now to Sweden that is performing well on customer metrics. We had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers. And in consumer, Telia again had the happiest customers among the mobile main brands and fellow came out well among sub-brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband and TV, as you can see here, the broadband intake stands out as it actually is a result of 2 good quarters rather than one since around 10,000 new customers in Q2 were registered in Q3. The late registration was related to our transition into a new system. In Enterprise, we signed a long-term partnership with Sweden's largest train operator, SJ, to deliver high-quality communication for the entire train fleet. Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2%, driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues, which is lumpier than subscription-based revenues. In Q4, we expect more project-based revenues than we had in Q3. And EBITDA growth was again strong on the back of profitable growth and cost savings driven by the Change Program. Let's now move east to Finland. That came out as the #1 in the EPSI's survey on customer satisfaction in both Consumer and Enterprise. This is promising and shows that we have good foundation in Finland to build on. Mobile net adds improved, and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband, where the market is declining. Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4%. On fiber, we are also adding customers not least from being a service provider in our Valokuitunen JV network. Financially, we saw a slight improvement in service revenue trends with growth in Consumer and a decline in Enterprise, driven in part by our choices to discontinue noncore activities and in part by a weak market. And finally, the strong execution of the Change Program continued to give tangible savings and resulted in EBITDA growth at high single digits with a margin climbing to 34.6% versus 32.5% one year ago. So in summary, we are making progress on all 3 of our midterm ambitions for Finland that we presented 1 year ago, stabilization of the mobile market share, improvement in SME and improved profitability. Now moving west to Norway, which is, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys with Phonero winning the EPSI survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. So EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3. The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, a weak performance in our fixed business is something we are addressing very actively. And on the next slide, I want to share some more information about this development. So we have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements and created a dedicated organization for fixed consumer services. Network quality has improved. And as you saw, we added TV and broadband customers in this quarter. At our investor update 1 year ago, we talked about our backbone of our network being already fully fiberized and around 50% of our broadband customers were on fiber or fixed wireless access connections. Today, the share is around 55%. And as we have said before, this is too slow. And from next year, we will see a clear acceleration in the coax to fiber upgrades, in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed, something that together with continued efficiencies resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter, Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C, 2 achievements which will help our growth journey going forward. Now let's move to Estonia. That saw both service revenue and EBITDA growth accelerating following great momentum in especially the public sector and good work on generating efficiencies. And like for Lithuania, cash conversion remained at record levels. And with that, I hand over to Eric before I come back to summarize the quarter. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue. In Finland, we also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year-to-date, we are at 1.3% service revenue growth. And looking into the last quarter of 2025, we expect an improvement related to pricing, growth in Enterprise and public sector contracts and less revenue decline in Norway. Moving to EBITDA. Growth in Q3 was somewhat below the 5% ambition for the year as we flagged 3 months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the Change Program. We're also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the investor update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing costs, both in Norway and Finland. Moving now to OpEx and CapEx. As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our Change Program continues to drive down resource costs. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OpEx as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with CapEx of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago. This shows how being focused and having clear priorities can be translated into better capital efficiencies. CapEx spend is expected to increase somewhat in the last quarter of the year, in line with normal telco seasonality. But overall, we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering CapEx resulted in EBITDA minus CapEx comfortably above the SEK 19 billion on a 12-month basis. This equals a step-up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter. Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year. And as for several quarters now, the key building block is our profitable growth. Cash CapEx increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor financing program, the latter, however, having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusual high due to phasing of interest between Q2 and Q3. Working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program. Finally, we saw a SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of our mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first 9 months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment, and we also received the proceeds from the divestment of TV and Media. The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer-term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last 2 years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like, for example, the last quarter, we announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase 2 investigation of Bredband2 has now started. And as said before, we expect to close the transaction in Q1 next year. Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the investor update about a year ago. As you may remember, we laid out a clear agenda at the investor update on how we aim to create shareholder value. And I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first 9 months of the year. And as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing. Largely, this free cash flow uplift is driven by our profitable growth trajectory and CapEx discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden, while we are working hard on securing the full exit for Latvia. Thirdly, our balance sheet continues to strengthen. Liquidity is strong. And after closing the TV and Media divestment, we are below the 2 to 2.5x net debt-to-EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. And finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment. Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik. Patrik Hofbauer: Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was in the start -- or at the start of 2024 after our Change Program and the exit from TV and Media. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers and some have been closed down. We are encouraged by the results so far. Network incidents have continued to become fewer and so has incoming calls from customers who are contacting us with issues and questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up and our people see that barriers to execution are being removed, collaboration and decision-making is improving and of course, EBITDA growth has improved. This is a promising start of first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster and more efficient than we are today. And then on the summary of the quarter, which was overall in line with our own internal expectations, we continued a healthy group EBITDA development, supported by profitable growth and efficiencies from the Change Program. And we continue to see clear signs that customers appreciate our high-quality services and see the benefit from how those improve their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. And with that, I will open up for questions. Thank you. Operator: [Operator Instructions] Our first question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's Owen McGiveron from Bank of America. So on your upgraded guidance, how should we think about 2026 and 2027 CapEx within the frame of your medium-term ambitions? Should we expect similar levels versus 2025 or more moderation? And how does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Patrik Hofbauer: I can start. It's Patrik here. First of all, we are not guiding yet on '26 and '27. We will come back to that in January. But I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. So we continue to see how we can use the capital much more efficient than we are today, and that will continue. But we will come back in January with the guidance or update or whatever in January -- in that call. So Eric, do you want to add something? Eric Hageman: Yes. I mean that would -- just my simple observation that it doesn't change so much from one moment to the next. And with regards to Norway, it's part of that. So the slide that Patrik talked about where we say we want to accelerate the rollout of fiber. That part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years, but it's firmly part of that CapEx guidance that we have just talked about. Operator: Our next question comes from Andreas Joelsson with DNB Carnegie. Andreas Joelsson: Just to follow up on your comment on further efficiency gains. Could you perhaps describe how you view the cost base currently and what else you can do? From the last slide, it seems like you have been able to do this Change Program without any basic negative effects. So are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand. Patrik Hofbauer: Andreas, I understand your question very well. It was not blurry at all. So first of all, the Change Program went obviously very well. We have delivered on basically all parameters, and we see that the operations is really much more stable, which we had, of course, the concerns about when we do this big change that we did last year. But so far, everything is running very well. Then remember, last year, we had this investor update, we gave out a 3-year plan with a CAGR on service revenues around 2%, EBITDA at 4% and then a free cash flow above SEK 10 billion in -- or at least SEK 10 billion in 2027. And that requires to continuously work with efficiency to deliver on that plan. And we are fully committed to deliver on the plan that we have put in place, which means that we will actively, of course, to improve the operations from year-to-year. So I think that is a clear answer on your question where we are heading. Well, I hope at least. Andreas Joelsson: Yes, absolutely. Less blurrier than the question. Patrik Hofbauer: Thank you. Operator: Our next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: So I have a question each on Finland and Norway, which are 2 of the areas where investors had a bit less certainty recently. Just on Finland, there's some improving -- slightly improving service revenue growth trend today and also sub-trends. Could you just talk about how you're achieving that? And also how you're thinking about the balance of not disrupting the market too much, given we've had one of your competitors basically disappointed fairly materially on their mobile service revenue growth outlook in the near term. Just comments around kind of how you're improving and how you don't disrupt the market too much would be helpful. And then secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September. I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Patrik Hofbauer: Andrew, thanks for the questions. I can start with Finland. I think, Eric, you can take Norway then, so we divide a little bit here. Starting off with Finland first. I mean, the most important part is actually the customer satisfaction, which we have been invested quite heavily in. So we have upgraded our network and then several activities that we're now seeing is paying off. Then on top, we also had some good execution here, especially in the consumer side to turn these trends around. And we are not at all disrupting the market. I don't know what that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. And then we have also a consumer operation that is more efficient every day. And remember, we have said clearly that we are accepted to lose market shares in Finland for too many years now. And we said clearly, we want to stabilize that, and that is what we're doing. So we see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. And then also on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, where we are focused on and having good also development on. So I think this is not -- I think it's a healthy operation. We are improving, and we will continue to improve during 2026 as well actually to defend and stabilize our market share. That's actually what we're doing. So I think good done by the whole team in Finland. Eric Hageman: Yes. With regards to Norway, so very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, is never to disrupt, but certainly to defend our position. So let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss, that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. So we're working on that. We've made some management changes in the organization. We're fixing fixed, as Patrik just talked to in this slide, and that will take a bit of time. So we guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps. Operator: Our next question comes from Fredrik Lithell with SHAB. Fredrik Lithell: I have two of them. You have, on earlier calls, talked about that service revenue should be a bit slower, both in Q2 and Q3 and then to reaccelerate a little bit in Q4. And I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. And then also the CapEx, the lower CapEx from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow of SEK 1 billion down and SEK 0.5 billion up. Could you sort of walk us through a little bit what movements you have that support your free cash flow raised guidance would be interesting. Patrik Hofbauer: I can start with a comment on the service revenue. And right, you said that we said that Q2 and Q3 will be a bit softer, but then we'll see an improved situation in Q4. And we do expect better growth in Q4 than in Q3 with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason. Erik Pers Berglund: It's mission-critical, as I said a few times. Eric Hageman: Yes, on CapEx, it's very simple. We sort of never felt we're going to do the SEK 14 billion, right, when we guided for less. We're very happy with the progress that we've made as an organization on a profitable growth, which ultimately drives our free cash flow growth. And then when you go through 9 months of the year, where you then feel is this the moment where we have that visibility. It's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. And on the CapEx, yes, we have good visibility for where we will land for the year and also where that will trend going forward as per the first question we got. So very happy with how that goes through. And yes, let's see where we land for the full year when it comes to free cash flow. Patrik Hofbauer: If I may add a clarification, Fredrik. We never plan to invest SEK 14 billion. It was always below, right? So it's not a SEK 1 billion downgrade as such, but yes. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So maybe a follow-up to Andreas' very clearly worded question. Just thinking of the current trends here, it looks like you will exit the year at about 4.5% perhaps EBITDA growth rate approximately and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for '26 and beyond. I mean, do you think you need to clearly accelerate cost savings to reach your targeted EBITDA CAGR of 4% between '25 and '27? Patrik Hofbauer: I think the answer will be pretty much in line with Andreas' question. So we -- I mean, when we set the plan, the 3-year plan of the 2% and the 4% then related to EBITDA, as you know, we were clear on that, okay, this is a rightsizing that we did with Project Sprint. It was an internal name on it that we did last year, the minus 3,000, and we executed on them. And then we need to continue to take out cost, and that will be in every aspect and every area of the cost base. So this is work ongoing. So I don't -- and I don't want to be more specific on how we'll do that, but we will show you quarter-by-quarter that we are able to take out cost to defend because we want to -- we are fully committed again to deliver on the 4% CAGR growth on EBITDA. Then we need to -- because that's a combination of service revenue growth and cost out to be more efficient. Eric Hageman: Yes. Maybe to add from my perspective is, as time goes on, now having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen, it gives us more confidence as a management team that we are on the right path to deliver what we promised, not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion, right? The combination of profitable growth, good CapEx discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion plus by 2027. Operator: Our next question comes from Maurice Patrick with Barclays. Maurice Patrick: For me, just a question on Sweden, please. So yesterday, it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, the dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounds probably more like grabbing headlines than reality. But again, curious for your insights in terms of how you see that in the context also of you delivering a pretty solid broadband number this quarter and last. Patrik Hofbauer: Yes. I mean, coming back then to the access cost for local networks. I mean, we have seen the high cost for the local networks access for several years. It's nothing new. So -- and that is driven basically by ourselves growing service provider in these local networks and then also higher access prices. So we haven't seen any recently that increase. This has been going on for a while. So I don't know exactly what happened there. And so yes, and also on our own networks, we have made very modest increase in our [indiscernible] business, a couple of percentage points only. So I'm not -- I don't recognize really the whole situation from a new thing. This has been going on for many years. So that, yes, around regulation... Erik Pers Berglund: Yes, regulation has been postponed as you know again -- so we'll see what happens when we eventually get there. But I think you're right, that's probably what brought the topic up this quarter. Eric Hageman: But maybe overall on Sweden, we are incredibly happy with the performance there. As you saw, very good service revenue growth, perspective of even more service revenue in Q4, as we indicated, very strong cost control leading to good EBITDA growth. So yes, we hear what others are saying, but we are very happy with our developments in the Swedish market. Erik Pers Berglund: And I think you also mentioned the broadband intake, Maurice. It's a good work over a couple of quarters. As we mentioned, this is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. So that's working. And so overall, we're happy with that. Patrik Hofbauer: And continues to perform -- TV continues to perform well and not a surprise. I mean, we have the best product in the market. And obviously, customers are appreciating it. And for the fourth year now, we have got the best feedback from the customer surveys on TV. So all in all, happy with the performance. And again, remember that we have seen a more household perspective on the consumer market in Sweden rather than looking each for the products because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in the strategy. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: My one is just around leverage and shareholder returns. So obviously, you're below your target at the moment. We have some acquisitions coming maybe in the next few months. But it feels like you'll still end up below your target range of 2 to 2.5x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media sale as buybacks or extraordinary returns? And if so, when would this -- when would you approach this decision with the Board? Eric Hageman: Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet, one, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. So that's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block, which is doing, as I said earlier today, coming right on progressively growing dividend, next year is when we'll come back to that. And the beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the Board. So we will come back to that. Maybe the last point is, we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband [indiscernible]. So it's important for us that we have the flexibility to be able to do that as well. So -- but we know it's an important pillar of our value creation plan, and we'll come back to that at the beginning of next year. Operator: Our next question comes from [indiscernible] from BNP Paribas. Unknown Analyst: I had a question, please, on Finland, where you've delivered strong EBITDA improvement over the last sort of 3 to 4 quarters. You're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? And then just a quick clarification around the Norway CapEx, I'm sorry if I missed this. Does this at all change your thinking around the FY '27 free cash flow target of SEK 10 billion plus? Or is that reflected in this? Patrik Hofbauer: So I can start with the later one with the CapEx. No, it's reflected in the figures and will not impact our 2027 target. So to be super clear, it's in the envelope of that. And then Finland? Eric Hageman: Yes, with Finland, maybe a step back, a big part, and we talked about it today in the voice over as well of the analyst presentation, which is margin expansion was a very important part of what we talked about in the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, but all other countries, you see the margin expansion coming through. And what is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary costs that we have. We have a very, very clear plan, and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda. So you should expect more margin expansion, including in a market like Finland in the coming years. Patrik Hofbauer: Can I just add also Finland? And don't -- to build on what Eric said, don't also forget to look into the ARPU development that we have in Finland, which is 4% up on the mobile postpaid, which is also very positive. And that has been driving the agenda to run price increases, but also a better mix in the portfolio. So all these activities are actually paying off at the moment. But we're still a way to go to be where we want to be in Finland, to be clear. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: I've got two questions, please. So at the CMD, you showed a target for mission-critical revenues to more than double from '23 to '27. You've been quite clear on this as a source of support for Q4. But can you comment on how we should think about the mission-critical growth in '26 compared to the growth in '25? It's obviously a bit difficult for us to model. And then secondly, on Norway, you've talked quite clearly about the moving parts. But can you comment on when you actually expect Norway to stabilize EBITDA? Patrik Hofbauer: Yes. I'm not sure I understood the first question on mission critical. But I can give you -- I mean, we have a clear -- I mean, we said it will double rightly, as you said, for the coming years, and we see that it's coming into now to our books and orders and also that's the reason why we will see a comfortable increase in Q4 in Sweden. So that's part of it. And this will continue, but they are a bit more lumpier, these revenues. So we will see it continue in the coming years as well. But we have not been explicit more than say that we will double from where we came from. And we will still stand with that. We are delivering on what we have said and on the expectations. So no surprises coming in. Eric Hageman: Yes. With regard to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4, as you heard earlier today, that will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy costs there. We typically have salary inflation in our countries as well that we have to work with. So we do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses we have on mobile. TV is back on after the outage that we had, but it takes us a couple of quarters. So as we said last -- at the half year results, we need a bit of patience before we also, from an EBITDA perspective, turn around this business. Operator: Our next question comes from Viktor Hogberg with Danske Bank. Viktor Högberg: So just a question on the new free cash flow guide. Just a clarification maybe. Given the assumption of SEK 650 million in spectrum CapEx annually included in the guide for this year, would you say that you still expect the real free cash flow that is including the higher spectrum CapEx to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question. Erik Pers Berglund: Thanks, Viktor. It's Erik here at IR. We don't guide for free cash flow, including the real spectrum cost as you might understand, simply because we're not able or allowed to speak about spectrum CapEx ahead of the auction. So we have to stick to the normalized spectrum when we talk about free cash flow guidance. But maybe it's worthwhile to add a comment to that. So SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year, we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay plus, let's see about the SEK 1,800 million in Sweden. Next year, we don't have any big auctions coming up. So it goes up and down. But yes, that's where we are. Viktor Högberg: Okay. Fair enough. On the second question, just another clarification, maybe if you were talking about the group or just Norway on Q4 group EBITDA growth, the trend being in line with Q3. Was that for the group or for Norway, so below 5% that is for Q4. Patrik Hofbauer: So Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. So that's for the group. And for Norway, we expect EBITDA improvement to take a couple of quarters, as Eric said. So we need some more patience for Norway specifically. Operator: Our final question comes from Siyi He with Citigroup. Siyi He: I have two actually. And my first question is on Finland. I mean, the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that put through by 2 of your competitors in Finland. And my second question is on service revenue growth in Sweden. And I just want to ask about how we think about 2026 and '27, given that the price is still doing quite well and have lower legacy drags and mission-critical revenues should also come through. Do you think it's fair to assume that the top line trend is next year and year after could be better than what we have witnessed this year so far? Patrik Hofbauer: So I can take the first question on Finland. I'm a bit surprised that we get the question all over and over again regarding the package, the security package. Look back in Finland, we have been driving the price increase raise there and the value creation agenda for many, many years. And remember, our position, we are the #3 mobile operator in the market. And if we look at the ARPU levels, they are very similar to each other. And we should be the challenger in the market, not the responsible leader in the market. So look at our position, I think, we are looking into different ways of driving price increases, i.e., ARPU increases. And we don't need to follow what our competitors are doing all the time. We have our own agenda that we are running and that we're looking into to make sure that we continue to grow and defend the position that we have in the market. And that you will see going forward as well. And I don't want to go into commenting on every package and price, et cetera. So we have our agenda. We are running that. We are #3 in the market. We should be the challenger. We have been too much more -- too responsible as a #3 player and acting like we were the incumbent almost in Finland or the leader. So I think we are well positioned. We have done a good quarter and good improvement during the year, and that will continue. I expect that will continue in the next year as well. Erik Pers Berglund: And to add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base cohort by cohort as certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices. And that's giving the results. You can see there. I think the 4% is roughly in line with the competition. So even though we don't do exactly the same thing on security add-ons. Eric Hageman: Yes. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first 9 months performance and what we're expecting for the full year. A little bit like our answer on CapEx, that's not something that changes overnight, right, when you have certain momentum. And clearly, we're guiding for a stronger Q4, driven by what we're doing in mission-critical, particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us. And on top of that, some price increases. So we expect that momentum to continue. Said in a slightly different way, if you think about a medium-term guidance, the 2% and the 4%, that would not be possible without Sweden delivering that, right, because it's roughly half of our business. So again, we feel comfortable with that medium-term guidance, and we're very encouraged by the performance that we're seeing in Sweden. Operator: There are no further questions. Erik Pers Berglund: All right. Thank you very much, everybody, for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you, and goodbye.
Operator: Good morning, and welcome to Nexans' 9 Months 2025 Financial Information Conference Call. My name is Laura, and I will be your coordinator on today's event. [Operator Instructions] And now I'd like to hand the call over to Mr. Julien Hueber, Nexans' CEO. Please go ahead, sir. Julien Hueber: So good morning, everyone, and thank you for joining us today on the Nexans conference call. It's a special moment for me to be speaking with you for the first time as the CEO of Nexans. With me today, I have [ Christine Preolevi ], our Interim CFO; and Audrey Bourgeois, our VP, Investor Relations. I would like to begin by thanking the Board of Directors for their confidence. It's an honor to take this role and to lead a strong, high-performing company with a clear vision for the future. I also want to express my appreciation to Christopher Guerin for his leadership and the remarkable transformation he has led, a transformation I was proud to help drive as part of the Executive Committee. Chris leaves behind a strong company built on solid foundation that we will keep strengthening. I spent more than 2 decades at Nexans always close to operations and transformation. From my early years in manufacturing to leading our activities in China, South Korea or globally for the Industry & Solutions project, I've seen how performance is built on operational excellence, flawless execution and a deep understanding of our customers. As a member of the Executive Committee since 2018, I helped shape the group strategy on the capital markets road map. Leading our EUR 2.6 billion of PWR-Grid and Connect in Europe business reinforce my conviction that agility, execution and industrial excellence are the levers that will be key to Nexans's next chapter. Our strategy remains unchanged, and the megatrends behind it never been so strong. Electrification is accelerating and the need for secure, modern infrastructure keeps growing. These dynamics reinforce Nexans' positioning and long-term strategy. As a new CEO, I want to be very clear, we will continue to execute the road map presented at the last Capital Market Day, and we confirm our 2025 guidance and 2028 objective as well. The direction is right and the foundation are solid and all megatrends are continuing. The environment, however, has grown more complex since our last Capital Market Day, from geopolitics, supply chains disruption or shifting policy environment around energy and renewable. This makes one thing clear. It is the right time to make Nexans even stronger, stronger in execution, stronger in competitiveness and stronger in agility. I will continue to fuel our model of value creation that delivers results, combining our SHIFT program, complexity reduction, innovation deployment and vertical development. But building on that, I will also move forward and I will emphasize even more on the further complexity reduction of the organization, efficiency optimization of our industrial operations, both in terms of productivity and cost competitiveness, further mutualization of our industrial footprint and of course, keeping absolute discipline on cost and cash. All these priorities will further enhance the resilience of Nexans model. Our ambition is clear, to consolidate Nexans' competitiveness while amplifying selective profitable growth in Electrification, powered by digital acceleration and the smart use of new technologies and artificial intelligence. Nexans is entering this new phase from a position of real strength. We have a clear road map, robust financial foundations and teams that are talented, dedicated and united and proud of what we do. Together, we will deliver with strong discipline and focus, the long-term value creation for all our stakeholders. So after this introduction, let me now turn to the group's performance in Q3 on the first 9 months of 2025 on Page 4. In the third quarter, the group delivered a plus 7.7% organic growth, including a strong 12.6% in Electrification. Over the first 9 months of 2025, the group standard sales reached EUR 5.3 billion, representing a plus 5.8% organic growth compared to last year. Over the same period, Electrification, which remains the core of Nexans growth, recorded a plus 9.4% organic growth, confirming our disciplined execution across our 3 segments, which are Transmission, Grid and Connect. Our Transmission adjusted backlog reached EUR 7.9 billion at the end of September, providing for Nexans a strong visibility for the coming years. And no later than today, I am pleased to announce the acquisition of Electro Cables in Canada that will be reinforcing Nexans' position in PWR-Connect in a highly dynamic market and with approximately EUR 125 million current sales on a yearly basis. And I will come back on that on the next slide. In short, the first 9 months confirm the solid and disciplined growth of our Electrification businesses. This performance reflects our sharp focus on high added value solution and our selective approach to capture the strong underlying trends in Electrification. So before we move to our segment in details, I wanted to highlight something that is important to me. So I will move to Slide 5. Our Innovation Summit in Toronto that took place 2 weeks ago was a great platform for exchange with our platinum customers, our technology experts and our partners. Nexans becoming a pure player of Electrification. So I believe that our role is to bring together the key stakeholders of the electrification ecosystem to imagine and to build collectively the next level of electrification that is critical to our societies from powering homes and hospitals to supporting education and many other essential services. The choice of holding this event in Canada reflects our strong interest in North America. Canada is a powerful growth platform for Nexans, both for the Grid and the robustness of this construction industry in our Connect segment. So talking about Canada, I will now move to Page 6, where I will present the acquisition of Electro Cables that was signed today, this morning, in fact. Electro Cables is a Canadian player in low-voltage cable system, delivering a high performance and service-focused solution. This company represents a strong strategic complement to Nexans Canadian portfolio, offering an attractive growth perspective and a robust profitability profile. This acquisition also allows Nexans to further strengthen and complement its portfolio in Canada, enhancing its position in a very dynamic market while optimizing local supply chain efficiency. It also paves the way for valuable synergies driven by Nexans' expanded local presence and the rollout of its proven proprietary SHIFT program while enhancing innovation. This acquisition will be fully financed in cash, leveraging Nexans' strong balance sheet and is expected to be EPS accretive from day 1 and from year 1. Now moving to Page 7. Let me now comment the overall group performance over the first 9 months of 2025. Standard sales reached EUR 5.3 billion, representing a plus 5.8% of organic growth, confirming a solid trajectory for the group. The growth continues to be driven by Electrification business, which make up the core of Nexans strategy. It delivered a plus 9.4% organic growth over the period. Let me remind you that this is well above our Capital Market Day organic growth that we have announced last November of a CAGR between plus 3% and plus 5%. This performance reflects the disciplined execution in Transmission and in Grid as well as the recovery in Connect during this third quarter. Other Activities, mainly Metallurgy, a strategic segment for Nexans, posted a plus 4.1% organic growth over the first 9 months of this year. And as you know, we observed unusually high level of external sales in H1 that was driven by customer bringing forward orders ahead of the U.S. tariff. As expected, this overstocking subsequently led to correction in Q3 2025. The Non-electrification activity declined by minus 6% as expected, given the challenging automotive market. We remain very active to make this disposal of autoelectric, the last remaining activity to finalize our portfolio rotation. So overall, the group growth is at a high level and fueled by healthy growth drivers in Electrification, which remains our main engine of value creation. So let's now take a closer look at our different segments, starting with Transmission on Page 8. Performance was particularly strong over the first 9 months of 2025 with standard sales above EUR 1 billion, which is up by 25% organically versus last year and with a very strong Q3, up by 33%. This strong performance reflects solid execution, a favorable production mix and a more installation campaign carried out in Q3 compared with last year. Now regarding GSI projects, let me confirm once again that we keep working hand-in-hand with our customers. We have a very collaborative approach with them on this ongoing project that is on track as per schedule and milestones. Last but not least, Transmission pipeline of activity remained robust, supported by sustained demand for interconnection and offshore projects across our key markets. Our adjusted backlog stands at EUR 7.9 billion, which is up by 27% compared to last year, providing a strong visibility until 2028. So in short, the PWR-Transmission segment continues to deliver, thanks to the quality of the execution. I will now move to Page 9 on the following slide regarding PWR-Grid. So PWR-Grid sales reached EUR 989 million, which represents a plus 6.7% organic growth for the first 9 months, which also represents a plus 9% in Q3. This reflects solid structural trends coming from replacement of offset grids and the connection of renewables to the Grid, coming from Electrification needs in verticals such as electrical mobility and data center. And it also comes from the high development of our low carbon offers, and I will be able to comment or answer any of the questions regarding this element. Also, our Accessories business continued to be very well oriented over the period. Overall, projects in Europe and North America ramp up under the new frame agreements with major utilities. So now turning to our PWR-Connect business on Page 10. The net sales of the Connect amounted to EUR 1.7 billion for the first 9 months of 2025 compared to EUR 1.5 billion in the same period last year, representing a plus 1.4% organic growth. You know how contrasted is this segment. We have indeed some strong performing regions with a double-digit organic growth. It's the case for Canada, South America, Middle East and Africa. And so here again, our acquisition of today in Canada will further leverage on wind trend. We continue also to actively grow our tech product as fire safety product with sales growth progressions, which are higher than the market average. That was a key element that we communicated during our last Capital Market Day last year in November. In contrast, and as you know, some region remains more challenging. That's the case of Nordics in Europe or Asia Pacific, specifically Oceania in Australia, specifically on the residential market. Countries like France, Italy and Spain were quite resilient. And let me deep dive on Italy, where, as you know, we have started our SHIFT complexity reduction program on the new LTC business that we acquired last year. This SHIFT complexity program is completely part of the integration process. So we are currently exiting from low-margin products and low-margin market as per schedule. And I can tell you that the integration process of LTC is going very well. Moving on now to Page 11. And before we move to the Q&A, let me confirm our full year 2025 guidance, which was upgraded in July. We continue to execute with discipline and focus and remain on track to deliver an adjusted EBITDA between EUR 810 million and EUR 860 million, and a free cash flow between EUR 275 million and EUR 375 million. Let me remind you that this annual guidance upgraded in July is confirmed and does include only 6 months of Lynxeo. Now entering the final quarter of 2025, we look ahead with confidence. Electrification keeps powering the group performance and Nexans is well positioned to capture this growth with resilience, efficiency and focus. Also, I would like to thank all our teams in Nexans for their commitment and hard work. They are the driving force behind our success on the journey that lies ahead. I am now happy to take on the questions. Operator: [Operator Instructions] We will now take our first question from Daniela Costa of Goldman Sachs. Daniela Costa: I want to ask one sort of like more medium term and one a bit more shorter term. So I'll do them one at a time. But given the deal you've just done now in Canada, and I think in your commentary remarks on the press release, you're mentioning that you're moving from -- or Nexans moving from execution to expansion. Can you talk a little bit about how you view the balance sheet? What's an ideal positioning? Should we see this deal has sort of more of a start of a wave of deals in Electrification perhaps? And then I'll ask the second one. Julien Hueber: Okay. Thank you, Daniela. So clearly, the capital allocation is not changing. My priority will remain the same. I will focus and accelerate the M&A as per -- based on the same logic as in terms of thesis, basically, which is prioritizing M&As in countries where we are already located in order to reinforce our positions and in order to scale our innovations. And also second thesis is to focus on M&As in countries where we are not. So basically, we'll be looking for bigger acquisitions in these countries. And then the third thesis is also to grow in adjacent to cable, could be around Accessories or any other elements. Daniela Costa: And then just -- it sounded like in Q2 that the commentary was very strong regarding the outlook for 3Q on Connect. And I think sort of the market in general had interpreted that maybe more like high single digits or maybe above that, and you ended up with some growth, but relatively modest. Was it something in those countries that were weaker that deteriorated further? Or maybe people just got overexcited with the growth rates after the Q2 call? Sort of what's your interpretation of the deviation there? Julien Hueber: Yes, of course. So first of all, Connect is a very contrasted market. We have indeed meet the double-digit growth in South America, Canada, Middle East. That was completely in line with our expectation. For Europe, we were expecting a recovery in the Nordic part that did not happen. So what we have been doing is to accelerate the launch of innovation products. We are launching our more than 10 innovations both in Norway, in Finland and Sweden in order to compensate this. So we will not have any impact in terms of profitability in this area of Europe. On the rest of Europe, we start to see some -- in Q3, we started to see some signals of recovery, specifically in France, Belgium, Italy and Spain. Daniela Costa: But -- so it was as strong as you expected at the same dynamics you expected at Q2 or... Julien Hueber: So basically, you see the recovery in Q3 in Connect, it's a plus 3.6% compared to -- it's better, it's an improvement compared to Q2. And I expect that Q4 will be on the similar trend in Connect. Operator: And we'll now take our next question from Lucas Ferhani of Jefferies. Lucas Ferhani: I just wanted to have a bit more information on the North America business. So you said it's about 20% of group revenues. Can you say how much it is in Connect and Grid specifically? And also, do we still have that same split between kind of Canada versus the U.S.? And how would you characterize the EBITDA margins there? Would you say that they're higher kind of than group average? And the last point on that North America business, do you see any risk related to copper tariff in the U.S. that might redirect some volumes towards Canada? Julien Hueber: Thank you, Lucas, for this question. So I just want to remind that when we talk about North America, we are not in the U.S., we are in Canada. We are well positioned in Canada, and this acquisition will strengthen our position there. The split between Connect and Grid, it's mostly a Connect business, and we are in both, of course, markets, but it's mostly Connect business. And this Connect business in Canada is very accretive to the group. We have an extremely high level of first growth, but as well as profitability, hence, our choice to accelerate this M&A in Canada. Regarding -- sorry, your last part of the question, the copper tariff. We -- basically, we see that there is no impact for us in terms of copper tariff because we are our own brand in Canada, delivering the market in Canada. So we have no impact for that. on the H1 and the H2 will be as expected. So there will be no specific impact there in this part of the world for the tariff. Operator: And we'll now move on to our next question from Chris Leonard of UBS. Christopher Leonard: So maybe 2, if I can. And focusing on the Transmission business, obviously, a very good quarter in Q3. Can you update us on the contracts that you're still looking at in terms of the pipeline and saying that there's good growth potential here? Is there anything we should expect for 2025 so that you can reach that book-to-bill level of 1x? And within that, could you also help to give us some color on the U.K. National Grid contract again and just give us a flavor for why I believe you decided not to bid and move into the tender on those contracts. Because so far, the pricing looks very strong on those contracts for Prysmian and as a preferred supplier and NKT, it would be helpful to get any color there. And then a second follow-up question would be on your comments for GSI saying that the contract with IPTO is going well, very collaborative and on track with schedules and milestones. Is there anything more you can give on visibility of a plan B that you spoke to or your previous management team, I suppose, spoke to at first half results? That would be super helpful. Julien Hueber: Okay. Thank you for your questions. I will start and then I will hand over to Vincent Dessale, who is with me in the room today. So basically, indeed, you've seen this strong performance Transmission in Q3 and year-to-date as well. In terms of backlog, you have noticed that we are a book-to-bill of 1 in Q3, and we expect to have a similar approach during the year-end. We are active in terms of -- in the quotation at this moment. We are -- of course, I cannot disclose the number of projects, but we are quite active, and we are positive to do some quotation in Q3, hopefully, with some award in H1 next year. So that's basically the situation. And regarding the GSI project. As I said, the project is ongoing, extremely good relationship and collative work with IPTO, our customer. And for us, there is no plan B. There is only one plan A, which is keep going and working with our customers to deliver this project. And I will not -- leave Vincent to continue. Vincent Dessale: Yes. Maybe to give some color and to complement Julien answer regarding the backlog, indeed, we have a great improvement compared to last year, plus 27%. You know it. It has been mentioned with some press release, typically the award of the RTE frame agreement in March and more recently, the Malta-Sicily Project. The pipeline remains active. We have indeed -- and just to give an example because it's public recently this week, Terna has announced a new tender for a major interconnection in Italy. So it just gives an example of the robustness of the pipeline. And indeed, we are quite active on what I would call medium-sized projects and large projects, which are going to be awarded in the next 12 months. So quite active backlog and quite active pipeline in the coming months. Christopher Leonard: And is there any comment on the National Grid contracts that you guys weren't a part of? Vincent Dessale: Yes. Sorry, I forgot this point. I will answer to it, of course. But the story for Nexans has not changed. We are -- we have the SHIFT approach in the project, which means that we are very selective in the way we choose the project that we want to target. We have commented this in the past. It's a mix of technical fit, terms and condition fit, how it fits with the other projects that we have already in the backlog. And indeed, when we look at this frame agreement, it was not answering from our perspective to the different criteria. And as I said, we have other opportunity in the pipeline that we consider from our perspective, more interesting for Nexans. Operator: And we'll now take our next question from Jean-Francois Granjon of ODDO BHF. Jean-Francois Granjon: Yes. Two questions from my side. The first one concerns the acquisition of Electro Cables. Could you give us some more details regarding the current profitability of this company compared to the profit of the Connect division? And what do you expect? You mentioned an accretive impact, but could you give us some more details? And can you give us the EV and the multiple for the transaction? And the second question, I will come back on the GSI project. So you confirm the continue of the operations. Could you give us the contribution expected from GSI this year in 2025? And when do you expect next year? And I understood that probably there will ramp-up, and we expect a higher contribution in '26 compared to 2025. Could you give us some more color about that? Julien Hueber: Okay. So first question regarding the new acquisition, Electro Cables. So this is -- this business is relative to Nexans. It's on Canada for us as well. So both our business in Canada and as well as this Electro Cables is in the upper range of the -- above 20% of EBITDA. So it's extremely relative to Nexans. This business is extremely well positioned in market segments which are for us priorities and fully in line with our Capital Market Day. So the -- for example, the data center elements, the infrastructures, gigafactories and so on. So it's completely aligned with what we want to do. We also see some very interesting synergies from a supply chain standpoint between Nexans Canada and Electro Cables. So basically, that's why we decided to move on and to finalize this deal. So that's element -- first positive element. Regarding GSI, your second question. Well, you know that we have received EUR 250 million of payments the past months in different parts. So this year, we will do approximately EUR 150 million as part of the -- that was what we have communicated. So we will stay on this type of ratio. And maybe, Vincent, you want to comment for... Vincent Dessale: Yes. I think Jean-Francois, I think we will not comment in details, of course, the coming revenue for GSI. But as a matter of fact, this is -- you know the amount of this project is EUR 1.4 billion, basically. We have started in '23, so a smooth ramp-up. And after you can consider that you have a kind of linear activity in the first year and with a kind of acceleration in the last 2 years of the project, '28 and '29 due to the installation, which is usually compact in terms of activity versus the production, which is split basically during 5 years. So that's basically the profile of what you can expect in terms of activity. Jean-Francois Granjon: Okay. And just the additional question regarding that, you expect you confirm an improvement for the EBIT margin for the Transmission division next year compared to 2025? Julien Hueber: I think, yes, we will come back on you on this when we'll publish our results in February with a new guidance. But what I can tell you is that we are extremely satisfied with the execution of this -- of the different project ongoing and very proud of what the team is doing at this moment in this Transmission stream. Operator: And we'll now move on to our next question from Scott Humphreys of Berenberg. Scott Humphreys: I just have 2. The first is a very quick follow-up on the tariff topic. So one of your peers has been speaking recently about kind of increasing their purchases of scrap in the U.S. or in North America. From a kind of European perspective, has the reduction in the amount of scrap that China is importing from kind of North America. Is that having any impact on the cost of your scrap in Europe? Or was the Chinese buyer not as significant in Europe in the first place? So that's the first question. But I can -- carry on, please. Julien Hueber: No. So very clear here. So no impact at all in our scrap recycling activities in Europe, no incidents, nothing. Scott Humphreys: Okay. And the second one, just kind of a broader one on medium voltage. If you could maybe kind of remind us where you are in terms of the process of adding capacity in the medium voltage business in terms of, I guess, Morocco and then you mentioned briefly the low carbon production in France as well. So kind of how are you seeing that the level of capacity in medium voltage given how strong the Grid segment continues to be? And how does that kind of tie in with this additional layer of kind of a focus on production efficiency that you've talked about in addition to the CMD strategy? Julien Hueber: So thank you. This is a very interesting and important question. So you can imagine when we grow your business by 9% year-on-year, of course, it has an impact on manufacturing. So here, first of all, I want to remind you that what the job we have done in the past year was to increase the capacity because we anticipate this large increase in the Grid to come. I just want to remind you the acquisition we did in Reka, Finland 2 years ago with 2 civil lines, the announcement of the additional CapEx in Bourg-en-Bresse, an additional civil lines as well as the [ Safi ], which is Morocco new plant that is going to come. So in terms of capacity increase, I mean, we are completely in line with our plans to sustain this growth. Now regarding the existing footprint as well, we are -- and that's -- and you've seen in terms of communication that we have done in the past last week, basically, that in order to basically deliver our commitments and objective for 2028, industrial excellence will be key. And that's why we are really accelerating today, the efficiency, the productivity and as well as the competitiveness of our plant in Grid. So we have a full program on that, and that's extremely important to continue on this. And maybe one word because Grid is, of course, cable, but as well Accessories, and I will let Elyette to comment on the Accessories as well. Elyette Roux: Thank you, Julien. So what we can say is that we are accelerating even further away in Accessories. And indeed, as presented in our CMD, we mentioned that we had anticipated the investment in the plants with automation and robotization. So we are basically delivering at the scale that we announced in the CMD. Operator: And we'll now move on to our next question from Nabil Najeeb of Deutsche Bank. Nabil Najeeb: The first one is on GSI. I think you guys said -- you just said you had received EUR 250 million of cash for GSI so far, and that's the same amount as what you indicated at the H1 stage, which you said should keep you going until early September on GSI execution. So I'm just wondering if you have received any more cash recently? Or are you executing on GSI while waiting for a payment? And then the second question, given, Julien, you've been in charge of the Grid and Connect business for Europe, I was hoping to get your thoughts on how you see the margin potential for these 2 divisions. I think previously, your predecessor alluded to a longer-term range of around 15% to 16.5% for Grid. Is that a view you share? And what about for Connect? Julien Hueber: Okay. So I will start, of course, by the GSI. So indeed, you know the amount of cash we received, EUR 250 million. We have been completely transparent on this. Once again, what I can tell you is that we are working very closely with IPTO in a very, let's say, collaborative way. And we are in discussion at this moment in terms of the next steps of this project on the milestone and payment is part of it. So I cannot disclose anything, but that's, of course, as you can imagine, a part of our discussion. There's also ongoing discussion on political as well regarding the GSI. But on the cash payments, we are close discussion with IPTO on the -- and that's where we stand today. Now regarding your second question, indeed, the European business, there are 2 streams, Grid and Connect. So Grid, you are right with more than 15% EBITDA in terms of profitability. Here, you need to understand that in Grid, there is basically 3 parts, 3 elements. First one being the long-term agreement with utilities. And here, we are extremely satisfied with relationship with platinum customers that we're having. We have signed long-term agreement with them. In the past, it used to be 2 years contract agreement. Today, we are talking about 4, 5, 6 years contract. So we give us a very good visibility about the long term. The second part is project base of Grid, which are renewable solar or wind. Here, it's more, let's say, a project for a few months. And this business is extremely dynamic as well in Europe. I mean, Italy is one of them, Greece, or the other parts of the countries. Here, the profitability of this project are also at the right level of what we are looking for and what is in line with our Capital Market Day. And then you have the third activity, which is Accessories managed by Elyette, which is -- and we have communicated that a few times that is extremely lucrative as a business growing very fast because you know that the accessories part is, let's say, the critical element of the Grid. And our customers, platinum customers are replacing that regularly due to the climate change. And that's also giving us the reason why this business of accessories is growing even faster than the cable. So that's basically for the Grid part. Now talking about Connect. So Connect contrasted, as I said, businesses. The -- let's say, the profitability in Europe is around 13% EBITDA. And we will be growing this step by step with -- because we have growth patterns in our strategy where we will be growing in the sectors in the verticals for us, which matter the most, data center, critical building, injecting new technology of products, injecting new innovation of products. On that point, I think just for you to understand, we are -- in the past 2 months, we have launched Klaro, new innovation in Italy market with LTC. We are launching in September, ULTIMO innovations in Benelux, MOBIWAY in Norway. All these innovations are comforting the profitability of this business and are providing us also some resiliency because we try to avoid being too much exposed to residential and much more, let's say, focused to the market segments, which are going better. Vincent Dessale: And maybe to add on Julien's comment, just to remind that we have improved significantly over the last year, the performance of the Connect business, thanks exactly to what Julien comment, the SHIFT program deployment plus innovation, which are really the 2 pillars. And if you remember in the last call, we have not given any guidance on the percentage of EBITDA for Connect for very simple reason is that we have an ambition in terms of acquisition and the acquisitions that we do usually are slightly below the average of Nexans. And we have after the deployment of our integration program in order to bring them at least to the average and sometimes above the average. And indeed, we have -- we know that in the coming years, we'll continue to do this acquisition. So this is basically why we -- how we drive the evolution of the performance of Connect. But as mentioned by Julien, we are confident. Julien Hueber: And one more comment, I think what is very important to understand, in the Connect, you can grow very fast and you can take any type of business. But remember, the strategy of Nexans is to be selective. And for instance, in the Nordic in Q3, I asked the team to be extremely selective in the type of project because we don't want to consume cash for projects which are not accretive to our EBITDA. So we took always the decision to select the type of project and choose the one that really bring both cash and profitability to Nexans. Operator: And we'll now take our next question from Akash Gupta of JPMorgan. Akash Gupta: My first one is on outlook. So when you raised full year guidance in July, you were guiding double-digit growth in Grid and Connect in Q3, but we saw Grid growth in Q3 was slightly below double digit and Connect was not below double-digit level. And then we also saw some losing momentum in Metallurgy business, which was pretty strong in first half. So my question is that today, you are reiterating the guidance. But when we look at this guidance corridor and giving consensus is towards the bottom end of the range, where do you expect to end up in the year? Like how much confidence do you have in the midpoint? And how much confidence do you have on the upper end of the range? So that's the first one. Julien Hueber: Okay. Thank you, Akash, for your question. So basically, the Metallurgy tariff impact was none at the moment where we upgraded the guidance. So I think this one is -- there's no, let's say, negative impact whatsoever in terms of the guidance for the year-end 2025. Regarding the Grid and Connect, so our strategy is not always to go for volume. It's also to go for profitable growth. And typically, as I mentioned, for Connect parts, even though, as you say, the volume has been slightly below the expectation of the market. I can tell you that the quality of the growth of the 3.6% based on innovation we are doing, secure our guidance for the year-end. So I can tell you, that's why we will be securing our guidance by year-end. And I will not now comment where we'll be landing because we are still working on it. Of course, you can imagine. But the quality of the growth we have both in Grid and Connect secure our guidance. Akash Gupta: And my follow-up question is on Transmission growth. So when we look at the comps in absolute term, I think you will have a toughest comp in Q4. So maybe if you can comment about what sort of growth rates do we expect in Q4? And then when we move from '26 to '25, again, is there any unutilized capacity where utilization can be driver for growth? Or will the growth in 2026 will be mostly coming from project mix? Julien Hueber: Okay. So in Transmission growth, you have seen that -- so basically, we will be -- so you may have some spike from one quarter to another. You see a very strong Q3 numbers, 33%. I would say that our growth for the year-end will be first very well oriented and in line with the average of what we have announced in H1, this type of growth level. Now regarding the vision for 2026, maybe Vincent, you want to comment on this one? Vincent Dessale: Yes. Akash, Vincent speaking. I think you know the story very well. I mean the significant increase of this year is the result of our decision some years ago to make several investments in terms of manufacturing, testing and installation. So it's a kind of expected, I wouldn't say mechanic, but at least expected growth. Now we have a backlog, as mentioned by Julien before, for the next 4 years. So we will be in line in terms of volume with this year because now all the capacity that we have added over the last 3 years are now running and they are fully loaded for the next 4 years. So that's basically the profile of activity for the next 4 years. And as mentioned by Julien, depending on the different, I would say, planning of the execution, you can have from one quarter to another one, some differences in terms of volumes because you will have more installation, less installation. You know that we do more installation during summertime than during winter time, the usual approach of this business. Operator: And we'll now take our next question from Uma Samlin of Bank of America. Uma Samlin: So my first question is on -- a follow-up on GSI. I was wondering if you could help us -- how should we think about the progress of GSI so far in relation to your full year guidance? I think in the previous calls, you had mentioned that even if the project does not go ahead, the EUR 250 million that you have received so far would still contribute enough for the guidance to be hit in the mid-range of the guidance. Just wondering if you can confirm if that still is the case. My second question is on the PWR-Grid market. I guess we've seen a fair share of capacity expansion there. How should we think about pricing versus capacity expansion in PWR-Grid going forward? Julien Hueber: Okay. So GSI, I think I will repeat what I just explained. So basically, yes, indeed, when we -- when the guidance has been raised last July and confirmed today, we completely integrate the GSI elements of the milestone we have with customers. So having no change for that, I can [ contain ] this point. Now regarding the PWR-Grid, your second question. So it is also a very interesting question. So the growth is there. We demonstrated 9%. The capacity in Nexans -- manufacturing capacity in Nexans is also ready to sustain the growth. And we do not see any change, any pressure on price. Why? Because, first of all, we are -- we have launching low carbon innovations, which are extremely let's say, in line with the expectation of our customers, platinum customers that -- because you may know that the type of medium voltage low carbon offer that we are providing and selling to the market today, they are reducing by 50% the CO2 emission. So you can imagine the importance it has for our customer utilities. That's why we are able to differentiate from our competitors that are not offering the same thing. And as well as the strong, let's say, no pressure on price in Grid is also linked to the growth we are making in Accessories. Here again, I think you have seen last communication where we are launching innovations on new type of accessories, new joints that are also accelerating the installation phase from our electricians on the field. Operator: And we'll now take our next question from Miguel Borrega of BNP Paribas Exane. Miguel Nabeiro Ensinas Serra Borrega: Sorry to come back to GSI, which you say is on track, and there is no plan B. But it seems you're now more at risk than where you were in the first half. If the project is really canceled, what are the remedies? How can you replace the production reserves for next year? And do you think there are other projects out there with such a margin? I'm just trying to understand if the previous 17% margin for Transmission as a whole is still possible without GSI. Julien Hueber: Okay. So first of all, the project is not canceled. We are still working on it. They are extremely close discussion on relationship with our customers. There are ongoing discussion on the political side and supported by the European Commission. So I mean this is -- we do not see that as a risk. And we'll come back on that, of course, when we'll have some more, let's say, information to share. But this project is not canceled so far. Regarding now the -- we have enough pipeline of projects ongoing. Some of them already secured. Some of them are also under quotation. So here, we have so far -- we have no -- let's say, we don't forecast any problem for next year on this part. So basically, on -- maybe Vincent, if you want to add. Vincent Dessale: Yes, maybe to give you some color, I mean, just keep in mind that this project is what we call a mass impregnated project with deepwater installation. And let's be clear, on the previous projects with this type of technological content, we have been only 2 players to be qualified. So you don't have so many players able to deliver so far this technology. And basically, when you look to all the coming projects in Med Sea, for example, they will all request this type of activity. And today, both players are fully loaded for the next 4 years. So you can imagine that the other projects coming in the pipe are just waiting the available capacity. So as mentioned by Julien, there is no plan B. Today, we are working with our customers in very good collaboration. And we are already working with some potential projects after GSI, which will be '28, '29, basically. Miguel Nabeiro Ensinas Serra Borrega: Okay. And then just a high-level question as you were previously Head of PWR-Connect and Grid, what can you tell us about recent performance in terms of growth and profitability? And maybe some insights on what will be the #1 priority from here on? Is it accelerating top line growth? Is it continuing to expand margins or accelerate M&A? And then if I just can squeeze one more on Industry & Solutions. I think there's only Auto-harnesses left to be disposed. Is that still the plan? And do you see other areas potentially up for sale? Julien Hueber: Okay. So I will start by your last comment with autoelectric. So the answer is yes, it is -- there are still ongoing discussions with potential buyers. And this discussion are progressing. So that we will be able to come back to you as soon as something is a bit more concrete on that. But that's something that is part of our strategy to dispose and to become 100% electrical pure play electrification. Now regarding the -- you like, let's say, what would be the priorities. But basically, capital allocation is clear because we want to accelerate the M&A. That's really my objectives. I think the announcement of today for Canada can demonstrate it. And we have -- the team, M&A teams of Nexans is also very active with different pipeline. So we will review that very quickly to move on these elements. Growth, yes, but profitable growth, selective growth like we have demonstrated since several years. I think we will continue to do this. And also, we will be extremely -- and we explained that in the Capital Market Day in terms of innovations. We have a pipeline of innovations. There was recently a big event with one of our customers, platinum customers in France. We have seen a lot of electricians understand talking about innovation. There's a big appetite for innovations. And last but not least is the SHIFT and SHIFT AI that maybe we can also explain to you. That's one of our priority. We really want to grow in this segment. And I will give the floor here of Guillaume in charge of strategy and AI for Nexans that maybe can give some color on that. Guillaume Eymery: Thank you, Julien. Indeed, SHIFT AI is a hot topic for us. Basically, it's the platform from which we develop the Nexans AI solutions. And the choice we made is to amplify and accelerate the SHIFT program that has been very successful for Nexans. We focus on 4 axis: costing, complexity reduction, dynamic pricing, client advanced segmentation. And basically, the idea of SHIFT AI is that when a normal manager uses 5% of the data available, we moved to 20% with SHIFT. And with SHIFT AI, we will move to 90%. So at the moment, we are really in the topic of building up this platform, and we will tell you more in '26. Julien Hueber: And maybe just to finish on your question, maybe one of my other priorities, which is for me extremely important, is to work on the industrial excellence, generate mutualization of industrial footprints, both in Grid and Connect because we have here a room of improvement, productivity and competitiveness. So that will be also a key element of my priorities in the coming weeks with the team. Operator: And we'll now take our next question from Eric Lemarie of CIC. Eric Lemarié: I've got 2, the first one on GSI. I appreciate your various comments on this project, but could you confirm maybe that you're on time with the initial schedule on GSI and that the project has not been somewhat delayed as it is sometimes mentioned by the press? And could you maybe say when you expect to receive the final notice to proceed for GSI? And I got a second question on the backlog. The backlog on Transmission is flattish, is up year-on-year. I can see that, but it's flattish sequentially this year, around EUR 8 billion. Could you perhaps remind us your strategy here? Is it to properly execute and renew the backlog in good condition? Or is it more to expand the backlog to make it grow further? Julien Hueber: Thank you for your question. Maybe, Vincent, you want to comment? Vincent Dessale: Yes. I can take the backlog, if you wish, Julien. I think what we must have in mind, you have to take a kind of step back, I think. Why the backlog has increased significantly is that, if you remember, in '23, there has been this big move on the market with the Tenet frame agreement, which was basically the largest award of the history of the subsea business, which has basically catch a big part of the capacity on the market. And as a consequence of this major move from Tenet, you have seen plenty of other players placing their tender in order also to avoid a lack of capacity on the market. So '23 was indeed a peak of order intake. So I think now we are more in a normal process because basically, all the key players, we have 4 to 6 years of backlog. So it's quite logical, I will say, that you have a lower activity of tender right now, even if, as we say, it's still very active and very robust. You have the different players have announced award around this year. But if you follow my logic, you should expect potentially a new peak of order when there will be much more free capacity, which means basically probably more in '27 or '28. And that's why we have said previously that we think that the book-to-bill will be around 1 this year and probably next year due to this -- not due to us, but due to the cycle of the business. So we are focusing to answer to your question to 2 points. First, to execute properly the backlog because we have a good backlog to execute. And indeed, we are looking to the pipeline in order to on time, prepare the next generation of order, which will start basically from '29 onwards. And this means probably, as usual in this business, tendering 2 years in advance before the available capacity. Julien Hueber: And just -- thank you, Vincent. Just to answer your first question regarding GSI, yes, I do confirm we are in time with initial schedule, and we are in close discussion with our customers about the next steps. And so that's where we are standing today. Operator: And we'll now take our next question from Xin Wang of Barclays. Xin Wang: A quick follow-up on GSI, given we can't see your financial statements. Can you confirm for the volumes produced since September, are these sitting as contract assets or trade receivables on your balance sheet, please? Vincent Dessale: Just maybe a clarification because you speak a lot about the production. And I think just as a reminder, a project is not only production. I will not give you in details the detail of the scheduling of the project. But when we -- all what we have done since the beginning of this project is, of course, engineering, testing, production and so on. So when we say that we are on track, as mentioned by Julien, it means that we are on track not only with manufacturing, but also with jointing activities, with testing activities, with engineering activities, and this is basically what we are doing. So we have produced, I think, probably around 240 kilometers more or less. And indeed, we are continuing with both production and jointing and testing. That's the normal life of a project from a pure -- to give some color on the -- what does it mean from an operational perspective. It's not only production. If not, the project will not progress as planned. Xin Wang: Okay. I think my question was more on for the work you did since September, are you able to invoice them? Julien Hueber: So yes, we have been -- of course, we have been invoicing the customer as per normal, as per the ongoing project as per the milestone. So -- but that's nothing exceptional to report as usual, yes. Unknown Executive: [indiscernible] is limited so far. Xin Wang: Sorry, I didn't quite get the last bit. Julien Hueber: So it's Christine, our interim CFO, which was saying that our exposure is completely aligned with -- there's nothing special to report yet. Xin Wang: Okay. Great. And then my second one is, do you think there is a temporary regional oversupply in Canada since the introduction of U.S. tariffs? Because in H1, it was very obvious that you were exporting a lot more copper to the U.S., which was reflected in very high other activity numbers as you also commented in Q3, this was negative 6.3% year-on-year. Julien Hueber: So I don't think so for Canada. We have a very strong growth in Canada, close to 20% growth year-on-year, extremely dynamic. You know that we have 2 type of business, Grid and Connect. The Grid, it's fueled by long-term projects, long-term agreement with customers, utilities. So here, we are very well secured on the visibility. And in terms of Connect, we are -- what the team is doing is to really focus the activity on the specific verticals, data center, critical buildings. And here, again, there is no -- we don't see any specific additional competition from outside the Canada or from any other country. So basically, we are very well secured in this market, very dynamic with very long capability to grow in terms of construction infrastructure. Xin Wang: Okay. Good to know. And then final one, is the 9% Grid growth margin diluting? Because I think previously, management commented on sensitivity table between organic growth and margin. Is there a shift on how you think about the market? Julien Hueber: I can tell you that it's not diluted. This Grid business is extremely profitable. And so no dilution at all. It's -- we are completely aligned. Once again, we are aligned with the target we have communicated in Capital Market Day, both in terms of profitability and in terms of growth. Operator: Thank you. There are no further questions in queue. I will now hand it back to Julien for final remarks. Julien Hueber: So thank you, operator. So let me just finish by saying that I believe the solid performance delivered in our trading update today confirm the robustness of Nexans model and discipline with which we execute it. Now we enter into a final quarter with confidence, and we reiterate you have seen and you understood today our 2025 guidance. I'm very pleased to go now on the roadshows and to meet investors in the coming weeks. Thank you again for joining today. Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the SEB Financial Results Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Johan Torgeby. CEO. Please go ahead. Johan Torgeby: Good morning, and I'd like to extend a warm welcome to all of you today for SEB's Q3 financial results. Going to our first page with highlights. We today post a solid financial result in a quarter which is seasonally slower but we've also experienced less volatile and stable financial markets. Noteworthy is that investment banking activity has held up and showed resilience and we saw an increase in capital markets activity to the later half of the quarter. Customer satisfaction and employee engagement continue to show relative strength and it has been decided to continue the SEK 2.5 billion share buyback program per quarter by the Board as we announced today. Flipping to the next page, we have some recent events. And the first one is the infrastructure of payments which is now being disrupted to some degree by new technology coming from blockchain. We have, together with 8 other European banks launched a consortium with an initiative to see if we can launch a euro-denominated stablecoin on the chain and targeting the first half of 2027. Also, AirPlus has now been used as the new brand for our previous Eurocard. And this is an example of the marketing campaign, particularly towards the Scandinavian countries where Eurocard has been a long prevailing brand within the Corporate Card segment. It has now been rebranded under the headline green is the new gold. And if you haven't already, you will soon get an AirPlus instead of your Eurocard in the color scheme represented here on the slide. Turning to Page 4. We have, over the last couple of quarters, updated you on our progress within AI. We have shown you the internal projects that we're running, about 130, which is funneling in, in different categories of areas we think we can improve. But also gone through the recent investment that we've done together with a consortium to get compute capabilities available to us. Today, I'd like to introduce the third corner of this triangle, which is actually SEB not only working with offering better products, integrating it in the products, not only running the bank using AI, but actually enabling banking in the AI community, which is the core business we do. We speak a lot about different business units in the bank, but this is probably one of the lesser known ones. In 2022, we created a business unit called SEB Growth, where we now have an offering tailored for fast-growing companies with high innovative content and companies that plan to raise capital and/or lift or sell themselves in the future. This is an attempt to combine corporate banking with investment banking, with private banking, force entrepreneurs and these fairly young companies as they begin their journey. We've also included a few of the logos which we have recently supported such as Lovable, Sana, Modal and Legora. All these are well-known fast-growing companies in the AI space in Scandinavia. The next page, we can then look at the development of our credit and lending portfolio. As all of you are aware, we've had a little bit of a sideline movement in recent years. However, both last quarter and this quarter, we have some growth, albeit modest. Lending year-on-year for the corporate book is up 4% FX adjusted and the total lending portfolio is up 3% FX adjusted with households and Swedish mortgages just shy with half of that growth in the third quarter year. Looking on the next page on the jaws slide. We can see that the costs -- the trajectory of costs is tailing off. And we are roughly back to trend that we had prior to the elevated profits generated by the interest increase with a CAGR here represented from the time 2016 to 2021. And with that, I'd like to end this part and hand over to the CFO, Christoffer Malmer. Christoffer Malmer: Thank you, Johan. I would now like to turn to financials on the next slide. Operating income for the third quarter declined from the previous quarter, reflecting typical seasonal patterns, notably within net fee and commission income, where the second quarter performance was particularly strong. Net financial income was impacted by market valuations of our strategic holdings during the quarter, which had a positive contribution in the second quarter. This valuation effect accounts to around SEK 500 million of the delta in net financial income between the quarters. Net interest income increased slightly despite continuously downward trending interest rates explained in part by the higher day count in the quarter, some positive effects from FX, slightly lower deposit insurance guarantee fee and a lower short-term funding cost. Operating expenses declined slightly from the previous quarter, also following the usual seasonality. As the Swedish krona has continued to strengthen in the quarter, we are providing an updated FX adjusted cost target for the full year of SEK 32.6 billion compared to the original cost target of SEK 33 billion. We maintain our range of plus/minus SEK 300 million around the cost target level which is primarily related to the ongoing integration of AirPlus. Here, we see some potential scope for possibly accelerating that implementation program a little bit further. As mentioned at the start of this year and reiterated also here in the second quarter, we're now in a phase of consolidating recent years of investment, which is resulting in a lower cost growth. We also maintain our external hiring pause for nonbusiness-critical positions to facilitate this consolidation and to make room for continued investments in selected areas, notably within technology and AI. The full year cost target does imply that there are some effects to expect in the final quarter of the year. Net expected credit losses of around SEK 200 million or 3 basis points reflecting underlying stable asset quality as also reflected in the continuous decline of Stage 3 assets. We added around SEK 100 million to the portfolio overlays in the quarter, and we also had some sizable reversals. Imposed levies came down in the quarter as expected, reflecting the development of our Baltics levies and our full year guidance for imposed levies now also including Riksbank's introduction of the interest-free deposit now amounts to SEK 3.6 billion. So that's up from the SEK 3.5 billion communicated in the second quarter. Tax rate of 21%, in line with guidance. Net profit for the quarter of SEK 7.7 billion and a return on equity at 14%, and we ended the quarter with a CET1 ratio of 18.2%. On the next slide, we turn to the development of the net interest income. On a divisional basis, the NII in Corporate and Investment Banking declined by around SEK 200 million, primarily reflecting a lower net interest income within Investor Services, which was elevated during the second quarter, and that was a dividend season as we mentioned at the time. NII also within our markets business was a little bit lower as customer activity came down for the season. From a volume perspective, lending within CIB declined in the quarter as some of the event-driven financing volumes generated earlier in the year rolled off. And that, together with FX effects, explained the majority of the move in the loan book compared to the second quarter. Now year-on-year, lending to corporates within CIB increased by 3% on an FX-adjusted basis. Within Business & Retail Banking, NII declined by around SEK 100 million compared to the previous quarter, and that's primarily reflecting the impact from lower interest rates on deposit margins. Lending volumes were largely unchanged in the quarter and following 2 strong quarters of market share gains in the Swedish mortgage market, Q3 volumes grew a little bit less than the market. Now year-to-date, our net sales of mortgages represent a market share of around 13% which is in line with our share of the stock. Competition in the market remains firm and mortgage margins moved largely sideways in the quarter, remaining at historically low levels. Within our Baltic banks, net interest income was largely unchanged as the impact from lower interest rates was partly offset by higher lending and deposit volumes across both private and corporate customers. Loan growth in the Baltics remained robust with mortgage growth of around 9% and corporate loan growth at around 8% compared to last year. Within treasury, NII was positively impacted by the yield curve as well as favorable funding conditions within short-term funding. Looking forward, we continue to expect our net interest income to bottom out some 3 to 6 months after the latest or the last rate cut. Bear in mind that, that is based on how our balance sheet looks today. So volume growth and any proactive repricing could impact those dynamics. If we turn to the next slide, and we look at the fee and commission income in the quarter. Total fees and commissions declined by around SEK 400 million compared to the previous quarter. And if we look on a divisional basis, we effectively see 3 developments behind this. Firstly, within Corporate and Investment Banking, fees are seasonally softer in Q3 across most capital markets-related businesses, including issuance of securities and advisory, which was also particularly strong in the second quarter. This is also true for lending fees and combined, these effects accounted for around SEK 400 million in CIB. Nonetheless, CIB generated the highest net commission income on record for a third quarter. The second factor related to card and payment fees within Business & Retail Banking and again, seasonal patterns impacting activity levels primarily within corporate cards and AirPlus and this affects around SEK 100 million compared to the previous quarter. And thirdly, going in the other direction, we saw about SEK 100 million increase in fees and commissions in wealth and asset management as a result of higher assets under management and continued business momentum. Net new money across the group amounted to SEK 8 billion in the quarter. And on fees and commissions, when we close the second quarter, we refer to a more constructive fee environment. And while Q3 will see or should see some usual seasonal patterns, which we've seen, we said that if the market backdrop doesn't change dramatically, Q4 should see a continuation of this more constructive trend. And this comment, we think remains valid, which is encouraging going into the last quarter of the year. If we turn to the next slide, we set out the development of net financial income this quarter, NFI from the divisions was largely unchanged from the previous quarter at SEK 1.9 billion. The decline in the headline, NFI versus the previous quarter is, as I mentioned, largely explained by valuation effects related to our strategic holdings and that's primarily in Euroclear, which also paid a dividend during the second quarter. affecting that comparability. These effects were partly offset by XVA going the other way, and we continue to look at the long-term average of around SEK 2.5 billion per quarter. Turning to the next slide. We'll look at the development of the CET1 ratio in the quarter. We closed the second quarter with a management buffer at 290 basis points. And during the quarter from left to right, as usual, we received an updated SREP, update from our supervisor. And as you will have seen in our separate disclosure on that topic. This resulted in a lower Pillar 2 requirement related to lower capital impact from IRRBB, interest rate risk in the banking book. Then we had 41 basis points, reflecting the net profit in the quarter after deducting our dividend accrual while lower risk REA contributes about 14 basis points reflecting positive risk migration in the book during the quarter. Under REA other, you will find a combination of other developments on the balance sheet. So the FX effect, the overall REA size market risk REA and also a positive impact from us applying the SME factor to some of our CRE exposures. These factors in total added 22 basis points and largely evenly distributed between them. Finally, the decline of 18 basis points reflects the phasing in of the REA increase in the Baltic banks that we announced in the second quarter, and that is related to the ongoing work with our Baltic IRB models. This takes the CET1 buffer to 360 basis points at the end of September. And we also highlight that the remaining impact from the Baltic REA increase is around 70 basis points, so in line with the communication at the time of the second quarter. And we expect to phase this in over the coming 3 quarters. So that means that our buffers in effect on a pro forma basis stands at 290 basis points with the Baltic REA fully phased in. Other effects to bear in mind as we go into the end of the year is the impact from operational risk REA in the fourth quarter when we do review that level. On the next slide, we summarize our capital and liquidity position at the end of the third quarter. Our capital as well as our liquidity measures have all strengthened during the quarter, reflected in rising LCR from 130% to 136% and a higher NSFR from 112% to 116% and the CET ratio, as we just discussed on the previous slide. Finally, I would like to conclude with our financial targets, which remain unchanged, including a 50% payout ratio, a management capital buffer target of 100 to 300 basis points above the regulatory minimum and a return on equity competitive with peers with a long-term aspiration of 15%. Return on equity year-to-date stands at 14.1%. So with that, I hand the word back to you, Johan. Johan Torgeby: Thank you, Christoffer. That ends our prepared remarks, and I'll hand over to you, operator, for the Q&A. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Namita Samtani from Barclays. Namita Samtani: My first question, what should we think of funding costs related to net interest income going forward because surely, if rate is still coming down or they have come down, which is yet to be factored into our net interest income, this will continue to be a tailwind. And secondly, I just wondered, do you lend to private credit and what percentage of that is part of your book? Christoffer Malmer: Thanks for your question, Christoffer here. I'll take your first question on the net interest income. And you're right to say that we've had a positive effect from funding costs in the quarter, and you saw that also in the breakdown of the NII in treasury. And we estimate that effect to be positive for the quarter of around SEK 100 million or so. Now going forward, we'll continue to reiterate the message on 3- to 6-month lag from the last rate cut for the dynamics to work their way through the balance sheet before the net interest income would trough. So we should expect the net interest income to come down again in the fourth quarter. And then in the first quarter, and then we'll see again what happens to rates, of course, as we go into 2026. Those are broadly the effects that I would bear in mind. Johan, you want to comment on the private credit? Johan Torgeby: Yes, sure. Thank you, Namita. We have no meaningful noticeable exposure direct to any private credit. We do have a very, very small group of private equity firms that also have a private debt arm, but no direct exposure. So it is so small that it's not really noticeable. Operator: We will now take the next question from the line of Magnus Andersson from ABGSC. Magnus Andersson: Two questions, please. First of all, on corporate lending. Last quarter, you said you had an elevated level of activity-based lending. And it comes down a bit now quarter-on-quarter FX adjusted. Could you please tell us how you see the outlook for activity-based lending as transaction activity is undoubtedly picking up now? And also what you think about the more lending for general purposes when you think that will pick up? That's the first question. Secondly, on capital and risk-weighted assets. The level was significantly lower than at least I thought in this quarter, and I see that your -- I mean, risk weight comes down in corporate IRB, for example. Is this -- with the exception of the op risk coming in into Q4, is there anything else here that could be volatile? Or is this a reasonable run rate to use? Because I think you even included SEK 10 billion of the Article 3 announcement as well here. And related to capital, do you know already now if you will continue with the share buyback approval for the full year in the Q4 '25 report? Or if you would consider doing it as you did previously with half in -- half year approvals? Johan Torgeby: Thanks, Magnus. I'll start with the corporate lending. So first, I just note that you did accurately depict what we said and what happened last quarter. Those temporary elevated levels for transaction-based exposures, they have not fallen off. So this quarter with its 4% year-on-year does not have those, let's call it, temporary bridges on as there was very little transactions done into the summer. So this is a much more steady as we go. When it looks going forward, so the pipeline looks unusually strong. That doesn't mean that they naturally materialize for events and the event-driven lending that might come with it. But we did see a pickup in investment banking and also capital markets transactions towards the later half of the third quarter, which is an encouraging sign. And we, of course, always keep a close look as a leading indicator of what the Americans do. And you could see some similar signs or even more pronounced there. But I also want to say that the lending fees this quarter, even though it's a very, very quiet one is still 24% up year-to-date, the lending fees, which is, of course, what you typically -- the majority of what you earn on leases is not NII when it comes to transaction is up 9%, the first 3 quarters this year compared to last. So there is some underlying event-driven momentum, but it's -- I still want to be cautious because a lot of things need to happen, and we don't want any of the risks that have been identified to materialize in Q3 that would create volatility. So if I'm a little bit constructive and hopeful, I think general corporate purposes, that's a longer transition. So we are not seeing this broad-based, let's invest in increased capacity, then you need to borrow to invest further because the first investments, they're always done with the operational capital or cash at hand to meet the demand. So in my mind, I often come back in this discussion around the lack of demand in the economy. Retail sales and consumption in GDP. And that's kind of the last leg that we are looking for really to change the picture. And of course, looking at the economists they are looking pretty constructive for '26 and '27 on this topic, but let's wait and see. Malmer? Christoffer Malmer: Thank you. So Magnus, on the REA. If we look into the fourth quarter, you're right that we expect the op risk effect. We estimate that to around 15 basis point negative impact. The other moving parts that are subject to movements during any quarter is the FX effect, of course, you see that is positive in the quarter. That remains, of course, unknown. It's a REA size, which in this quarter is again positive contribution. And coming to your previous question, of course, I hope that we will see that be moving in the other direction. And the third one is REA asset quality, which, again, in this quarter due to upgrades of risk classes of a number of counterparts also contributed positively. So these are the moving parts and then you go to op risk REA. So when it comes to the buffer, the 360 basis points, and we look at the pro forma effectively the 290, assuming the remaining phasing of the Baltic REA, last year, at this point, we were around 470 basis points. So of course, the situation was very different. But still, there are, to your question, a number of moving parts in the REA that will play out in the fourth quarter. I will come back at that time with comments on future buybacks. Operator: We will now take the next question from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was thinking about -- there is some growth in the Baltic lending business. So I was thinking your ambitions going forward? Do you expect to grow in line with the market given your size? Or is there any reason to believe that you can capture more market shares there? Johan Torgeby: Okay. yes, we are growing clearly higher, and it's not only this quarter, it's been going on for a while. So we are actually accelerating a bit. So we're now looking to 8%, 9% growth in this quarter year-on-year compared to -- if I remember correctly, it was about 6% last quarter. We are maintaining our market share as -- the long-term picture is that it's quite concentrated as you probably know to 2 large institutions, Swedish banks in the Baltics. And there has been, of course, increased demand for higher competition from everyone in the marketplace. But right now, we have an ambition to maintain this position. I wouldn't commit as it is a very high market share we start with. So this is a little bit defend and protect, but we are not going to give it up easily. So be careful in increasing market share, but definitely it's a fast-growing market. I'd also like to point out that it is a higher inflationary market. So in real terms, it is not as impressive as these headline numbers are, and you need to also take that into account because the loan book unless you relever the economy will grow with nominal inflation plus whatever you do. Operator: We will now take the next question from the line of Martin Ekstedt from Handelsbanken. Martin Ekstedt: I wanted to focus a bit on your retail business. Looking at statistics, Sweden data on mortgage lending during first half of '25, you saw quite strong market share of net new lending. I think you took like 16% on new lending against the back book market share of 13%. But as we enter the second half of the year, this trend kind of evaporated, and you took just 1% in July and 3% in August despite similar volumes in the market overall. Is there a story behind this that you could share with us perhaps? And then secondly, on that same topic, with Sven Eggefalk now joining you as a new head of the business line, should we keep hopes up for higher volumes share -- volumes of market shares to return? Christoffer Malmer: Christoffer here, I can comment on this. I think, as I mentioned in the remarks, if we look at our market share year-to-date in net sales and mortgages, that stands around 13%, and that is in line with our historical stock level. So there is, as you point to some movement between the quarters. I think when I look at the focus that we have for winning the mortgage market share business, we think all 3 components, it's the speed, it's the availability and it's the pricing. And it's about us continuously evaluating and making sure that we are competitive along all those 3. And as you will see that we haven't moved pricing much in the last quarter, but we're continuously working around speed and availability. But I would also mention that there is a volume effect into this as well, volumes are still relatively small, which can impact movements in between individual quarters. But year-to-date, broadly in line with the stock market share. Martin Ekstedt: Understood. And then a second question, if I may, and just picking up on Namita's earlier question on private credit. I wanted to just pose this question to you a bit more broadly. I mean, the main focus around the private credit discussion has been centered on the U.S., right? And you said you don't do this yourselves currently to any large extent. But I mean, generally, you stand perhaps as the leading Swedish lender to nonbank financial institutions. So I just wanted to check with you for a Swedish take on this. How widespread is this concept in Sweden? And what are your views on the viability of the model in Sweden and also a bit on the risks perhaps. I mean if you don't do this, who should be doing it or shouldn't we be doing it at all in Sweden, and why not. Johan Torgeby: Okay. Yes, this is a little bit of reasoning. Don't take this as a fact. So first of all, this has been a development very much driven by the U.S. I hear numbers like USD 2,000 billion. It's actually surpassing bank lending if you extrapolate the current trends. It is a very, very significant deep source of debt capital for the American economy. Europe is much, much smaller as a whole. And even the things that are growing fast in Europe is typically more American firms, replicating what they've done in the U.S. rather than European firms. Then you go to the Nordics, it's even more pronounced. So private debt is not a large funding source for the Nordic where we operate. And this is, of course, very much if you look at the classic private debt, private equity firms of Scandinavia, which is our home market, that it looks very, very different in terms of the balance between equities, infrastructure, alternatives versus private debt lending. So my take on this is that, first, the leverage buyout market is very well functioning in Nordics. This means that there's much less of a free lunch to be had sourcing the money that you then refund and redeploy into a leverage buyout type of financing because this is almost like a game between the 2 different products. They are slightly different, but they achieve the same thing for a private equity firm. One is you borrow from a private debt with typically 7% to 9% yield expectations or you borrow from a bank, which in the Nordics, we are very efficient, and we've been able to price the LBOs quite differently. But if you look at the overall market of LBOs, how they're financed, it's clearly in favor of private debt funds. But from the banking system, as far as I know, Nordic is very little -- has very little exposure in the Nordic banks to this. It's other capital providers that have put the money in. Operator: We will now take the next question from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first one is your comments around the pickup towards the end of the quarter in capital markets activity. Of course, this quarter was affected somewhat by sort of lower episodic transactions debt than you'd expect. So I just want to talk about what the pipeline for the fourth quarter, what you've already seen in the fourth quarter and going forward, please? And my second question is going back to your comments on the scope for accelerating the implementation of AirPlus. You've previously, if I'm not mistaken, commented qualitatively about when you expect it to be accretive, excluding and including restructuring costs. Is there anything further you can now provide on that, given you've obviously had an extra quarter seeing the business and integrating it. Johan Torgeby: Sure. I'll start with the pickup. So the circumstances around capital markets and primary deals, M&A and IPOs is quite -- it's very, I would argue, benign. It's a good market. Markets are strong. They're not over -- they might be an all-time high on the stock market, all-time tight on credit -- recent tights in credit markets, lower interest rates and a little bit of European spurring optimism for what is going to come. It's not particularly strong here and now, but it's definitely more optimism around where Europe could go, not at least in Scandinavia and the Baltics, if you look at GDP protect -- projection, consumption, et cetera. And also, I would argue that Germany has had the biggest delta from 1 year ago, where they were very much not in favor. And now it's a little bit of, let's say, interest at least on what could Germany do with all these announcements around fiscal, stimulus, defense, security and resilience. The uptick is exactly what we would have expected. We've actually been a little bit disappointed, I would say, if you compare 1.5 years ago when we saw that the interest rate has peaked, then we had a very quiet couple of years behind us after the record years of the early 2020s. And now it looks quite constructive. And you saw that -- before summer, we did an unusually amount large deals in the Nordics, then, of course, summer dies. And I would say that the pipeline and the amount of discussions for the fall and next year, still indicates that there is a higher level of potential than there was before. Now don't take that too much, but I'll just look at issuance of securities and secondary market and derivatives, which is, of course, it's cut in, in the financial result today, we're up 29% year-to-date compared to last year on issuance and securities and services, M&A and equities. And we have 14% in secondary markets year-to-date. So there is something clearly better already happening compared to last year. And we are just saying that we feel quite constructive. We're not saying that this seems -- there are no indications right now that this would implode tomorrow, rather being quite supported of this could probably continue. Christoffer Malmer: On your second question around AirPlus, a reminder of where we are there. So as we highlighted in the second quarter, the first critical milestones around IT migration, the discontinuation of noncore markets and the rightsizing of the organization has been completed, and this process is on track. The next phase now is to increase pace of implementation between AirPlus and the rest of the SEB Group business. So what we are now reviewing is if there is reasons to try and accelerate that phase. As you will remember, we gave a range around the cost target for 2025 of plus/minus SEK 300 million as we said, largely attributable to the pace of implementation of AirPlus. So it was in that context, I made those comments. Operator: Thank you. We will now take the next question from the line of Johan Ekblom from UBS. Johan Ekblom: Just to come back on some of the comments you made earlier around AI. I guess trying to figure out what AI could mean for your business longer term. There's 2 aspects to it, I guess, that I'm interested in. One is, how do you think about the cost of AI? So we hear a lot of stories about the cost of AI being heavily discounted today and that we should expect cost to increase materially as you get on to kind of normal rate cards for what you're paying. And I guess when do you expect to see concrete benefits in terms of efficiency or revenue opportunities that will be kind of obviously visible in the financials. So that would be the first question. And then secondly, just a bit of a detailed one on asset quality. I mean we had a big green project that went belly up in Sweden earlier this year, and there's another one that's in the press now. Your corporate loan book tends to be very much focused on investment grade. How do you view this potentially higher credit risk project? And how do you manage risk around those? I realize you probably can't comment on individual exposures. But just from a more kind of top-down view. Johan Torgeby: If I start with the last and I'll hand the -- I think you asked mostly for the financial impact, I'll ask Christoffer to reason around on AI. The traditional loan book is investment grade. The really minimum rule of thumb is that you have to have 3 years of good cash flow, that has proven resilient business model, et cetera. So that's what we do. But there are, of course, also a very, very small part of the balance sheet that also gets dedicated to starting up of firms. These -- the ones you mentioned, the larger green ones, they have been unusually very unique that they are of that magnitude, but we have had very, very modest, if I say it that way, exposure that you won't really have seen even though there have been a little bit of actually blowouts in the whole green and clean tech sector as we speak, and it's continuing. The other thing is to see that the capital stack of all these projects, if they are large, are very different from the past. They are namely predominantly government guaranteed, and there are risk and offsets. So the nominal values often, if not always, exaggerate heavily what the banks actually are exposed to. But -- so there are 2 mitigating factors to any worry. And that is that the amount is very small, and it's often guaranteed somewhere between 60% to 85% by a government. Christoffer Malmer: If I reason a little bit around the AI and the financial impact, and you're right that we are at an early stage and trying to assess and quantify the ultimate impact is still difficult. But I'll make a few comments. I think in terms of the benefits that we can already see is there are certainly some areas where we do see tangible efficiency gains and productivity enhancements One is in software development, where we see the use of Copilot increasing developer productivity and output and deploys. Another area is in Wealth and Asset Management, where we can see an increase in the number of outbound customer calls as a result of AI support in documentation. So we see those productivity gains. Now how does that translate into P&L? Well, one of the comments that we made around the hiring pause that we're having consistently asked the question when we do replacement hires, if there is a technology or an AI solution that could be levered for that same activity. So we will see this gradually coming through. In terms of the cost of the actual AI. One of the reasons we decided to team up with a couple of other companies in the Wallenberg sphere to invest in the compute power from NVIDIA here in Sweden is partly to get access to sovereign access to compute, but also to ensure the cost. And to your point, we're buying compute power from the large compute providers around the world is, of course, an exposure that anyone would have if you want to grow and expand in AI. And that is also for us a level of comfort to have that cost under our own control. So those are some comments. But as you point out, it is still early days. But we are following it very closely. And the early signs that we're seeing is constructive productivity enhancements. Operator: We will now take the next question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on the fee line. The softness that we saw in fees this quarter, was that reflecting margin pressure? Or was it just less volumes than expected. So if you could kind of just discuss a little bit margin pressure compared to the volumes on the fee side? And then my second question would be around kind of capital. What we're seeing is that the fiscal outlook or fiscal spending next year is quite good for Sweden, macro-outlook is improving. Should loan growth pick up for SEB. How do you think about kind of prioritizing growth over shareholder returns. And what kind of takes priority if you look at like growth versus dividends versus share buybacks versus any potential M&A? Christoffer Malmer: Thank you, Sofie. So if I'll start with the fees, the sequential development there is really in 3 areas where we see this. First, within CIB and as Johan alluded to, a little bit, even though activity level is benign in the third quarter, it was very strong in the second quarter. So you see the drop in fees and commissions sequentially of about SEK 400 million being partly attributable to activity levels and fees in CIB. The second component you see is card fees in BRB, particularly on the corporate side. And as you know, we are in our BRB card business more exposed to corporate activity than private activity. And that being slower during the summer month is a second explanation. And the positive effect and partly offsetting this is an increase in fees and commissions on AUM-related fees in wealth and asset management. So there's no margin development impacting sequentially in the quarter, but more how the fees have fallen between Q2 and Q3. Johan Torgeby: Yes. Sofie, and nice to hear that you're back in a different role. So welcome. I would say that the reason for the more optimistic outlook, as you also pointed to, is partly driven by the monetary stimulus that we have already seen, let that bite in the economy monetary policy, typically works with 12- to 18-month lag. But also, as you pointed out, the fiscal stimulus that is expected to come. So those 2, I think, are quite important pillars for economists when they do look at it. Will this increase loan demand? Well, that's the purpose of it, both the monetary policy want the economy to pick up in pace and particularly focused on consumption. Fiscal policy tends to be quite effective on consumption. But the pattern right now is because uncertainties, high risks are very mitigated in my book, but uncertainty is still around. It means that households have been quite keen to save rather than consume. So all this is kind of part of that package to become a little bit more constructive for the future, and it should be supportive of growth. But that prediction I'm not making. I'm just reasoning around it. So it's definitely a part of it. When it comes to priority between growth and shareholder return. I assume you mean shareholder repatriation and not just total shareholder return because I think growth in SEB, having more clients doing more with them is very much aligned with total shareholder return, that's the same thing. But of course, it's not -- you might want to save more capital for the business rather than repatriating it. And there, it's pretty easy. We always try to develop the bank first. I would love to use the capital that we generate to do more business to generate even more, so that's typically not a big conflict. Otherwise, as we've had for many years now, we generate more than we can redeploy and then we'll pay it out to shareholders. Sofie Caroline Peterzens: Okay. That's very clear. And maybe just on the fee side, one follow-up. So in terms of DNB Carnegie, you haven't seen any business opportunities kind of getting any -- being able to take any market share from them? Johan Torgeby: I would say no, but I also want to acknowledge that it's a formidable competitor, and they're very good, and this is not an easy market to win in. And it's getting -- it's tough out there. Operator: We will now take the next question from the line of Tarik El Mejjad from Bank of America. Tarik El Mejjad: I just wanted to come back on Johan Ekblom's question as well on AI from a different angle. The scalability of use of AI and the benefits also, I think, is based on how your core systems can actually be plugged to these AI tools. How do you consider today your IT system ready for this, I would say, evolution in terms of using for AI, especially in your triangle on the parts on integration into the products. And also, I mean, there is a perception that the cost to achieve is actually much lower using AI versus the traditional kind of cost savings measures in the past. Do you -- would you confirm that perception? And just very quickly on the capital part, I mean, Sofie, I think addressed that partly, but the -- I think you commented in the past that to go below the 300 basis point buffer or the high end of the range, that will be used for growth rather than special distribution or buyback. Given the headwinds on CET1 coming -- on RWAs coming in the next quarters from the add-ons on Baltics, should we assume that our priorities for volume growth and the buyback would probably be secondary here? Christoffer Malmer: So if I start with the question on AI, you're right that there is a broader upgrade of core systems in general required to some extent, this reflects our ongoing work with our technology road map that has been in place for some time. But there are also opportunities in multiple areas where AI can be applied without necessarily completing all those upgrades. And there are also ways where we can work with compartmentalizing certain parts of our legacy technology and making APIs available for new applications. And the third option that is also interesting to explore is actually to have some of that legacy code rewritten with the help of AI. So there are ways both in which we can address the challenges with traditional legacy systems, but also where we can proceed without necessarily completing those investments. Now when it comes to the triangle, I think you're right to say that from a product perspective, it's probably where progress has been the least thus far in terms of introducing and implementing AI capabilities in the product. Where we have thus far seen the best impact and the greatest achievements thus far has been in running. And what we're highlighting in this quarter as well is, of course, an interesting opportunity working with a growing and exciting AI community in Sweden and the Nordics. So we'll continue to, of course, monitor this closely, but there are certainly areas where we can accelerate with AI implementation in parallel with legacy upgrades. Johan Torgeby: Yes. And if I just may add, it's interesting, we have the IMF, IAF trip to Washington, where all bankers met last week that it is a clear distinction, the one selling AI capabilities between the ones buying them and selling them and how much value has been created lately. So this third point that Christoffer made, the third leg is actually us banking the AI community, which is doing very, very well. On the capital repatriation preferences, so let's say that if we are above 300 as we have stated target board mandate to be in the range of 100 to 300, we have one type of dialogue, and that is how to best come back to the range where the 300 is the upper end. That's the discussion we've had for 2 -- 3 years when we -- from the day we had to cancel the dividends post COVID. And of course, that's kind of the new now. If we're in the range, we have a more forward-looking discussion in the Board in December, where we typically have room for both. So don't assume that you cannot do a share buyback only because you're in the range. However, there is a different discussion. It's more about lending and if we want to retain it to improve business of over and beyond 15% return on equity. If there is a reasonable degree of probability, we know how to do that in the coming years. We'd like to be able to capitalize on that. If not, then, of course, it becomes more of a question of how to repatriate capital to the shareholders with a base, 50% of profits go in the form of dividend. And as you can see in history, we've used both extra dividend in combination with share buybacks to look at, but that's the forward-looking, and I also would say, just the numbers, you need pretty significant loan growth numbers for this not to be -- for SEB not to be able to do capital repatriation in the combination of 2 or 3 types. So it would be lovely if that would happen, but that's a luxury problem. Operator: We will now take the next question from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: My first question was on the NFI line, which came in a bit below in recent quarters in Q3. So I was wondering how you think about the -- how the lower interest rate environment is impacting this revenue line. With your current macro outlook for 2026, how confident are you that your previous indication of the past 16 quarters average is a good indication where the normalized NFI line should be? And how do you think about that given the ultimate macro outlook for next year with, yes, maybe lower interest rates and possibly also lower volatility than what we've seen in the past few years? Christoffer Malmer: Thank you, Nicolas. I think the -- within that number that you have in the NFI, for us, these are, to a large extent, customer-related income. So taking aside the strategic stakes in the mark-to-market and the valuation gains that we present separately in the XVAs, we have a significant proportion of our FICC business booked within NFI. And within the FICC, we have the fixed income, currencies and commodities. And if I look at the third quarter, we had after the very high level of volatility in the second quarter, a lower level of volatility in the third quarter in FX, which resulted to a somewhat slower activity related to our customer demand. Now within fixed income, on the other hand, activity levels remained high with credit spreads at very low levels, issuance continues, and there was a clear demand to prefund during those favorable conditions. Within commodities, we are, as you know, the one Nordic bank that does offer this, and we have seen that contribution growing. But of course, there's an element of volatility, but we think that the underlying structural development there is also constructed. So as we look forward, there are effects driving this. The volatility in FX space and the demand for FX products will be impacting that part of the FICC booked in NFI. We also have the steepness of the yield curve, which impacts the treatment of the inventory and the mark-to-market of the inventory within the fixed income in NFI as well. But at this point in time, we have our range and I think that remains our best prediction for the future. Nicolas McBeath: And then I had a question on like if you have any general remarks or thoughts how you're reasoning regarding the cost growth into 2026. I mean on one hand, you have lower rates, which are a drag on return on equity. But on the other hand, as you've alluded to in the call, potentially higher activity loan growth, economic recovery during next year. So do you think 2026 is a year to expand and invest more or keep the hiring freeze and try and defend the profitability? Johan Torgeby: I'll start and ask Christoffer to add. So the current, let's call it, plan of attack on cost control is the one that we, I think, launched last quarter or 2 quarters ago, and that is to change the pathway that we've been on for some years now of increasing investments in the bank and to tail that increase off. And as you can see this quarter, it looks to be supportive of actually happening. We are in a different place now where we have a different trajectory. The purpose is to sit when we do our business plan in December and hopefully be in a position where we have freed up some operational costs that we can discuss with the Board and the management team how to redeploy. So it is still a different type of forward outlook now than we've had in the last years, and that is more cost control, be cautious and handle resources a little bit more until we have a clearer look on the income outlook because we really need to have a high return on equity and a low marginal cost of income, so profitability secure if we were to start investing more. And then there are many other things must do investments in banks. So there's no lack of holes to put all this money in order to maintain a good and solid and robust infrastructure. But it is the same tonality we've used now for a couple of quarters. There's no change in that, and that goes beyond year-end. It's actually to have a little bit of extra flexibility going forward. That doesn't mean that the decision in December where we set the cost frame for '26 will be up, flat or down. It just means that there will be a discussion to be had and we'll communicate it as always in conjunction with the Q4 report. Nicolas McBeath: And then just a detailed follow-up question. Could you please give us the AirPlus implementation costs for Q3 and how you think about the implementation costs in 2026? Christoffer Malmer: Yes. The AirPlus implementation cost in the third quarter was around SEK 120 million, which means that we, year-to-date, have taken a little bit less as a run rate, which leaves a little bit more in the fourth quarter. And we have guided to around SEK 700 million in implementation costs for the full year. Nicolas McBeath: And for next year, how do you think about those costs developing? Christoffer Malmer: Well, as I referred to earlier, we are now reviewing whether there are parts of the implementation program that should be accelerated. So we'll be coming back to that together with the cost outlook for 2026 together with our fourth quarter results, Nicolas. Operator: We will now take the next question from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: Thanks a lot for taking my questions. I have 3, if possible. The first one is on the NII indication, Christoffer, that you provided early in the call, meaning NII to bottom out 3 to 6 months after the last half. Now raising in Euro area should be done, Riksbank has cut 25, okay, I understand the impact on the equity side, but the federal reserve should cut much more aggressively and you have a much larger amount of U.S.-denominated liabilities than assets is SEK 300 billion larger amount of liabilities in dollars. So I was wondering why the rate cuts by the Federal Reserve should not have a mitigating impact or the only 25 basis point rate cut by the Riksbank. And by the way, also this quarter, what you -- this indication should have happened and did not materialize, NIIs is actually up quarter-on-quarter. So I was wondering why you keep reiterating that given the Federal Reserve cut expected in the coming quarters? The second question I have is, on the 290 basis point buffer, if I'm not mistaken, this includes the whole SEK 50 billion of RWA done -- imposed by ECB on your Baltic operations. Just to confirm my understanding correctly. And if I understand it correctly, 290 is already at the top of your range in terms of management buffer. But you are expecting to go back to that level in only 3 months. And because if that is the way I understand, it's just a matter of how you want to return excess capital rather than if you can keep the current capital return. So what is your thinking about that? And then I have a question, a curiosity that's more a curiosity. Overlays go up by SEK 100 million if I'm not mistaken. Some of the Nordic banks have actually reduced them or brought it to 0. They're using it progressively, releasing those. Why are you keep accumulating those overlays? And when do you expect this to come to an end or this to be used at some point or released or allocated. Christoffer Malmer: Thank you for your questions. I'll start, and I'll let Johan contribute as well, and we're just going to make sure we have the questions correctly. So if I start with the overlay, that is an assessment that we do every quarter. And we take into account geopolitical developments, sometimes we change our macro outlook and assumptions and it's a continuous evaluation of our various exposures across our portfolios. And you have also seen in quarters that we have released some of those overlays and in this quarter, we're adding. And it's hard for us, of course, to comment on how other banks are proceeding with this, but that is our process. For the net interest income, you're right, we are reiterating the expectation of a 3- to 6-month lag from the last rate cut until we see the trough. What happened in this quarter were a couple of technicalities that led to an increase in net interest income sequentially. One is the number of days. We also referred to the deposit insurance fee that is booked over the year. That happened to tilt a little bit more favorably for NII in this quarter. We had a positive FX effect. And we also saw some beneficial treasury contributions, partly from the funding cost and what we have been referring to as repricing effects or timing effects. So as we then look forward, we continue to see pressure on deposit margins as the rate cuts will make their way through the balance sheet. And also bearing in mind that some of our transaction accounts both for corporates and households are down to 0, which means that, of course, the further down we come in the rate cycle, the more any incremental cut will have as an impact. And finally, to your comment around the U.S. denominated deposits, those are primarily wholesale deposits. So those are priced off of market rates, and that's effectively a margin that moves with market rates rather than having an impact as they are being discretionary priced, but they are market rate linked. On your question... Riccardo Rovere: This will go down. The Fed will cut, this stuff will go down, the cost of this stuff will go down. If they does, when they cut. Of the wholesale fund -- this wholesale funding, and it's SEK 400 billion. Christoffer Malmer: Correct. And then, of course, the impact will then be on the asset side when Feds are being cut when we have U.S.-denominated loans that they are funded by. Riccardo Rovere: Sure, but it's smaller the amount. The delta is smaller. The liabilities are much, much larger than the assets in dollar, much larger. SEK 300 billion. Christoffer Malmer: Right. And I think what we have also mentioned when it comes to the U.S. denominated deposits is the fund that we're also placing with the Fed. And that is effectively us operating in the U.S. with our balance sheet, and we will collect deposits from U.S. financial institutions and placing with the Fed. And that is effectively a relatively opportunistic business that we have been running there, and that goes to an element of lumpiness between quarters, but that accounts for a sizable part of the U.S.-denominated deposits as well. Riccardo Rovere: But what I see is longer than SEK 188 billion cash at the Federal Reserve, I guess, and you have SEK 409 billion deposits, which you say is wholesale is going to go down. This one number is more than twice the other. So I don't understand how this cannot be positive regardless FX and all the other stuff, calendar days, whatever. Christoffer Malmer: No, I think this is one of many moving parts in the balance sheet. So when we are looking at the impact in totality from rate cuts, there are various dimensions moving in different directions. And this is one impact that we get from the development of the Fed funds. We have other parts of the balance sheet that's impacted by the ECB rate and others from the Riksbank. So it's taking all these into consideration together where we conclude that running this through our balance sheet as it looks today, we expect the trough. It doesn't mean that all the variables go in the same direction. Some, to your point, might be contributing positively, but the net of it all, we expect to result in a trough 3 to 6 months after the last cut. Riccardo Rovere: And on the SEK 290 billion. Johan Torgeby: Yes. Sorry, can you repeat that question, Riccardo? Riccardo Rovere: The question is that SEK 290 billion is already the top of your rating, the top of your management buffer. And that 290 includes the whole SEK 50 billion, which should be, despite, as I remember, phased progressively, not if I'm not mistaken, you got SEK 10 billion this quarter, maybe you will land another SEK 10 billion next quarter, I don't know. But the real number is the SEK 290 billion. So that is already at the top of your buffer. So how do you see this? Is this -- were you expecting it to be already basically at the top of your buffer only with the whole impact of the ECB imposed add-on after only 3 months. Because there has been, let's say, some discussions around the impact of this stuff into -- mostly 2026 is affecting your capital return blah, blah, blah. How do you see that? Johan Torgeby: Yes, I think we understand that. Christoffer Malmer: I can just start, Riccardo, with confirming that we have taken in this quarter the equivalent of 18 basis points or SEK 10 billion phase-in of REA in the Baltics, and we're showing that the remaining, what we estimate to be another 70 basis point impact would take our pro forma buffer to 290 basis points, where we have booked so far in this quarter, SEK 10 billion of that. Johan Torgeby: So just to be clear, that is pro forma today. So I think you're absolutely right. It's the 290 if we would technically have deducted all of it and it would have been over. But as we -- for accounting reasons and other things, couldn't or wouldn't do that. So we just showed it pro forma. Then you have, as I think you alluded to, now capital generation, in the dynamic analysis going forward, we'll, of course, continue to increase this number, everything else being equal. And therefore, I think we will have a better position when we get to Q4, and we will have to look at the current capital position then in a quarter to then for the board deliberations on repatriation. Was that an answer? Riccardo Rovere: Yes, yes, yes, definitely, that's an answer. So 290 before, then you start accruing the dividend, 50% payout or whatever it is. And then the rest, we'll see. But the starting point is 290. Johan Torgeby: Correct. Operator: We will now take the next question, question from Bettina Thurner from BNP Paribas Exane. Bettina Thurner: I would just have 2 clarification questions, please. The first one on NII. So you have been quite helpful over the past 2 quarters to try and isolate the temporary effect on the net interest income base. For this quarter, should we look at the effects in treasury that you mentioned before, of repricing quicker. Is that the SEK 100 million? Or would there be other parts of the NII that you would also expect to get out again or reverse partially in the last quarter of this year or first quarter of next year? And then the second question would be on the dividend. At the start of this year, you said you had the intention to pay out a semi-annual dividend next or in the next year. Is that still the plan? Or are you still deciding on that? If you could just give us more update on that, please? Christoffer Malmer: Thank you, Bettina. So on your first question on net interest income, I think the number that you're referring to, the SEK 100 million or so as a positive impact in Q3 from those timing effects is the number that you should have in mind for that effect going forward. And for the semi-annual dividend, you're right, that is something that we mentioned at the start of the year, and we have ongoing dialogues with our shareholders, and that's something we'll come back to when we report our fourth quarter results and come back to the capital question. Bettina Thurner: If I can just double check. So it's not set in stone yet, let's say, on the semi-annual dividend? Christoffer Malmer: Correct. That's correct. Operator: Thank you. That's all the time we have for questions today. I would like to hand back to Johan Torgeby for closing remarks. Johan Torgeby: I'd just say thank you, everyone, for your participation and your interest in SEB and look forward to seeing you soon. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the Icade 9-month Trading Update Conference Call. [Operator Instructions] Now I will hand the conference over to Nicolas Joly, CEO. Please go ahead. Nicolas Joly: Good morning, Nicolas Joly speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning Icade 2025 9-month update. This presentation will be, of course, followed by a Q&A session. Let's move to Slide 5 for an overview of the main messages. To date, Icade has completed or signed preliminary agreements for EUR 430 million in disposals. This includes a reduction of the group exposure to healthcare activities by circa EUR 210 million and the sale of mature or non-strategic assets for EUR 220 million. The investment division reported a very good rental activity with circa 166,000 square meters signed or renewed to date. This volume was boosted in October by the renewal of 41,000 square meter in EQHO Building with KPMG. For several months, the financial occupancy rate has improved, notably for well-positioned offices and light industrial assets. On the property development front, H1 trends are continuing into H2. By the end of September, Icade recorded stable order volumes with a total value decrease of minus 5%. Lastly, we reaffirm today our 2025 group net current cash flow guidance between EUR 3.40 and EUR 3.60 per share. On Slides 6 and 7, we focus on the good progress made on disposals. Early August, Icade signed an agreement with BNPP REIM to sell its stake in a diversified portfolio of 23 health care assets, accounting for circa 15% of its exposure to the healthcare real estate sector. This transaction with one of France's leading real estate investment management firms confirms the quality of healthcare portfolio in Italy. These sales represent circa EUR 173 million for Icade, in line with the asset values included in the group NAV as of June 30, 2025. The proceeds from the sale will repay the shareholder loan from Icade to Icade Healthcare Europe almost in full. The deal is scheduled to close at the end of the year. In addition, year-to-date, Icade reduced its exposure to Praemia Healthcare by EUR 36 million through 2 smaller transactions completed in the first half of 2025. The property investment division also secured EUR 220 million in disposal of nonstrategic or mature assets. Since the last year results, preliminary agreements were signed on additional assets for EUR 115 million, namely an office asset covering 1,800 square meters on Charles de Gaulle for EUR 17 million, the remainder of the B&B Hotel portfolio for circa EUR 30 million and the entire Mauvin business park in the north of Paris, representing 21,000 square meters for EUR 69 million. This successful transaction is the direct result of the hard work of our asset management teams who managed to bring the occupancy rate of this park up to 100% by the end of June. All of these transactions represented an average yield of about 6.1% and were completed at prices above the net asset value as of the end of December 2024. Let's look now at the performance of investment division on Slide 9. Over the first 9 months of the year, the rental market remained challenging with take-up in the Greater of Paris region down 8% year-on-year. The subdued economic environment and French political instability continue to weigh on corporate real estate decisions. As we observed in the previous month, there has been still in Q3 2025, a lack of new leases signed for spaces over 5,000 square meters. In this environment, Icade teams delivered a very solid performance with around 125,000 square meters signed or renewed by the end of September. These agreements represent an annual rental income of EUR 29 million with a WALB of 6.8 years. This achievement demonstrates our ability to secure large leases over 5,000 square meters and to support our clients over many years like Club Méd, who has been our tenant within Pont de Flandre for 30 years. It also shows our expertise in creating spaces tailored to our client needs as we have done with Sopra Steria in the Orly-Rungis business park. The total financial occupancy rate stood at 84% as of September 30, 2025. In the well-positioned office segment, the financial occupancy rate stood at 88.8%, up plus 0.8 points compared to the end of December 2024, following, in particular, the leases signed for more than 3,000 square meters in the Hyfive building and nearly 2,000 square meters in the EQHO Tower. After including the [indiscernible] in the first building scheduled to start in Q4 2025, the financial occupancy rate of well-positioned offices stood at over 90%. In the light industrial segment, the occupancy rate stood at 90.4%, plus 1.5 points versus December 2024, thanks to leases signed in November, Port de Paris business park. In addition to the 125,000 square meter, we are very pleased to announce that we renewed in October the lease with KPMG for approximately 41,000 square meters. This lease has a firm commitment until 2031. In total, Icade has signed or renewed more than 60,000 square meters since the beginning of 2025 in the La Défense and Péri-Défense area, which offers significantly lower rents than Paris CBD, while still being very well served by public transport. Let's now move on to the operational performance of the development business line on Slide 11. The trends have remained consistent with the first half of the year. The development division recorded a stable orders volume with 2,815 units totaling EUR 722 million, down by 5%. Activity in the individual segment declined by 11% in volume, in line with the overall market. This decline occurred in an unfavorable tax environment marked by the end of the P&L tax scheme, which led to a sharp contraction in individual investor activity, i.e., minus 43% year-on-year. The momentum was more positive for our owner-occupier orders, which increased by 14%, supported by favorable measures promoting homeownership. Bulk orders showed an 11% increase in volume, but a 6% decrease in value. This discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to support business activity as they accounted for 51% of orders in volume terms year-to-date. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year with circa 60% of bulk orders made in Q4 in both 2023 and 2024. I'll now turn the floor over to Bruno to present the change in revenues. Bruno Valentin: Thank you, Nicolas. Let's move to Slide 13, which we present the trend in consolidated revenue as of September 13, 2025. Icade's total IFRS revenue is down by 9% due to lower revenue from both the property investment and the development divisions. Let's dive into the financial performance and property investment division in Slide 14. In line with the figures reported in the first half of the year, gross income decreased by 6% to EUR 253 million, mainly due to tenant departures last year and the gradual crystallization of negative reversion of renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated but still contributed plus 3.2% and by early termination fees mainly related to the to-be repositioned offices. Move to Slide 15. On property development side, economic revenue amounted to EUR 729 million as of September 13, 2025, down by 12% year-on-year. This decline results firstly, from a drop in commercial segment with revenue down by 42% year-on-year due to the completion of major projects at the end of 2024, coupled with the low volume of new contracts signed in 2025. And secondly, from the progressive decline in residential backlog. I will hand over to Nicolas for the conclusion. Nicolas Joly: Many thanks, Bruno. So, let's move on Slide 17 for the 2025 guidance. We reaffirm our 2025 guidance of a group net current cash flow of between EUR 3.40 and EUR 3.60 per share. This includes net current cash flow from nonstrategic operations of approximately EUR 0.67 per share, excluding the impact of disposals. As of September 2025, the income already recorded by Icade represented 92% of annual net current cash flow from nonstrategic activities. Let me remind you that the contribution from nonstrategic activities does not include the payment of a potential interim dividend from Praemia Healthcare in 2025. Well, to conclude, in an environment that remains complex and uncertain, Icade teams achieved a number of successes during the quarter as illustrated by the continued execution of our disposal plan and a very strong leasing performance. We remain focused on implementing our strategy with priorities that include improving the occupancy rate of our assets, diversifying our portfolio and rigorously managing our balance sheet. And with that, let's start the question-and-answer session. Operator: [Operator Instructions] The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: So 3 questions for me, if I can. So, my first question would be in offices. So, you have said that improving the occupancy rate is a high priority. So maybe could we say some words on your next challenges in offices for notably for the end of 2025 and 2026. So, what shall we expect? Maybe second question on healthcare assets. So, have you any comments to make for the other assets to be still sold in healthcare? And maybe last question on the 2933 Charles de Gaulle comment on your intention to dispose or not at the end of this asset? Nicolas Joly: Thanks for your question. Well, maybe start with the financial occupancy rate. Well, you saw that there were some recent improvements indeed in the occupancy rate for well-positioned and light industrial segment. As I said, including the positive effect of Pulse by the end of 2025, the occupancy rate will be above 90% for the well-positioned. Light industrial 90.4%. Well, of course, there will be a slight negative impact to be expected post disposal of the Mauvin business Park, but thing is getting better month after month. Once again, this remains and shall remain the first priority for the teams as for the Investment division. Maybe to give you a bit some visibility on the -- what to expect in 2026 regarding the expiries. I would say it's globally the same trend as in 2025, of course, with some expiries to be expected concerning the to-be repositioned assets. As more than half of the expiries will occur in H1 2026, we shall be in a position to give you some good visibility for the full year 2025 result presentation. And on the second question on the healthcare portfolio, well, clearly, given the political environment in France, which does not help and could discourage some international investors, our first priority is to focus on the international side. We've shared some good news with the Italian portfolio that shall be closed at the end of the year. We are also focusing a lot on the Portuguese assets, which are, as you know, high-quality assets that can attract unsolicited interest. And we are also marketing the small remaining part of the Italian portfolio, which constitutes of 5 assets, representing roughly EUR 20 million. On France, once again, on [indiscernible], there's no major news to share given the French context, but we are still exploring some additional routes, sale of noncore assets, additional swaps as we've done during the H1. And on the Charles de Gaulle asset, of course, we won't comment specifically on the asset or the process, but will keep being consistent with our DNA, which is to capture the maximum of the value creation. And once again, for this asset, in our view, a large part of the value has been already created through the eviction of tenants and the obtaining of the permit. And there's a good window because they have very strong liquidity on the investment market for core plus and value-add assets in Paris CBD. We saw a lot of transaction there with loads of cash. So clearly, with those 2, an opportunistic approach in our view shall be considered. Once again, the key decision will be made on value creation. Operator: The next question comes from Stéphane Afonso from Jefferies. Stéphane Afonso: First, on the EQHO Tower, could you please share the reversion rate reflected in this renewal? Second, on Icade's promotion, should we expect additional provisions or impairments since market parameters have changed? And finally, on asset values, market data points to further yield expansion. So, what should we expect in terms of asset value decline in H2? Or at least what assumptions are you using in your business plan? Nicolas Joly: Thanks for your question. Well, starting on the EQHO Tower, maybe just before sharing thoughts on the economics, let's take a minute to celebrate, which is really good news rewarding the hard work of the team that have been working on this for several months now. As we shared with you, we try to anticipate as much as possible the large break options we are facing and we have some strong relationship with our major tenants. So, we were really happy to succeed in that. Of course, we cannot share the detailed figure but maybe highlight the one thing is that as put in the PR, the signature rent is in line with the RV as we usually do. Of course, this crystallized a significant negative reversion. It was the highest negative reversion potential in the portfolio. That shall be captured after the end of the actual lease from October 2027. But I'm sure that if you put some raw figures, you can be able to estimate this roughly. As for the incentive, they are slightly above the market trend, but in my view, remain fully consistent with the very large surface that is considered. We are talking here about circa 41,000 square meters. So, this to conclude on the EQHO Tower is, in my view, an emblematic transaction, testifying once again the good dynamics of the area in La Défense district and the strong relationship we have with our tenants. Stéphane Afonso: Maybe jump in on your -- I have in mind that the reversionary potential was minus 11%. So, taking into account this renewal, where does it stand now? Nicolas Joly: Yes. This accounts for roughly 2 points out of those 11 on the average portfolio. Yes. But this once again will be captured at the end of the actual lease in 2027, because until then we are still on the current rate, okay? Is that clear? Stéphane Afonso: Okay. Yes. Thank you. Nicolas Joly: Jumping on your second question on Icade promotion. Of course, the market trend is still very tough. As you saw on the residential business, we've been deeply impacted by the end of the P&L tax scheme that had a negative impact on orders of individual investors were roughly minus 43%. As shared, there's better dynamic for owner occupier. The bulk sales still represent more than half of the total orders with a historical volume very strong in the Q4 and of course, very low activity in the commercial division, and that shall be the case in the years to come. So, we are still very selective in our operations. There may be 1 or 2 operations identified will be more difficult than expected. We've done the job on the whole portfolio in June 2024. So, there is no thing that is expected once again on that. And I would say that for the global activity, there are no recovery, in my view, expected before 2027, especially due to the political agenda. As you know, next year will be the local election on the town. So, this is usually years with very low level of building permits. Stéphane Afonso: So in your view, the provision and impairment that you recorded maybe 2 years ago are conservative enough at this stage? Nicolas Joly: Yes, we went through the whole portfolio on that. As I said, given the context, there still can be some operation selectively that can have some issues. But once again, on the whole portfolio, the job has been done. And on the last question on the evolution of the asset value, where you saw in H1 that there was a small deceleration of the asset value decline of minus 2.8%, if I remember well, in like-for-like, both from negative impact of residual yield decompression and to a lesser extent, lower expectation for indexation, clearly. Light industrial were more resilient, of course. But if we focus on offices, while it's still difficult to confirm the timing of value stabilization as there are still very few transactions on the market to assess properly the target cap rate. And on top of that, there are still some persistently high sovereign yields. But nevertheless, as you saw, we had a strong divestment activity during the first 9 months of the year and the sale of core assets completed year-to-date confirm the level of our actual NAV. Operator: The next question comes from Celine Soo-Huynh from Barclays. Unknown Analyst: I got 2 questions, please. The first one is about the guidance. In the press release, you said that the disposal of the Italian healthcare portfolio could impact the NCCF depending on the closing date. So, could you please give us a number around this? And the second one is around your outlook. You sound very cautious. I would almost say quite negative on your outlook for 2026. And we know your S&P credit rating currently is negative. Are you expecting a credit downgrade coming? Nicolas Joly: Maybe quickly on the first one, well, globally, the impact of the disposal of the Italian portfolio will be nonsignificant on the cash flows because it's expected to occur at the very end of the Q4, so not significant. On the outlook, well, cautious clearly because 2026 globally will remain very tough, in my view, on market conditions. Well, you get this political agenda in France that will definitely have an impact on the pace of recovery. We are facing persistently high sovereign yields that won't help. And thirdly, there's a lower positive indexation to be expected in 2026. On top of those macro effects, more specifically on Icade side, well, as I said, on the property development, given the political agenda, there is no expectation in our view of recovery in 2026. And on the investment side, I was mentioning a lower positive impact on indexation that we expect roughly at 1%, so much lower than expected some months ago. And as you know, there are still some negative reversions to be crystallized in the cash flow. Of course, this is already, as you know, in the NAV, but still to be crystallized lease after lease in the cash flows. And there are still some departures, mainly on the to-be repositioned assets that will still while on the like-for-like clearly. So not negative, but clearly, cautiousness in our view on both businesses and the macro is necessary. And maybe Bruno, you want to. Bruno Valentin: Yes. So, we remain highly focused on SAP, of course, the 3 points. First one, the disposal achieved over the last 9 months helped to keep the LTV ratio under control. Secondly, we have a limited committed level of CapEx in the pipeline. But nevertheless, we remain subject to variation in asset valuation. Nicolas Joly: And Celine, you were mentioning, I though the outlook, but the current outlook is stable. Bruno Valentin: It's not negative. Unknown Analyst: Sorry, I thought your outlook was negative. Nicolas Joly: No, no. This is stable. BBB stable. Operator: The next question comes from Michael Finn from Green Street. Michael Finn: Yes. I was just curious given the change in the sources of funds. Since it seems slightly better than it was, I'm curious if there is any change in the uses of those funds as well. Should I assume that the strategy is in line with the Investor Day from Feb of '24? Nicolas Joly: Yes, Michael. Well, we are still bang in line with ReShapE. As I shared in my conclusion, we are focused on our existing portfolio and the occupancy rate. We are also focusing on diversifying our exposure to additional asset classes such as PBSA or data centers, for example. There were no major news to be shared during this Q3. But clearly, we intend to reallocate into relative developments, the cash that comes from the divestment, but we are still bang in line with the main guidelines of the ReShapE strategic plan that we've shared in February 2024. Operator: The next question comes from Samuel King from BNP Paribas Exane. Samuel King: Just one clarification question on earnings guidance, please, and specifically on the contribution from nonstrategic operations. I understand that it excludes a potential interim dividend from Praemia Healthcare. But am I right in thinking it also excludes a potential dividend from IHE, which last year was around EUR 10 million? And if so, what is the decision made if IHE pays a dividend? Because in theory, the disposal and repayment of shareholder loans should improve the financial position of IHE and therefore, its ability to pay a dividend this year? Nicolas Joly: Yes. Thanks, Samuel for your question. Well, indeed, there was no assumption of an interim dividend on Praemia Healthcare and no dividend on IHE, but we don't expect dividend on IHE, most of the cash flows were drawn through the shareholder loan. So, nothing to expect on this regarding IHE. And as for Praemia Healthcare, we'll see there is an interim dividend before the year-end. And if this is the case, of course, we will be telling the market that it's the case. But indeed, you were right on the current guidance, the EUR 0.67 does not include any interim dividend on Praemia or any dividend on IHE. Operator: The next question comes from Valerie Jacob from Bernstein. Valerie Jacob Guezi: I just wanted to ask a follow-up question on your rating with S&P. My understanding was that S&P had assumed approximately EUR 700 million in order for your outlook not to be downgraded. I mean I know your outlook is stable, but I'm talking about an outlook downgrade. So, I was wondering you've only done EUR 400 million so far. If you don't sell Charles de Gaulle in 2025, is there a risk that your outlook can be downgraded? Or maybe if you can share some discussion you're having with S&P. Nicolas Joly: Well, today, once again, we are consistent with the trajectory we've shared. We've demonstrated our ability to sell assets, even sell assets at the right price. We said it was above NAV. There is a few opportunities in the pipeline that make us confident in being able to secure the debt on debt plus equity threshold at 50%. So, at this stage, nothing specific to worth sharing. Valerie Jacob Guezi: So if you don't sell anything until the end of the year, there is no risk in your view that your outlook is going to be downgraded. Is it what you're saying or? Nicolas Joly: Well, it's not for me to say. I mean it's S&P to say. But clearly, today, we've demonstrated that we are able to secure our debt on debt plus equity trajectory. And on top of that, the additional 2 KPIs are very comfortable headroom regarding the guidelines set by S&P. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Nicolas Joly: Okay. Thank you very much. Happy to share this part of the morning with you. Looking forward to talking to you. Have a nice day. Bye-bye.
Martin Carlesund: Good morning, everyone. Welcome to the presentation of Evolution's report for the third quarter of 2025. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Joakim Andersson. As always, we will start with some comments on our performance in the quarter and then I will hand over to Joakim for a closer look at our financials. After that, I will conclude with an outlook and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. And I would like to start by taking the bull by the horns and address the bad performance in Asia. This has been a recurring theme over the past quarters. But unfortunately, this time, it looks a bit worse. We were, as you remember, very cautiously optimistic about the remainder of the year in the last report. And there's really nothing that doesn't say that Q4 could be better. However, we are experiencing a lot of volatility, which makes the near-term performance hard to predict. At this stage, we want to be realistic and keep expectations low. So what are the main reasons behind the Asian development. First is the cybercrime activity that continues to hurt us. Every day and around the clock, we do everything that we can to mitigate the issues. However, some measures do impact also the end users, and this is what makes it tricky. At the point in time, within the quarter, we did too much, causing loss in revenue. On the other hand, if we do too little, we lose to the pilots. Towards the end of the quarter, we found a better balance, but it's still volatile. And we are -- we do constant security updates to our core to increase protection. We will continue to adapt the changes that are working, and to fine-tune the methods that are working well and explore completely new actions as well. I ask for continued patience on this, but rest assured that is a top priority. Additionally, in Asia, the newly regulated markets, Philippines is volatile, which often is the case when operators and players adapt to the new framework. There are also other markets, such as India, that show signs of moving towards regulation, which creates a higher level of uncertainty than before. And to clarify, with showing signs, I mean that the current heated debate and quick and not widely acknowledged political decisions is something that we often see in the very beginning of potential regulation. Over a longer period of time, it will likely not be noticeable, but on a quarterly basis, it will cause variations like the one we see now. With the context of Asia in mind, let's look at the overall numbers. Net revenue came in at EUR 507.1 million, corresponding to a year-on-year decline of 2.4%. EBITDA amounted to EUR 336.9 million, and the EBITDA margin came in at 66.4%, which is within the range of our full year margin target of 66% to 68%. What stands out as positive in the quarter is the performance in Europe, which is back to growth quarter-on-quarter compared to the first half of the year. We saw the full effect of our protective ring fencing measures in the second quarter, and this provided a new foundation for growth. Worth mentioning is also that we got recognition for our ring fencing from one of the largest regulators in Europe, where we were pointed out as one of the best B2B suppliers. I'm happy with the progress in Europe in this quarter. North America also performed decently, and Latin America is stronger than what we have seen earlier this year. Our Live revenue declined by 3.4% to EUR 431.7 million, while RNG increased by [ 4.2% ] to EUR 75.5 million. It is actually the first time that RNG outperformed Live in terms of growth. Our studios have worked hard and especially Nolimit City has performed great in this quarter. To further strengthen our portfolio, we have launched a completely new brand, Sneaky Slots from scratch, and it will be very exciting to follow that progress going forward. On Live, growth is held back by Asia, but we continue to see good growth in the rest of the world. In both North America and Latin America, Live is still in early days and gains considerable attention from operators and players alike. The opening of our new studio in Brazil has been a true success. On the game side, our highly anticipated Ice Fishing title has finally seen the light, and reception has been great across our market. It is mirroring the trend of faster and shorter forms of entertainment that are widely consumer channels like TikTok and Reels. And it is needed -- is indeed a much faster experience than, for example, Crazy Time. Another great thing is that expansion of Ice Fishing to other studios will be fast compared to the more massive games like Lightning Storm. With its success, we will definitely explore more opportunities in the speed game show arena going forward. To conclude the quarter, overall revenue is not where I want it to be. But when opening the lead, it's clear that the development comes from 1 out of 4 regions. The development in Europe, North America and Latin America is overall good and also supports the margin together with our clear focus on cost efficiency. Next slide, please. If we then move to our operational KPIs, consisting of head count and game round index. On head count, we are growing 4.2% on a year-on-year basis, but we have actually decreased 2.7% quarter-on-quarter. The slowdown is, to some extent, reflected in the revenue. We don't hire unless we grow, but looking at recruitment base within full year, there are sometimes fluctuation based on temporarily slower high pace in recruitment. As we plan for more studio expansion over the next years, the long-term trend is that we will see continued increase in the number of Evolutioneers. The game round index can be seen as a general indicator of activity throughout the network over time, as you know. And for an individual quarter, it can be -- can vary quite a lot and does not always correlate with the revenue development. However, as you also can see this quarter, this actually shows a decrease. Next slide, please. Innovation and quality will always be our signature when it comes to our game portfolio. And I am ever so proud of the continued delivery on our product road map for 2025. During the quarter, we released Ice Fishing, which I have already talked about, and also Dragon Tiger Phoenix, SuperSpeed Dragon Tiger, both the latter are based on a popular Dragon Tiger, a straightforward car game that now has been elevated with the new excitement. Rules are simple and gameplay is quick. In Dragon Tiger Phoenix, the Phoenix is introduced as the third legendary car and the players simply bet on which car that will win or if it will be a tie. Another very exciting release is the Sneaky Slots brand, which joins our portfolio that already includes Nolimit City, Red Tiger, NetEnt, and Big Time Gaming. We have created Sneaky Slots from scratch, leveraging all our know-how that we have within RNG and using our one-stop shop and global sales network to further boost its launch. Sneaky Slots will fill a gap between Nolimit City and NetEnt in terms of game style. And selected releases will use ex mechanics from Nolimit City that we know that the players love. First title was released -- was NetEnt, which will be followed by the new title every month until year-end. Among upcoming releases, we have Red Baron, a mix of Live and RNG where the goal is to cash out before the Red Baron flies away. The longer you wait, the higher the potential. Another release is Insurance Baccarat, which is an exciting variation of the classic Baccarat that adds a unique insurance feature to protect the space. While summarizing the year, we look back at over 110 releases, which is a truly great achievement. And as time flies, there's now only 3 months left until [ Ice ] where we, as always, will showcase the most exciting titles for 2026. I can promise that Todd and his team are ready to take entertainment to yet another level. Next slide, please. Okay. Let's look at the geographical breakdown. As already highlighted, I'm pleased to see that Europe growth quarter-on-quarter, with revenue amounted to EUR 182.2 million. We have talked a lot about ring fencing this year, and you probably remember that the effects on revenues were a bit larger than we had anticipated. It is a price that we have to pay to stay ahead of the regulatory curve. But with that said, we have a new base to grow from. And despite the summer without any major sports event, development has been overall good. I should also mention the dialogue with the U.K. Gaming Commission, which continued, and we are yet to receive the conclusion of its review. What I believe is important to note is that we have been very cooperative and also responsive to various requirements that the Gaming Commission has put upon us. We still have to wait for the outcome, but I truly believe that we have the most sophisticated compliance framework among all providers targeting the U.K. Moving on to Asia, where I have already provided the context for the bad development and revenue decline of 9.6% quarter-on-quarter. Even though the market in Philippines has been volatile, our newly opened studio has been off to a great start. A while ago, there were some media noise on our studio partner losing its B2C license, but it has nothing to do with us or our studio. Everything is working as it should. We did, however, suffer some building damage in the 6.9 magnitude earthquake that struck Cebu in the beginning of October, but to our great relief, no employee was hurt and operations continued, even though that is secondary when people's lives are on the line. Next slide, please. On the contrary from Asia, North America is, thanks to its regulation, more predictable and stable. Quarter-on-quarter growth is modest, but on the positive side, it is -- on the positive side, the operators continue to invest heavily in Live casino solutions and environment. Year-on-year growth is 14.5%. To meet the demand, we have launched our second Live studio brand, Ezugi, just around the end of the quarter, and we are planning to open a second studio in Michigan during the first half of 2026. I would also like to highlight that we, after the quarter, have launched Crazy Time in Connecticut. Great. Very, very good. Also, while speaking on North America, I would like to mention something on Sweepstakes as it has been a topic of discussion during the quarter. Sweepstakes is a popular product in the U.S., and we offer it in states where it's not prohibited or in any way under regulatory scrutiny. Sweepstakes is a very small part of our total revenue, but we believe it has some potential. And as you know, as the market leader, we'll want to offer a great variety of content. In the quarter, a city attorney in Los Angeles made a personal interpretation of the California law, and as our strategy is that we don't offer Sweepstakes where there are regulatory uncertainties, we pulled it from the market, simple as that. I'm also quite certain that you will ask us about the completion of the Galaxy Gaming acquisition. We are still awaiting some regulatory approvals, but believe me, we will be able to -- but we believe we'll be able to close the transaction before year-end. However, it's a regulatory process. It's not completely in our hands. Moving on to Latin America, where growth is picking up with 6.4% year-on-year and 5.9% quarter-on-quarter. The new regulation in Brazil seems to be done with its initial [ teething ] problems, and operator and players are becoming more active. Our new studio in Sao Paulo, Brazil has developed nicely during the quarter and will expand as we move forward. Now I will hand over to Joakim for a closer look at our financials. Next slide, please. Joakim Andersson: Great. Thank you, Martin, and good morning. As usual, I will now zoom in on some of the financial highlights this quarter. Let's start on Slide 7, where we have the financial development of the last 14 quarters. For the ones that are following us and are used to our format, you will note that we have added the revenue split by regulated and unregulated on this slide. Let's start there. As you can see on the line, regulated revenue is up to 46% of the total this quarter. And even if this will fluctuate between quarters as revenue mix shifts, the longer trend is clear. The portion of regulated revenue will continue to go up. To the left, as mentioned by Martin earlier, we had net revenue of EUR 507.1 million this quarter, and EBITDA margin of 66.4%. What is not shown on this graph is that we, now year-to-date, are at 66.7% in EBITDA margin, making it within the expected range of 66% to 68% for the full year. As you can see from the chart, our growth has clearly tapered off and even become negative, and this is not something we are happy about, and we can assure you that we are doing whatever we can to reverse that trend. Let's go to the next slide. And here, we had our profit and loss statement. A lot of numbers on this slide, so I have highlighted the key takeaways, and I will comment on them one by one. So firstly, again, we had net revenues of EUR 507.1 million, which is down 2.4% year-on-year and down by 3.3% quarter-on-quarter. Secondly, total operating expenses amounted to EUR 210.5 million, which is 5% higher than last -- higher than Q3 last year, but more importantly, down 3.4% from last quarter, which is good evidence of our efforts adjusting the cost base to the weaker revenue momentum. We are not only trying to work smarter and be more efficient optimizing how we use our studios and tables, but we are also taking some broad-based cost-cutting measures, which will continue for the rest of the year and into 2026. Thirdly, our operating profit amounted to EUR 296.6 million in the third quarter. And finally, EPS after dilution amounted to EUR 1.25. To be noted, the profit for 2024 includes EUR 59.7 million of other operating revenue related to reversal of earn-out liability. And so to make it comparable with this year, you should probably adjust for that. Let's move on to the next slide, where I'm going to show you the development of our cash flow. First, to the right, our capital expenditures. And as can be seen in the graph, we are down quarter-on-quarter, the total CapEx related to tangible and intangible assets of EUR 29.8 million. With that, we are likely going to be slightly lower than the full year forecast of EUR 140 million that we announced in the beginning of the year. If we then look left, our operating cash flow after investments amounted to EUR 342.1 million in the quarter, which corresponds to a cash conversion of 83%. With that, we are back on track after a seasonally and unusually weak second quarter. The change in working capital was positive EUR 35.2 million this quarter, meaning a swing back from the weaker number last quarter, which is good and in line with our expectations. Then finally for me, some brief comments on our financial position on the next page. On this page, you will find our summary of the balance sheet for the third quarter compared to what it looked like at the end of last year. The main items that I usually highlight, which are all signs of our financial strength, are the value of the bond portfolio of EUR 103.2 million, our total cash balance that amounted to EUR 656.4 million and the equity position at the end of the quarter, which amounts to EUR 3.8 billion. We have continued with the buybacks in the third quarter. And in total, we invested EUR 187 million and bought back 2.5 million shares. In total, we have now used EUR 406.5 million of this year's mandate from the Board of EUR 500 million. And following the release of the Q3 report today, we'll be back in the market with an aim to use the full mandate before the year ends. With that, I will hand back to Martin for his closing remarks. Martin Carlesund: Thank you, Joakim. So let's summarize the quarter and then move to the Q&A. Performance in Asia was bad and left a negative impact on the group revenues as a total. But with that said, the rest of the world is doing decent to good, and we are determined to get Asia back on track. I understand that it causes some frustration, especially since we actually saw some signs of improvement in the second quarter. And believe me, I'm frustrated, too. I can only repeat that it requires patience while being a top priority. I'm happy to see that the margin has improved compared to the first half of the year, and we don't see any reason why -- for it not to stay within our target range of 66% to 68% for the remainder of the year. Cost efficiency is something that I feel strong about as it's part of our roots as an entrepreneurial company. We never spend a penny unless it provides value to the business in terms of growth. This presentation is about the financial performance in Q3. We don't have a separate slide on the movement in the ongoing deformation litigation in the U.S. We have -- where we have for 4 years finally received information on who was behind the [ false ] report. This process will continue in court, and I will not make any comments about its future development. What I can say is that we believe in fair competition, where innovation and excellent operations count. When a competitor decides not to play by these rules, it hurts not -- it hurts not only us, but the industry as a whole. With that said, with a little bit more than 2 months left of 2025, we will continue to run, adapt and improve. When we summarize the year from a financial perspective, it will have been a bumpy ride, but from an operational perspective, a very strong and important period for Evolution. With that, we'll open up for questions. Next slide. Operator: [Operator Instructions] The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: My first question is on -- if we could discuss the Asia situation just a little bit more. I think you mentioned it remains volatile and you, of course, the ambition is to get it back on track. And my question would be, are there any signs that it has bottomed out because the counter measurements, that's in your control, right? So if you have been too stringent, you can adapt. But the regulatory situation and the effect from that is more -- is not in your hands. Is that a correct interpretation? Martin Carlesund: We are doing everything we can with the countermeasures. And as I said, we did a little bit too much, and we have to do a little bit less, and we'll find the balance. And I think that we are on to it and we're doing the right things. And it's also natural that there will be a situation where you do a little bit too much because otherwise, you won't know where the borders are. When it comes to the dynamic and the regulatory situation in the region, there's a lot of countries. And right now, there's volatility in some of the regions, some of the countries and that affects us as well. I can't predict much more than that. Martin Arnell: And my second question would be, first on Europe, return to growth quarter-on-quarter there. Is that because players finding their way back after the ring fencing through regulated alternatives, do you think? Martin Carlesund: That's a very good question. And I -- yes, I believe that players in some markets find their way back and want to play a regulated and good compound. So that's probably part of it. And we see good development in total. And I'm actually happy with the development in Europe. Martin Arnell: Okay. And final question is just on investments. I mean is there any investment that you could accelerate to improve this current situation in Asia? You've always commented that you will prio growth over margins. Martin Carlesund: It's -- there is no -- it's not -- if I could throw more money at the problem and I would get a quicker solution, I would do that. I don't see that it's a money issue. We invest and we put the resources -- topnotch resources in the world to do whatever we can. And there is actually -- but don't quote me on that, please, but there is no limitation when it comes to that money. We put revenue and market share before cost, but we also need to adapt to the situation we have. So that's what we're doing right now. Operator: The next question comes from Ed Young from Morgan Stanley. Edward Young: My first question is on North America. It's showing the best growth across your geographies, but it's still behind market growth. Could you give us an update on the drivers there? What's going well? What's going less well? And do you expect any material change in the growth rate into next year? The second is on Asia. It sounds like it's a reasonable conclusion from your comments around countermeasures, Martin, you may never be able to fully deal with these issues. So put another way, should we be rebasing fundamentally our Asia revenue and growth expectations? Or on what sort of time line do you have optimism over market growth and market share gains in Asia? And then finally, I'll ask it. I appreciate giving your very final comment. You may not want to answer, but what are you looking for as an outcome from your legal action? Are you seeking maximum financial damages? You expecting regulators to review your competitors' license suitability? What are you looking for? And what sort of time line do you expect this to play out? Martin Carlesund: Thanks. I got it. So when it comes to growth in U.S., Live is doing really well. We have a couple of fluctuations, maybe we didn't have the best quarter when it comes to RNG. There are a little bit fluctuations over the quarters, I'm happy with the development. I look forward to the future in U.S. That's the situation in the U.S. When it comes to Asia, to address this problem, it's technically difficult. It's very advanced, and we're doing it. And we're tuning and we're finding. My belief is over time, that we will find the right balance and the right solutions and continuously enhance and protect our product to make it even better. So in the longer perspective, I look at a very good situation in the Asian market. Now I don't have any -- I can't share any sort of time frame on that right now. I'm a bit more cautious with that. When it comes to the outcome of the litigation process in U.S., I mean I look for fairness, justice. I think that it's horrible to do what has happened to us. Someone is hiding between layers of companies and hiding the true identity and writing false -- a number of false statements in the report to us. It's unfair. We are protecting the shareholder value of Evolution. The company, as such, defending ourselves from our employees. And the first thing that we look for is some kind of justice, I would say. Operator: The next question comes from Ben Shelley from UBS. Benjamin Shelley: I've just -- I've got 3, if that's okay. On Asia, could you talk a bit more about the developments in India in more detail? What exactly is happening on the ground? And how should we expect this to develop over the coming quarters? My second question is on North America. Could you talk more about your Sweepstake exposure in the U.S. and how meaningful that is versus your North American revenues? And three, I was wondering if you could -- if you had any early thoughts on capital allocation for 2026? Do you think EUR 500 million is the right starting point for share buyback expectations for next year? Martin Carlesund: So the situation on the market in Asia, is a lot of different countries. We point out, Philippines is very volatile right now. There's things happening in India, but there's also other countries that are fluctuating and things are happening there as well. India is a large country. There are regions that have portions regulated when it comes to sports. There's a desire in some regions to regulate. Now there are suggestions on a sort of federal level to take a few steps towards blocking online gaming. These type of movements we often see, when there is talks and happenings about regulation, it opens up for different routes forward. It could go into regulation, it could settle down or it could go to somewhere else. We can't speculate on that. We just see that it's affecting us to a certain level right now. North America, I think that you asked about Sweepstakes, and Sweepstakes is -- we provide to the Sweepstakes market, where there are no regulatory problems or any legal problems. And we are very lean. We talked to regulators. And if there would be a letter or someone, a regulator or an authority stating, don't do it here, we would immediately go away. U.S. had the history of river boats that, from the beginning, travel on the river, down to only shore and they have to have the engine running and then they didn't have them, and then it was [indiscernible]. These type of movements have been -- prediction gaming could be one of these. But these type of movements have been there. And we want to supply to them as long as there is no regulatory or authorities saying no. So we did that. In the case of California, it's a state attorney in Los Angeles that made a personal lawsuit, and that's okay. And immediately when that happen, we withdraw from that. So that we -- okay, if that's what you want, then we will withdraw from that. So that's the Sweepstakes situation. Capital allocation, I don't want to comment on that. It's, in the end of the day, an AGM decision and a Board proposal. We are acting on the capital allocation that we have. And you also have the capital policy that we published last year, and I'm sure that the Board will continue following that. Operator: The next question comes from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, on Asia cyber attacks, so yes, we are seeing that. It sort of continues to be a drag on your performance. But do you see any risk of spreading these cyber attacks to your other markets like Latin America, where black market continues to be big? And then in Europe, can you just give us a sense that between Live and RNG, which have been the key drivers of your European growth on a sequential basis, and any sort of steer on how do you expect European revenues to grow from here? Martin Carlesund: The protection measures that we add to our core is valid for the whole core, meaning supply to all parts of the world. So one of the upsides in doing what we're doing now with advanced technology and AI and everything is that it also protects our core in other markets and all over the world. So I would almost say that it becomes a competitive advantage where we increase the gap to competition. And eventually, we make it so hard to steal our products. So if you want to steal the product, you have to go to someone else. So it's protecting everything. So any measure we take in Asia will be accommodated in all of the core. So that's that. And when it comes to the split in the growth, I mean, we're doing very well right now, momentarily very well, maybe not even showing in the figures in the right way. But when it comes to RNG, we're happy with the development. Nolimit City is delivering great games. And of course, it's contributing in a good way to the total revenue in Europe. Now it's still a smaller part. So Live is the big part. So don't forget that. I mean, it doesn't matter if it does tremendously well. It doesn't affect the figures that much. Operator: The next question comes from Monique Pollard from Citi. Monique Pollard: Three from me, if I can, as well. The first was just on the regulated revenue increase we saw in the quarter. And you talk about the sort of direction of travel. Just trying to understand whether that increase in the regulated revenues is driven by the fact that North America and regulated territories performing better than Asia or whether there were some new markets that regulated in the quarter that also added to that progression? The second question was just on the U.K. Gambling Commission review. You mentioned in the presentation that there's no new news, but also in the report, you say you're expecting a conclusion by the end of the year. So I just wondered what gives you confidence in that time line of end of year, please? And then the final question is in relation to the news we had a couple of days ago on Playtech Black Cube. I appreciate you don't want to get into the details of the types of damages being sought, et cetera. But it would be really helpful if you could give us some indication of how you look to assess the damages. So is the starting point for assessing damages based on market cap movement on the day that these bits of news became public? Or are there other sort of processes you use when you're thinking about the damages that have been caused by these reports? Martin Carlesund: The regulatory percentage, 46% in the quarter, good development. We're moving in that direction. That's nice. That comes out of, of course, that the regulated markets are outperforming the nonregulated, and it's affected, of course, by the situation in Asia. So more and more gets to be regulated. And I might remind you that as soon as it tips over to 50% and if the revenue grows equally, it will continue to increase more and more. So we're in a good position with that. When it comes to the U.K. Gaming Commission time line, unfortunately, I don't have any other information than what -- it's in the hands of the regulator, and we have been -- our estimation is that it will be by the end of this year. I have no further information. That's what it is. For me, when it comes to the Playtech situation, I mean -- I will say about the same things all over again, but -- when someone behaves in that way, [ hypes ] in -- during 4 years doing this type of action with that type of company that the Black Cube using, Juda as a PR company, it takes a bit away from my belief in humanity and fair play and in ethics and moral. Exactly how we will assess the damages, that's a later question, but it's a severe amount. Operator: The next question comes from Adrien de Saint Hilaire from Bank of America. Adrien de Saint Hilaire: So first of all, on Asia, again, it's been a volatile region now for a while. I'm just curious, high level, if there is a point where you might draw a line in your commitment towards that region and refocus towards other markets? Secondly, you touched on this, but cost of employee was down quarter-on-quarter. Can you explain a bit what's going on there and the sustainability of that? And then, sorry, this is a bit like technical perhaps, but there's been quite a switch between current liabilities and other noncurrent liabilities in the quarter. Can you explain a bit what's going on there, please? Martin Carlesund: Okay. I will start with the first 2, and then I will, with warmth, hand over the last one to Joakim. So we look forward and we are engaged, and we actually think it's intriguing, even if it's tough, to find a solution to protect our product in Asia. But I think it will become more and more important also for other markets if we look in a longer time perspective. So we don't have any line that we will draw against Asia. We'll continue to fight that. And as I stated before, it's not about money. It's not a cost that is the problem. It's to find real good solutions on the level for that. When it comes to cost per employee and the cost base, we have talked about all since actually July 2024, where we have the strike in Georgia in that situation and the cost mix and we had to shift a little bit. So we had an unfavorable cost mix. Now we're starting to be able to shift that, which is what we have talked about during the quarters that we need to have a better and favorable cost mix. It's not like we're cutting delivery right now. It's -- we are putting the delivery in the studios, which are good. So that's the reason why we come to that. And then I will hand over to you, Joakim. Joakim Andersson: Of course, the balance sheet question. It's simply a reclassification of earn-out bilities that we have moved from long -- being long term to short term in this quarter as they indeed are shorter than a year. I think that's the one that you are referring to. Well spotted, by the way. Operator: The next question comes from Raymond Ke from Nordea. Raymond Ke: A couple of questions from me. I'll take them one by one, starting with no surprise maybe at Asia as well. Compared to, say, Q2, how much of the decline here that we saw in Q3, which is due to cyber attacks, and how much is from regulations and changes in geographies like Philippines and India, would you estimate? Martin Carlesund: I don't split that out. There are sort of 3 components in the situation. One is cyber attacks, and the cyber attacks is, of course, the constant level of it, but also our action that was a little bit too tough and then we had to retract. And then there is unstability in the region when it comes to regulatory situation. And here, we point out India and Philippines as 2 of those, but there are also others. So unfortunately, I don't want to go into exactly where in detail, and it's also very hard to see that. Raymond Ke: Got it. And then regarding sort of the regulatory situation in not just Philippines and India, I understand it. But how many months of impact would you estimate that we have seen here in Q3? If we compare it sort of to ring fencing back in Q1, do we have the full effect? How much should we expect ahead? It would be really helpful to understand. Martin Carlesund: No, I understand. I assume that you're talking about Asia, right? Raymond Ke: Yes, that's right. Martin Carlesund: So I think that there is a difference between the situation in Europe and Asia, so to speak, but the ring fencing has a little bit of a tail. I think that in Asia, the situation is more momentarily, okay, this is where we are right now, and we need to take it from there. And then we need to see that we do the right things in the coming quarter and see to find the balance. Raymond Ke: Got it. And then on North America, your sequential sales growth was flat here in Q3. You had momentum going into Q2 where it added EUR 2 million on top line. How much of the trend here in Q3 would you say is due to withdrawing from California stake? Is it the majority here? Or is there other explanations? Martin Carlesund: I wouldn't say that, that affects significantly. Raymond Ke: And finally, just one more, if I may. Could you maybe help us get a better understanding of how you intend to reach your margin target with the revenue we see here in Q2? How much should come from, say, revenue growth? How much should come from additional cost savings? Is it sort of equal, equal? Or how should we think about that? Joakim Andersson: No. If I jump in and take that. I mean in Q3, clearly, we are within, right? It has a separate quarter, 66.4% this quarter. And also, as we said, year-to-date, 66.0%. So if we just repeat what we now delivered in Q3, we are there, right? So it doesn't take a lot to make it for the full year, and we are quite confident that we will make it for the full year. Operator: The next question comes from Rasmus Engberg from Kepler Cheuvreux. Rasmus Engberg: Cheuvreux that is. Do you anticipate that India could potentially have an impact also in the fourth quarter? So that's the first question. Martin Carlesund: I can't comment on that. I don't -- I look at Asia right now, and I'm cautious when I make any predictions due to the situation that it's so volatile. Rasmus Engberg: Fair enough. Can you explain the next step in your legal battle with regards to Playtech? What happens next? And could you also perhaps give us an indication of what the run rate of costs that you're incurring, if possible? Martin Carlesund: The first question I can answer. It's like -- the thing that happened this week is actually a non -- it's not an action that affects Evolution in any way. When we initiated the litigation, it was with a fake name, [ Joe Roe ], and that was Playtech, but we just didn't know that it was Playtech. So right now, that is just exchanged for Playtech because we finally got the name. So that's what happened. That's -- and then we gave you, to the market, all the information we had relating to that, and that's it. So from our perspective, and the next thing is that there are a number of depositions and potential information that should be shared, and the legal process will continue just like it had been. When it is -- when it relates to the cost, it's naturally very expensive to do this type of exercises. We do it to protect the shareholders. We do the value for the shareholders. We do to protect the company. We think it's unfair. It's unheard of. It's a behavior that we just don't understand. Now we won't split it out right now, maybe in the future to come, we will look into it. But right now, we don't comment on the exact cost. Operator: The next question comes from Jack Cummings from Berenberg. Jack Cummings: Two questions, please. The first is just on the ring fencing in Europe. Is there any more that you still have to do? Or is all of the European ring fencing now completed? And then just on my second question, I appreciate it's a little bit early than when you normally talk about full year '26. Based upon your comments on cost shift and cost mix, would you expect to see EBITDA margins expand in full year '26 or full year '25? Martin Carlesund: When I look at ring fencing, I think that we are in a very good position right now in Europe. Things can happen in both directions, but I don't know any other actions that are ahead of us right now. When it comes to EBITDA margin, we have full focus on 2025 to deliver the 66% to 68%. And we look forward to do that. And then I assume somewhere on a release to Q1 report -- the Q4 report, sorry for that, I'm a little bit ahead of the curve, then we will guide you for 2026. [indiscernible] is positive. Operator: The next question comes from Karan Puri from JPMorgan. Karan Puri: Most of my questions are actually answered. Just one on Europe, I guess, wondering how should we be thinking about a more normalized growth profile in '26 onwards once you sort of lapped the ring fencing adjustments. If you could share a bit on that, would be great. Martin Carlesund: The answer to that -- I don't guide on the future, but historically, over the time, Europe is the most mature market, and we had a pace of growing 9%, 10%, quite consistently over a number of years. That's the best knowledge we have of the situation. And right now, we are ring-fenced, and we are starting to see a little bit of growth from that. Operator: The next question comes from Andrew Tam from Rothschild & Co Redburn. Andrew Tam: Just one question from me. Can I just clarify just your position on India. You talk about the regulatory volatility there. I just wanted to just fully understand what that means. Obviously, you've seen in recent weeks, one of your largest customers globally, decide to exit that market entirely with the real money gambling band. Are you saying that, that is a market that you would look to ring fence as well, should you get some more regulatory clarity going the other way against you? Martin Carlesund: Ring fencing has to be done in relation to regulation and what is there. We are watching it closely right now, and there are volatility in India, as you understand. At the time, if there would be a ring fencing, that will be later down the road. Andrew Tam: Okay. So no plans to ring fence in future in India? Martin Carlesund: We're watching it carefully right now and see what will be there. Operator: The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: Yes, I just had a follow-up question on RNG, actually because I saw that you had growth improvement there. And could you just say, is it because Nolimit City has a strong edge in the market? Or do you see the market for RNG has improved? Martin Carlesund: We are doing better and better, slowly, bit by bit when it comes to our RNG offering. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Martin Carlesund: Thank you very much for participating, listening to us. I really look forward to seeing you in a quarter. Thank you.
Maria Caneman: Good morning, and thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank. Welcome to our third quarter results presentation. With me today is our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with the presentation, and then there will be an opportunity to ask questions. Jens, I hand over to you. Jens Henriksson: Thank you, Maria. Swedbank has once again delivered a strong result in uncertain times. The geopolitical situation, continued uncertainty about tariffs and trade and the increasing concerns about weak public finances across the world are slowing down global growth. Twice a year, the world's economic policy decision-makers meet at the IMF. The starting point for their discussions is the world economic outlook, which was published a week ago with the headline, "Global economy in flux, prospects remain dim." With that said, our four home markets have healthy fundamentals, strong public finances, low government debt, innovative companies, profitable banks and low interest rates. In Sweden, we see signs of improvement. Our economists forecast growth of 2% next year, while the Swedish government is more optimistic and projects 3%. In Estonia, economic development is still subdued, and we are seeing some recovery in Latvia and the development in Lithuania continues to be strong. In these uncertain times, Swedbank stands strong and is well positioned for sustainable growth and profitability. We can today report a return on equity of 16% and earnings per share of SEK 7.53 for the third quarter. During the quarter, income increased while cost decreased. Our cost-to-income ratio was 0.35. Strict cost control is producing results. We have a conservative and thorough lending process and, during the quarter, we saw credit impairment reversals. We have a robust ability to generate capital, and we have a very strong capital and liquidity position. During the quarter, Standard & Poor's upgraded Swedbank's credit rating. In their decision, they highlight the bank's improved governance, regulatory compliance and risk management. Furthermore, during the quarter, the U.S. authority, SEC, ended its investigation into the bank's historical shortcomings without enforcement. We are delivering according to our plan, Swedbank 15/27. And as you know, it focuses on three areas: strengthen customer interactions, grow volumes and increase efficiency. Our customer focus is producing results. We have further improved our availability during the quarter, and now 70% of incoming calls in Sweden are answered within 3 minutes, and we are thereby getting closer to our target of at least 80%. We consistently work to improve our digital offerings, and we see that more and more customers do their everyday banking through our app or the Internet bank. We have also increased our efficiency. Our employees can spend more time meeting customers and less time on administration using new AI tools, and the number of advisory sessions per employee has increased. During the quarter, we lowered mortgage rates due to lower policy and market rates. Mortgage loans increased by SEK 5.2 billion, and mortgages in Sweden distributed through our own channels accounted for SEK 4.2 billion. Deposits from private customers are stable, and we continue to be close to our customers and give them advice. Strengthening their financial health is an important task for the bank. Savings and pensions continued to develop positively. Swedbank Robur saw a net inflow of SEK 9 billion in our four home markets. As announced in August, we want to acquire the remaining part of Entercard, thereby, Swedbank will have the largest card business in the Nordic-Baltic region. This will develop our business and strengthen our customer offering. In Lithuania, the business climate remains strong. In Sweden, Estonia and Latvia, economic activity is improving, but from low levels. During the quarter, corporate lending increased by SEK 7 billion. Our customers are showing a high demand for sustainable investments. 36% of the bonds arranged by Swedbank during the quarter were classified as sustainable, and our Sustainable Asset Register has now surpassed SEK 150 billion. We now own 20% of the investment bank, SB1 Markets. And during the quarter, they started up in Sweden. It's an important step in further developing our offering to corporate customers. In addition, our customers will get access to an expanded range of equity research. In the Baltic market, we launched the card payment feature, Click to Pay, a secure and convenient service that simplify payments. Jon, it's your turn now to deep dive into the financials. Jon Lidefelt: Thank you, Jens. We delivered a strong result in the third quarter with volume growth across markets and increasing income. We have continued our work with focus on long-term shareholder value through business growth and cost efficiency. Cost-to-income ratio was 35% and return on equity, 16%. Lending volumes grew in the quarter and the increase came mainly from Baltic Banking, where we continue to see solid growth on both the private and corporate side. Mortgage volumes in Sweden sold through our own channels increased by SEK 4.2 billion, while the savings banks reduced their mortgage volumes on our balance sheet by SEK 1.6 billion. We see continued result of our increased efforts on customer interactions and availability as we're capturing a larger share of the market. In August, our front book market share through owned channels was 16.4%, still below the back book market share of 17.8%, but the development continued in the right direction. Also for the corporate business in Sweden, the positive development continued with increasing volumes, though somewhat offset by repayments related to a couple of larger exposures. Customer deposit volumes were stable in the quarter. In Sweden, private deposits decreased somewhat from a high level as the second quarter was impacted by seasonal inflow of tax returns. In Baltic Banking, deposit volumes were overall stable. Net interest income decreased by 0.9% compared to the previous quarter, driven mainly by lower mortgage rates. Lower deposit rates impacted NII in Q3 with a full quarter effect, while lower rates on the lending side were gradually rolled in during the quarter. Higher business volumes had a positive impact of SEK 94 million in the quarter. Wholesale funding costs continued to decrease in the quarter. Liquidity was, however, reallocated from the markets business increasing liability volumes, but also positively impacted Central Bank placements. and, hence, had an overall neutral NII effect. Day count and FX effects impacted NII positively in the quarter. The Swedish Central Bank cut policy rates effective as of the 1st of October and ECB cut rates effectively as of the 11th of June. Hence, there are further repricing dynamics in play. Reminding you that the positive effect on the funding side materialized ahead of the negative effect on the asset side, furthermore, that it takes approximately 3 months in Sweden for a rate cut to roll in and 6 months in the Baltics. We will continue with our pricing strategy on both sides of the balance sheet and maintain focus on the balance between volumes and long-term profitability. Net commission income increased in the quarter, driven mainly by strong asset management commissions. Mutual funds had a net inflow of SEK 9 billion and combined with the positive stock market performance, increased asset under management to SEK 2,471 billion. Card commissions were seasonally higher in the quarter following higher spending abroad during the summer months, while brokerage and corporate finance commissions were seasonally lower. In addition, we saw positive development in commissions from insurance products. Net gains and losses remained at a high level in the quarter and amounted to SEK 847 million. Income was strong, driven by high business activity, mainly within fixed income. Positive revaluations supported the treasury result. Other income increased by 2.7%. Net insurance decreased driven by both normalized levels of claims compared to the low levels we saw in the second quarter and the effects from revaluations of future cash flows. One-off transfer, in connection with the establishment of SB1 Markets on the 1st of September, also contributed. The results from partly owned companies supported as well as increased income from services to the savings banks. As a reminder, our collaboration with the savings banks include cost sharing for IT development and administrative services. The savings banks' share of the cost is included in Swedbank's total cost, and you can see the corresponding income as services to the savings banks here under other income. Total expenses were 1.4% lower. Fewer employees, together with seasonally lower staff costs, IT maintenance and consultancy costs contributed. As announced in conjunction to the Q2 presentation, a VAT recovery of SEK 197 million related to the year 2016 was received in the beginning of the third quarter. In line with previous patterns, costs will be seasonally higher towards the end of the year. Costs for the full year 2025 is expected to be around SEK 25.3 billion at current exchange rates. This includes the already received VAT recoveries related to the year 2016, '17 and '18 amounting to SEK 576 million. It also includes SEK 200 million lower temporary investments this year and an estimated SEK 300 million lower costs due to FX. Asset quality is solid. During the quarter, there were reversals of credit impairments amounting to SEK 398 million, which corresponds to an impairment ratio of minus 8 basis points. The reversals are mainly driven by improved macro scenarios, and we have continued to reduce the post-model adjustment, which now stand at SEK 364 million. Individual assessments resulted in a SEK 568 million increase, driven by a few larger corporate exposures. At the same time, repayments and reversals of previously written-off exposures resulted in a release of SEK 451 million. I feel comfortable with our strict origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was stable at 19.7%. In the 2025 SREP, our Pillar 2 requirement was lowered by 40 basis points, and our CET1 capital requirement now stands at 14.8%, meaning we have a buffer of around 480 basis points above the requirement. The reduction by the Swedish FSA stems from two parts. Firstly, 20 basis points are related to the new CRR3 risk weights for standardized credit risks. This has an impact on the Pillar 2 add-on that we shall hold until the new Swedish IRB models are approved. Thereby, approximately 20 basis points of the expected capital relief of at least 50 basis points from the new IRB models has now materialized. We continue to expect most of the remaining impact from the IRB model updates to materialize during next year. The Swedish FSA also approved parts of our nonmaturing deposit model, resulting in 20 basis points lower capital requirement for interest rate risk in the banking book. To conclude, we continue to focus on growth and efficiency. We deliver strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. Back to you, Jens. Jens Henriksson: So let me now sum up the quarter. Swedbank once again delivered a strong result in uncertain times. Income increased, cost decreased, and we saw credit impairment reversals. Return on equity for the third quarter amounts to 16%, cost-to-income to 0.35. Our credit quality is solid and our capital buffer is very strong at 4.8 percentage points. Swedbank is well positioned for continued sustainable growth and profitability, and we continue to deliver according to our plan, Swedbank 15/27, with a focus on strengthening customer interactions, growing volumes and increasing efficiency. We create value for our customers and our shareholders, and our customers' future is our focus. With that said, back to you, Maria. Maria Caneman: Thank you both very much. We will now begin the Q&A session. A kind reminder to please limit yourself to two questions per turn. Operator, please go ahead. Operator: [Operator Instructions] We have the first question from Martin Ekstedt, Handelsbanken. Martin Ekstedt: Can you hear me? Jens Henriksson: Yes, we can. Martin Ekstedt: Excellent. So could you just give us a bit more on the SB1 Markets initiative? You mentioned it launched in Sweden in the quarter. Is it now fully staffed up on the Swedish side? And are all the business lines up and running? That's the first one. Jens Henriksson: To be honest, I don't know if it's really fully staffed up. A lot of persons have gone over and I think they're doing some great jobs. So I think they're fully running. And the key point is that this is a partnership that offer our corporate customers a strength and offer through access to a larger set of investment banking services and sector expertise. And both corporate and private customers can also benefit from access to a broader range of equity research. So this is great. Martin Ekstedt: Okay, okay. And then second question, if I may then. I'm looking at your NII sensitivity on Page 20 of the presentation deck. So in the past, the NII elasticity, so to speak, or rate shifts have been balanced around plus/minus side. But your calculation example is now tilted towards seeing a larger impact if rates come down than if they go up. And I just wanted to confirm, this is due to some deposit rates now having reached 0 and therefore, are not able -- at least commercially able to go any lower, right, i.e., it's the floor of 0% rates that you mentioned on the page coming into effect. Is that correct? Jon Lidefelt: You're perfectly correct, Martin. That is the reason. Operator: The next question from Magnus Andersson, ABG. Magnus Andersson: My first question is how you view the prospects of potentially being able to increase the thin household mortgage margins in Sweden now that short-term rates are no longer expected to fall? And related to that, what market growth rate you think is necessary for this household mortgage margin pressure to ease? And secondly, just how -- you have lending growth now 4% quarter-on-quarter in the Baltics FX adjusted. How you view the sustainability of lending growth in the Baltics now that the deleveraging that's been going on for nearly 20 years finally seems to be over? And related to that, how you tame the inflationary tendencies, the impact on the cost base there? Jens Henriksson: Thank you for that. Two good questions. First one is, let me say a few words of the overall situation in the mortgage market, and reminding you that we are the market leader in all four home markets. And first, just me repeat that in the Baltics, we see continued strong growth in mortgage volumes. In Sweden, we've seen that the housing market remains muted, although we see some gradual increasing mortgage market growth during 2025 and you see that we're now picking up some momentum. And the reason for that is that we are more active. We have shorter waiting times and quicker to resolve questions. There is a strong competition out there, and we want to grow. And when that competition abates, we do not know. I don't think the competition will go down. I think it will be continued competition there. Then when you move over to the Baltics, we have seen quite a large volume growth in that. Reminding you that these are steady and stable economies, and we now expect Estonia and Latvia to pick off as well, while Lithuania has been doing very good. Magnus Andersson: Okay. So are you saying that you think the household mortgage margins we have in Sweden currently are here to stay? My question was whether you think there will be a potential to increase them going forward and what the trigger would be able to drive how you would be able to achieve that. Because I think it's a concern to all of us. Jens Henriksson: Well, I won't do any forecast on that. There is a tough competition. But I think when you see higher volumes, I think that we can grow in that environment. Magnus Andersson: Okay. And the inflationary impact on costs, in the Baltics? Jon Lidefelt: Magnus, I think as we've talked about before, I mean, in the Baltic Banking, we have lived with higher inflation for many, many years, even before the inflationary shock. So that is something that we are constantly working with to make sure that we can increase our efficiency to mitigate that. If you look at the societies as a whole, then I mean, our concern, as we have been talking about, generally, it's very stable and healthy. But of course, if the salary inflation continues, then that will eventually lead to a problem since it's going to be hard to pick up on the productivity in line with the current salary levels', increased levels. Operator: The next question from Andreas Hakansson, SEB. Andreas Hakansson: So first question on costs. You mentioned the three VAT refunds you had during this year. Could you tell us how many years have we got outstanding? And just to confirm that you don't assume one of those reversals to appear in the fourth quarter. Jon Lidefelt: You're correct. We have assumed no VAT recovery in the SEK 25.3 billion guidance that I gave you. If that will come, it will come as a one-off extraordinary thing that we will not take into account when we run our ordinary business. So no further VAT in the SEK 25.3 billion. We have, as I think I mentioned in the previous quarterly presentation, requested VAT return recovery for year 2019 up until 2023. It's in the hands of the tax authorities, and I have no visibility in the numbers, and we'll not speculate if and when we would get anything more back there. Andreas Hakansson: Are the cases similar? Or I mean, it seems like you won three cases. So are the other cases different? Or wouldn't the outcome be likely to be the same or... Jon Lidefelt: Sorry, I said '19 to '23. I should have said '19 to '24. But it depends a lot on the interest rate levels since this is sort of depending on the turnover that we have in the parts of our business that is non-VAT related and the one that there is VAT, i.e., mainly the leasing business. So it depends a lot on the interest rate levels for the years, and that's why I don't want to speculate in any numbers or if we would get it back before we have the answer from the tax authorities. Andreas Hakansson: All right. That's fine. Then on the Baltic NII, I mean, you talked about the 6 months' time lag. But could you just confirm that when you talk about that NII should trough 6 months after the loss rate cut, that's with a static balance sheet. And we saw already that NII grew Q3 with Q2 on the back of very strong volume. So if volumes continue at the current pace and, if anything, it seems to be picking up. Is there any reason why the NII shouldn't continue to grow even though you have that underlying pressure driven by interest rates? Jon Lidefelt: First of all, yes, you're correct. When I talk about the 3 and 6 months, then I mean the same margins, the same volumes, and then you'll have to make your own assumptions on that as well as some further central bank rate cuts. When it comes to the NII development in the Baltics, it's impacted by FX in this quarter. So underlying, the NII in the Baltics is stable quarter-over-quarter. Andreas Hakansson: With 3% volume growth, right? So those are the two components there, margin pressure and the volume growth. That's up to 0 in this quarter. Jon Lidefelt: Yes. Operator: The next question is from Gulnara Saitkulova, Morgan Stanley. Gulnara Saitkulova: So on capital, given your solid capital buffer, could you remind us of your latest thinking on how to deploy the excess capital between ordinary dividends, special dividends, buybacks or potential M&A? And how should we think about your approach to excess capital in a theoretical scenario where the AML resolution is still delayed by several years? Would you still aim to be around the midpoint of your targeted management buffer range? Or would you adopt a more cautious stance in that case? And if you were to pursue M&A opportunities, which areas or markets would be of the greatest strategic interest for you for potential acquisitions? Jens Henriksson: Well, thank you for that question. Let me be very short here. And that is that we have a capital buffer range between 100 and 300 basis points. In our 15/27 plan, we target the middle of it, i.e., 200 basis points. We now have a buffer of 480 basis points with a dividend policy of 60% to 70%. And the timing of further capital release continues to be a judgment call depending on the many uncertainties, where the long-running U.S. investigations is the largest one. And we have no intention to hold more capital than necessary. When you look into M&A activity, reminding you that we've had seen quite a lot of M&A activity during the last quarter. We want to acquire Stabelo. We want to acquire the remaining part of Entercard, and both those two are still subject to approvals. And then we've gone into SB1 Markets, which was the first question. As a CEO, I always need to look out for new opportunities. Operator: The next question is from Markus Sandgren, Kepler. Markus Sandgren: I was just going to follow up on Gulnara's question when it comes to Entercard. Can you just give some more flavor of your thinking about the acquisition? And what do you think or what's your planning in terms of asset quality for that company? Jens Henriksson: Well, straightforward, we've had a business cooperation with Barclays, and we own roughly 50-50 each. And they wanted to sell it, and we wanted to acquire it. It's that simple. And the reason we want to do that is that we want to become the largest card business in the Nordic-Baltic region with scale benefits and, of course, benefits also from increased efficiency. And I think Jon will get back later when we have more information when that's fulfilled and tell you the effects on the bank at large. What we will do is we'll do a strategic overview. And when we look on Entercard, we've seen that we think that the risk level is a bit too high, and we wanted to reduce it a bit more to a more appropriate level for Swedbank. Markus Sandgren: And what does that reduction mean? Is it getting rid of loans? Or how do you plan to do it? Jens Henriksson: We -- let us get back to that when hopefully, this goes through all the sort of processes. Operator: The next question from Shrey Srivastava, Citi. Shrey Srivastava: It's actually on the 20 basis points benefit to your sort of capital requirements that you've got from being able to model the contractual maturity of nonmaturing deposits. My question is twofold. The first is, is this all we can expect to see in terms of benefit? And secondly, does this open up the possibility of you sort of investing these nonmaturing deposits in potentially sort of high-yielding, long-dated assets going forward? Jon Lidefelt: Thank you, Shrey. First of all, we have gotten a partial approval for our modeling of nonmaturing deposits. So all things equal, if we would get the full approval, that would be a little bit more to come. When it comes to our NII -- or sorry, non-NMD hedging, I have said in previous quarters on questions from you and your colleagues that we have had some hedges. It's been an important tool for us to have in the toolbox. So we wanted to test it and try it out. But it is and has been immaterial from an NII perspective so that you can discard the impact of the hedges that we have in place when you forecast our NII. The approval that we have gotten, it still means, to make it simple, that our liability side is still shorter than our asset side. So if we would add further hedges to prolong our asset side, which is what we want to do in order to smoothen out NII when the timing is right, it would still mean that our capital for IRRBB, our Pillar 2 charge, will go up even with this approval. It might go up a bit smaller than before, but there still will be an increase. We will come back should we do more or should our hedges be material to make sure that we are transparent should that be in the future. Shrey Srivastava: And a very brief follow-up. You said you received partial approval. Should you receive full approval, what sort of capital benefit can we expect there? Jon Lidefelt: Unfortunately, as long as the Swedish FSA do not change their view on this, even a full approval will lead to the same thing, that if we prolong our asset side, our capital charge will still go up. There is a difference between the Swedish FSA's view and the view that banks under ECB supervision have. They can do this hedging much more efficiently than we can do. Shrey Srivastava: And a final one for me. Have you noticed a sort of softening of the Swedish FSA's view? Because it seems sort of that way, looking at the partial approval you received. Or is that inaccurate? Jon Lidefelt: No, I have not. Operator: The next question from Namita Samtani, Barclays. Namita Samtani: My first one, I just wondered what measures you're taking in the Baltics to bulletproof your ROE of above 20%. I saw an announcement that Revolut is now offering mortgage loans or something similar to that in Lithuania. And in time, that will probably become a full offering. And clearly, the deposit rates they offer better than banks. So what initiatives is Swedbank taking to protect itself from competitive threats? And then secondly, I appreciate the 2025 updated cost guidance. But we're almost through 2025. Could you please qualitatively talk us through the main moving parts of costs going forward or what we should think about going into 2026? Jens Henriksson: Well, the key thing about Estonia, Latvia, Lithuania, these are growing economies, and when compared to Sweden, they will grow with, let's say, 1%, 1.5% more. So it's a very attractive market. And it's also a market that doesn't have the same financial inclusion as there is in Sweden. So that means that we see many possibilities. And I think we went through very much this when we had Swedbank 15/27. In the end, it's about being close to our customers. We are the most loved brand in the Baltic region for the seventh year in a row. We want to grow volumes, continue to grow with the countries. We want to increase financial inclusion. We want to be -- have more customer interactions and want to make sure that we keep costs contained and work in an efficient way. So in that sense, it's not different from the other markets. Is the competition tough? Yes, it is tough. Will it be tougher? Yes. But that's life. Keep on and be close to your customers. Do you want to say a few things about the costs? Jon Lidefelt: I think your question was about 2026 costs, and we will come back in conjunction to the Q4 presentation on that. But principally, we tried to explain how we work with cost efficiency with the headwind and investment and so forth when we had the 15/25 presentation. But more details, I'll come back with when we present the Q4 results. Operator: The next question is from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just quick two questions, please. First, on costs. I mean you had quite impressive, good cost control here with cost/income really at very low levels. I just questioning the strategy of sustained hiring freeze, which -- how long that you can be sustained and especially in the context of potentially a recovery of growth. But also, we just had a call with one of your competitors and the approach is this hiring freeze or control could be sustained as long as we invest in AI and technology and be able to question each time, can we replace or hire or invest in some technologies that would be more cost efficient? Where are you in this thinking and these investments in AI and technology? And the second question is on the U.S. on money laundering litigation. I mean I've been following those with the German, French banks and so on in the past with the OFAC. How the conclusion from the SEC, you think are correlated to what would come for DOJ? Or is it -- because usually it's bundled within one decision. How do you read that? Are you more optimistic about the outcome? Jens Henriksson: Well, thank you. Two important questions. The first one when it comes to the personnel, we steer the bank on costs, not on FTEs. But what happened a year ago was that we saw that FTEs increased too much due to change of churn. And what we did then was that we implemented an external hiring freeze but sort of possibility for people to make exceptions. I gave quite a few exceptions but it worked. And then last quarter, we decided to take that away. And we now have a process where Jon take that sort of those kind of decisions together with the Head of HR. So we do not have a hiring freeze anymore. That's the first thing to say. The other thing is to say that we see quite a lot of use of AI. We work it both on the individual level and on a structure level. We work with AI for a very long time. And what we want to do is we want to decrease administration so that we can see more time with our customers. So to give you an example is that right now, we are seeing that the waiting lines or sort of the time waiting, if you call into a Swedish customer center, it's much shorter than before. So we've reached 70% of the call answered within 3 minutes. Why? New technology. And then we can use call summary, so that means you can have more time to meet the customers rather to do the administration, and we can do more things like that. When it comes to the U.S. investigation, first thing to say is that when it came to OFAC, that was closed quite a while ago. And as I said in my introduction, during the quarter, SEC decided to close their investigation without any further actions. That said, still have two other investigations by U.S. authorities. And now I need to sort of repeat myself. But I've told you many times when I was new as CEO, I met and called around and talked with colleagues that have been in similar circumstances. And they told me that a process like this usually takes 3 to 5 years. Now more than 6 years have passed, but the time line is fully owned by the U.S. authorities. I can just repeat what I say, and that is I still do not know whether we will get any fines. And if we do get the fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process. And when something material happens, we'll continue to adhere to that principle. Thank you. Operator: The next question is from Nicolas McBeath, DNB Carnegie. Nicolas McBeath: I had a question on the deposit volumes. So after the most recent rate cut in Sweden, your deposit rates on some of your most popular savings account like eSavings have been cut to 0. So I was wondering how are deposit volumes behaving on these accounts. Have you seen any increased tendency of withdrawals since the rates were introduced, either to your own Swedbank players or migrations to competitors' deposits with above 0 rates? That's my first question. Jon Lidefelt: Well, thank you, Nicolas. The volume or the mix has been stable in that sense. So we have not seen any mix shift. And over time, the deposit beta has been around 1 on accounts with interest rate and where the sort of distance to 0 has been enough to reduce it. So then as we have talked about before, sometimes, we have for business reasons, taking a little bit of time lag between doing different rate changes. But over time, it has been one, and we have not seen mix shifts lately. Nicolas McBeath: All right. And then I had a question on levies for next year. What's your expectation there? And could you confirm whether the cost for interest-free deposits at Riksbank, will those be taken on the levies line or reduced NII? Jens Henriksson: Well, let me start with saying that if you see overall loan demand in Sweden from both corporate and private customers is subdued. In the Baltic, demand is stronger. And just to be blunt here, but we have an appetite for healthy loan growth while sticking to our conservative lending standards and focusing on profitability. You want to follow up, Jon? Jon Lidefelt: On your question on the Swedish Riksbank, we will have to deposit SEK 6 billion for which we will not get an interest rate for now for 9 months, I think it is. I think the jury is still somewhat out on exactly how to account for that. But my assumption or belief is that, yes, it will be under the bank tax row. And then the discussion is will it be a one-off now in Q4 or will it be spread out for the period? But most likely under the bank tax rule. Yes, I think that was the answer, right? Nicolas McBeath: Yes. And then just also if you could comment what your expectations for bank taxes are for 2026? Jens Henriksson: Bank taxes, don't get me started. But let me say a few words. And then as always, I want you to remind you that banks are an important part of our societies. What we do is we channel our customers' hard-earned deposits to lending, thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. And we are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector-specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system and an investment climate that fosters growth, financial stability and sustainable transformation. With that said, I need to say that. Then let me do a quick tour across our four home markets. First, Estonia, general corporate taxes are increasing as we see, but there is a political debate on that. In Lithuania, corporate taxes are also up. And then remind you that on top of this, since 2020, there is a 5% extra tax on banks, and the extra investor tax on NII further on top will be phased out during the year. In Latvia, we will have 3 years with a similar investor tax. There are some discussions on excluding new lending from the tax. If that would materialize, it would be positive for the Latvian economy. In Sweden, the government has proposed a base deduction to the bank tax while delivering the same tax revenues. And the tax rate is therefore proposed to be raised from 6 to 7 basis points in 2026. And now there is a government inquiry of some kind that will look into the specifics. And then as Jon talked about, let's call it what it is, it's another tax on the banking system, is that the Riksbank has decided that credit institutions from the end of October this year will need to place an interest-free deposit with them. And as Jon said, it amounts to around SEK 6 billion that will earn 0 interest. Operator: The next question from Sofie Peterzens, Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. So my first question would be on net interest income. When do you expect net interest income to trough? One of your competitors this morning said that it will be 3 to 6 months after the last rate cut? Do you think that's kind of fair? Or do you have a different view to this? And then my second question would be on the VAT refund that you continue to get. It was SEK 197 million now in third quarter and SEK 174 million, sorry, in the previous quarter. Like when should we expect these VAT refunds to come to an end? Or should we expect still some VAT recoveries in 2026? Jon Lidefelt: Thank you, Sofie. If I start with the NII, then if we assume no further rate cuts, to make it a bit simple, then ECB did their last one. It was effective on the 11th of June; and the Swedish Riksbank, it was effective as of 1st of October. And then if you take 3 months roughly in Sweden and 6 months roughly in the Baltics, that means that around year-end these rate cuts will be priced in, and the first quarter next year then will be the first quarter where you have a full quarter effect. Then as I've said before, you'll have to add your own assumptions on potential further rate cuts from the central banks, volume growth and margin development. When it comes to the VAT, then I don't know. There is a discussion from the Swedish government to change the VAT legislation. And everything around the VAT recoveries is due to that there has been a clash between the Swedish VAT law and the European regulation around that. So I would expect in a couple of years that there will be a new Swedish law in place. I don't know how fast or when it will come or what it will mean. So I don't -- we don't know. We'll have to see what happens. But we have so far then asked back for '19 to '23. Now it's clear '23, I've been a bit back and forth on it. But '19 to '23, we have asked recoveries for. And then let's see for the years after how things play out. Operator: [Operator Instructions] The next question from Riccardo Rovere, Mediobanca. Riccardo Rovere: Just a quick follow-up, again, on NII. Do you think that the pickup in lending volumes in general, and also deposits could somehow offset the last leg of pricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics. It should be visible by the end of the year, the same volumes can offset that? Jens Henriksson: We lost you. But thank you, Riccardo. Riccardo Rovere: Can you hear me? Jens Henriksson: Okay. Sorry. Now we can. Do you want to... Riccardo Rovere: Can you hear me now? Jon Lidefelt: Yes. Jens Henriksson: Yes. We hear you. Okay, please repeat. Riccardo Rovere: Okay, fine. Just wondering whether you think the volume growth, deposits and loans could somehow offset the last legacy repricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics, so to say that the last cuts done should be visible by the end of the year because that is the margin part of the equation in NII. I was wondering whether the volume side of the equation can somehow offset it. Jon Lidefelt: Thank you, Riccardo. Yes, I mean you're perfectly right, but I do not sort of forecast the NII. So I can leave that to you to do your own assumptions on volume growth, margin development and so forth. But of course, there is an offsetting effect on this. I said that in this quarter, higher volumes has had a positive impact of SEK 94 million on the NII. So of course, growth do offset. But I'll leave you to do your own assumptions on how that will develop going further. Operator: This was the last question. I would like to turn the conference back over to Maria Caneman for any closing remarks. Jens Henriksson: Well, I'll take that, Maria, if it's okay with you. So thank you for calling in, and thank you for always asking tough and knowledgeable questions. I now look forward to meeting you and many of your colleagues in our dialogue on Swedbank. Thank you for calling in. Bye.
Operator: Welcome, everyone, to Telia Company's Q3 2025 Results Presentation. And with that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, Jen. Welcome, everyone, to the call. We have our CEO, Patrik Hofbauer; and our CFO, Eric Hageman, in the room, and I hand over the word to Patrik. Please go ahead. Patrik Hofbauer: Thank you, Erik, and good morning. Q3 was, in many ways, an important quarter as it confirms that we are doing the right things for our customers. Our group-wide NPS, so Net Promoter Score, continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI. And in both Finland and Norway, we had strong outcomes in the EPSI surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter. And as we talked about already 3 months ago, it was an eventful M&A quarter. The closing of TV and Media transaction strengthened our balance sheet further. In July, we also signed a memorandum of understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year-end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. And finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong CapEx discipline. And we are also now changing our full year outlook for booked CapEx from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights. Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was as expected, a bit below the ambition for the full year, but not too much, and with both Sweden and Finland continued to perform well. CapEx continued to be well below our SEK 14 billion limit. And even though we expect a seasonal pickup in Q4, we are already comfortable -- we are very comfortable, sorry, to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media divestment resulted in a lower leverage, and we ended the quarter at 1.93x. Moving now to Sweden that is performing well on customer metrics. We had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers. And in consumer, Telia again had the happiest customers among the mobile main brands and fellow came out well among sub-brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband and TV, as you can see here, the broadband intake stands out as it actually is a result of 2 good quarters rather than one since around 10,000 new customers in Q2 were registered in Q3. The late registration was related to our transition into a new system. In Enterprise, we signed a long-term partnership with Sweden's largest train operator, SJ, to deliver high-quality communication for the entire train fleet. Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2%, driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues, which is lumpier than subscription-based revenues. In Q4, we expect more project-based revenues than we had in Q3. And EBITDA growth was again strong on the back of profitable growth and cost savings driven by the Change Program. Let's now move east to Finland. That came out as the #1 in the EPSI's survey on customer satisfaction in both Consumer and Enterprise. This is promising and shows that we have good foundation in Finland to build on. Mobile net adds improved, and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband, where the market is declining. Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4%. On fiber, we are also adding customers not least from being a service provider in our Valokuitunen JV network. Financially, we saw a slight improvement in service revenue trends with growth in Consumer and a decline in Enterprise, driven in part by our choices to discontinue noncore activities and in part by a weak market. And finally, the strong execution of the Change Program continued to give tangible savings and resulted in EBITDA growth at high single digits with a margin climbing to 34.6% versus 32.5% one year ago. So in summary, we are making progress on all 3 of our midterm ambitions for Finland that we presented 1 year ago, stabilization of the mobile market share, improvement in SME and improved profitability. Now moving west to Norway, which is, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys with Phonero winning the EPSI survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. So EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3. The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, a weak performance in our fixed business is something we are addressing very actively. And on the next slide, I want to share some more information about this development. So we have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements and created a dedicated organization for fixed consumer services. Network quality has improved. And as you saw, we added TV and broadband customers in this quarter. At our investor update 1 year ago, we talked about our backbone of our network being already fully fiberized and around 50% of our broadband customers were on fiber or fixed wireless access connections. Today, the share is around 55%. And as we have said before, this is too slow. And from next year, we will see a clear acceleration in the coax to fiber upgrades, in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed, something that together with continued efficiencies resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter, Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C, 2 achievements which will help our growth journey going forward. Now let's move to Estonia. That saw both service revenue and EBITDA growth accelerating following great momentum in especially the public sector and good work on generating efficiencies. And like for Lithuania, cash conversion remained at record levels. And with that, I hand over to Eric before I come back to summarize the quarter. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue. In Finland, we also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year-to-date, we are at 1.3% service revenue growth. And looking into the last quarter of 2025, we expect an improvement related to pricing, growth in Enterprise and public sector contracts and less revenue decline in Norway. Moving to EBITDA. Growth in Q3 was somewhat below the 5% ambition for the year as we flagged 3 months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the Change Program. We're also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the investor update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing costs, both in Norway and Finland. Moving now to OpEx and CapEx. As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our Change Program continues to drive down resource costs. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OpEx as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with CapEx of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago. This shows how being focused and having clear priorities can be translated into better capital efficiencies. CapEx spend is expected to increase somewhat in the last quarter of the year, in line with normal telco seasonality. But overall, we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering CapEx resulted in EBITDA minus CapEx comfortably above the SEK 19 billion on a 12-month basis. This equals a step-up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter. Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year. And as for several quarters now, the key building block is our profitable growth. Cash CapEx increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor financing program, the latter, however, having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusual high due to phasing of interest between Q2 and Q3. Working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program. Finally, we saw a SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of our mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first 9 months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment, and we also received the proceeds from the divestment of TV and Media. The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer-term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last 2 years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like, for example, the last quarter, we announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase 2 investigation of Bredband2 has now started. And as said before, we expect to close the transaction in Q1 next year. Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the investor update about a year ago. As you may remember, we laid out a clear agenda at the investor update on how we aim to create shareholder value. And I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first 9 months of the year. And as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing. Largely, this free cash flow uplift is driven by our profitable growth trajectory and CapEx discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden, while we are working hard on securing the full exit for Latvia. Thirdly, our balance sheet continues to strengthen. Liquidity is strong. And after closing the TV and Media divestment, we are below the 2 to 2.5x net debt-to-EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. And finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment. Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik. Patrik Hofbauer: Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was in the start -- or at the start of 2024 after our Change Program and the exit from TV and Media. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers and some have been closed down. We are encouraged by the results so far. Network incidents have continued to become fewer and so has incoming calls from customers who are contacting us with issues and questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up and our people see that barriers to execution are being removed, collaboration and decision-making is improving and of course, EBITDA growth has improved. This is a promising start of first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster and more efficient than we are today. And then on the summary of the quarter, which was overall in line with our own internal expectations, we continued a healthy group EBITDA development, supported by profitable growth and efficiencies from the Change Program. And we continue to see clear signs that customers appreciate our high-quality services and see the benefit from how those improve their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. And with that, I will open up for questions. Thank you. Operator: [Operator Instructions] Our first question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's Owen McGiveron from Bank of America. So on your upgraded guidance, how should we think about 2026 and 2027 CapEx within the frame of your medium-term ambitions? Should we expect similar levels versus 2025 or more moderation? And how does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Patrik Hofbauer: I can start. It's Patrik here. First of all, we are not guiding yet on '26 and '27. We will come back to that in January. But I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. So we continue to see how we can use the capital much more efficient than we are today, and that will continue. But we will come back in January with the guidance or update or whatever in January -- in that call. So Eric, do you want to add something? Eric Hageman: Yes. I mean that would -- just my simple observation that it doesn't change so much from one moment to the next. And with regards to Norway, it's part of that. So the slide that Patrik talked about where we say we want to accelerate the rollout of fiber. That part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years, but it's firmly part of that CapEx guidance that we have just talked about. Operator: Our next question comes from Andreas Joelsson with DNB Carnegie. Andreas Joelsson: Just to follow up on your comment on further efficiency gains. Could you perhaps describe how you view the cost base currently and what else you can do? From the last slide, it seems like you have been able to do this Change Program without any basic negative effects. So are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand. Patrik Hofbauer: Andreas, I understand your question very well. It was not blurry at all. So first of all, the Change Program went obviously very well. We have delivered on basically all parameters, and we see that the operations is really much more stable, which we had, of course, the concerns about when we do this big change that we did last year. But so far, everything is running very well. Then remember, last year, we had this investor update, we gave out a 3-year plan with a CAGR on service revenues around 2%, EBITDA at 4% and then a free cash flow above SEK 10 billion in -- or at least SEK 10 billion in 2027. And that requires to continuously work with efficiency to deliver on that plan. And we are fully committed to deliver on the plan that we have put in place, which means that we will actively, of course, to improve the operations from year-to-year. So I think that is a clear answer on your question where we are heading. Well, I hope at least. Andreas Joelsson: Yes, absolutely. Less blurrier than the question. Patrik Hofbauer: Thank you. Operator: Our next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: So I have a question each on Finland and Norway, which are 2 of the areas where investors had a bit less certainty recently. Just on Finland, there's some improving -- slightly improving service revenue growth trend today and also sub-trends. Could you just talk about how you're achieving that? And also how you're thinking about the balance of not disrupting the market too much, given we've had one of your competitors basically disappointed fairly materially on their mobile service revenue growth outlook in the near term. Just comments around kind of how you're improving and how you don't disrupt the market too much would be helpful. And then secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September. I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Patrik Hofbauer: Andrew, thanks for the questions. I can start with Finland. I think, Eric, you can take Norway then, so we divide a little bit here. Starting off with Finland first. I mean, the most important part is actually the customer satisfaction, which we have been invested quite heavily in. So we have upgraded our network and then several activities that we're now seeing is paying off. Then on top, we also had some good execution here, especially in the consumer side to turn these trends around. And we are not at all disrupting the market. I don't know what that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. And then we have also a consumer operation that is more efficient every day. And remember, we have said clearly that we are accepted to lose market shares in Finland for too many years now. And we said clearly, we want to stabilize that, and that is what we're doing. So we see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. And then also on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, where we are focused on and having good also development on. So I think this is not -- I think it's a healthy operation. We are improving, and we will continue to improve during 2026 as well actually to defend and stabilize our market share. That's actually what we're doing. So I think good done by the whole team in Finland. Eric Hageman: Yes. With regards to Norway, so very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, is never to disrupt, but certainly to defend our position. So let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss, that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. So we're working on that. We've made some management changes in the organization. We're fixing fixed, as Patrik just talked to in this slide, and that will take a bit of time. So we guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps. Operator: Our next question comes from Fredrik Lithell with SHAB. Fredrik Lithell: I have two of them. You have, on earlier calls, talked about that service revenue should be a bit slower, both in Q2 and Q3 and then to reaccelerate a little bit in Q4. And I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. And then also the CapEx, the lower CapEx from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow of SEK 1 billion down and SEK 0.5 billion up. Could you sort of walk us through a little bit what movements you have that support your free cash flow raised guidance would be interesting. Patrik Hofbauer: I can start with a comment on the service revenue. And right, you said that we said that Q2 and Q3 will be a bit softer, but then we'll see an improved situation in Q4. And we do expect better growth in Q4 than in Q3 with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason. Erik Pers Berglund: It's mission-critical, as I said a few times. Eric Hageman: Yes, on CapEx, it's very simple. We sort of never felt we're going to do the SEK 14 billion, right, when we guided for less. We're very happy with the progress that we've made as an organization on a profitable growth, which ultimately drives our free cash flow growth. And then when you go through 9 months of the year, where you then feel is this the moment where we have that visibility. It's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. And on the CapEx, yes, we have good visibility for where we will land for the year and also where that will trend going forward as per the first question we got. So very happy with how that goes through. And yes, let's see where we land for the full year when it comes to free cash flow. Patrik Hofbauer: If I may add a clarification, Fredrik. We never plan to invest SEK 14 billion. It was always below, right? So it's not a SEK 1 billion downgrade as such, but yes. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So maybe a follow-up to Andreas' very clearly worded question. Just thinking of the current trends here, it looks like you will exit the year at about 4.5% perhaps EBITDA growth rate approximately and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for '26 and beyond. I mean, do you think you need to clearly accelerate cost savings to reach your targeted EBITDA CAGR of 4% between '25 and '27? Patrik Hofbauer: I think the answer will be pretty much in line with Andreas' question. So we -- I mean, when we set the plan, the 3-year plan of the 2% and the 4% then related to EBITDA, as you know, we were clear on that, okay, this is a rightsizing that we did with Project Sprint. It was an internal name on it that we did last year, the minus 3,000, and we executed on them. And then we need to continue to take out cost, and that will be in every aspect and every area of the cost base. So this is work ongoing. So I don't -- and I don't want to be more specific on how we'll do that, but we will show you quarter-by-quarter that we are able to take out cost to defend because we want to -- we are fully committed again to deliver on the 4% CAGR growth on EBITDA. Then we need to -- because that's a combination of service revenue growth and cost out to be more efficient. Eric Hageman: Yes. Maybe to add from my perspective is, as time goes on, now having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen, it gives us more confidence as a management team that we are on the right path to deliver what we promised, not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion, right? The combination of profitable growth, good CapEx discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion plus by 2027. Operator: Our next question comes from Maurice Patrick with Barclays. Maurice Patrick: For me, just a question on Sweden, please. So yesterday, it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, the dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounds probably more like grabbing headlines than reality. But again, curious for your insights in terms of how you see that in the context also of you delivering a pretty solid broadband number this quarter and last. Patrik Hofbauer: Yes. I mean, coming back then to the access cost for local networks. I mean, we have seen the high cost for the local networks access for several years. It's nothing new. So -- and that is driven basically by ourselves growing service provider in these local networks and then also higher access prices. So we haven't seen any recently that increase. This has been going on for a while. So I don't know exactly what happened there. And so yes, and also on our own networks, we have made very modest increase in our [indiscernible] business, a couple of percentage points only. So I'm not -- I don't recognize really the whole situation from a new thing. This has been going on for many years. So that, yes, around regulation... Erik Pers Berglund: Yes, regulation has been postponed as you know again -- so we'll see what happens when we eventually get there. But I think you're right, that's probably what brought the topic up this quarter. Eric Hageman: But maybe overall on Sweden, we are incredibly happy with the performance there. As you saw, very good service revenue growth, perspective of even more service revenue in Q4, as we indicated, very strong cost control leading to good EBITDA growth. So yes, we hear what others are saying, but we are very happy with our developments in the Swedish market. Erik Pers Berglund: And I think you also mentioned the broadband intake, Maurice. It's a good work over a couple of quarters. As we mentioned, this is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. So that's working. And so overall, we're happy with that. Patrik Hofbauer: And continues to perform -- TV continues to perform well and not a surprise. I mean, we have the best product in the market. And obviously, customers are appreciating it. And for the fourth year now, we have got the best feedback from the customer surveys on TV. So all in all, happy with the performance. And again, remember that we have seen a more household perspective on the consumer market in Sweden rather than looking each for the products because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in the strategy. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: My one is just around leverage and shareholder returns. So obviously, you're below your target at the moment. We have some acquisitions coming maybe in the next few months. But it feels like you'll still end up below your target range of 2 to 2.5x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media sale as buybacks or extraordinary returns? And if so, when would this -- when would you approach this decision with the Board? Eric Hageman: Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet, one, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. So that's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block, which is doing, as I said earlier today, coming right on progressively growing dividend, next year is when we'll come back to that. And the beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the Board. So we will come back to that. Maybe the last point is, we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband [indiscernible]. So it's important for us that we have the flexibility to be able to do that as well. So -- but we know it's an important pillar of our value creation plan, and we'll come back to that at the beginning of next year. Operator: Our next question comes from [indiscernible] from BNP Paribas. Unknown Analyst: I had a question, please, on Finland, where you've delivered strong EBITDA improvement over the last sort of 3 to 4 quarters. You're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? And then just a quick clarification around the Norway CapEx, I'm sorry if I missed this. Does this at all change your thinking around the FY '27 free cash flow target of SEK 10 billion plus? Or is that reflected in this? Patrik Hofbauer: So I can start with the later one with the CapEx. No, it's reflected in the figures and will not impact our 2027 target. So to be super clear, it's in the envelope of that. And then Finland? Eric Hageman: Yes, with Finland, maybe a step back, a big part, and we talked about it today in the voice over as well of the analyst presentation, which is margin expansion was a very important part of what we talked about in the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, but all other countries, you see the margin expansion coming through. And what is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary costs that we have. We have a very, very clear plan, and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda. So you should expect more margin expansion, including in a market like Finland in the coming years. Patrik Hofbauer: Can I just add also Finland? And don't -- to build on what Eric said, don't also forget to look into the ARPU development that we have in Finland, which is 4% up on the mobile postpaid, which is also very positive. And that has been driving the agenda to run price increases, but also a better mix in the portfolio. So all these activities are actually paying off at the moment. But we're still a way to go to be where we want to be in Finland, to be clear. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: I've got two questions, please. So at the CMD, you showed a target for mission-critical revenues to more than double from '23 to '27. You've been quite clear on this as a source of support for Q4. But can you comment on how we should think about the mission-critical growth in '26 compared to the growth in '25? It's obviously a bit difficult for us to model. And then secondly, on Norway, you've talked quite clearly about the moving parts. But can you comment on when you actually expect Norway to stabilize EBITDA? Patrik Hofbauer: Yes. I'm not sure I understood the first question on mission critical. But I can give you -- I mean, we have a clear -- I mean, we said it will double rightly, as you said, for the coming years, and we see that it's coming into now to our books and orders and also that's the reason why we will see a comfortable increase in Q4 in Sweden. So that's part of it. And this will continue, but they are a bit more lumpier, these revenues. So we will see it continue in the coming years as well. But we have not been explicit more than say that we will double from where we came from. And we will still stand with that. We are delivering on what we have said and on the expectations. So no surprises coming in. Eric Hageman: Yes. With regard to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4, as you heard earlier today, that will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy costs there. We typically have salary inflation in our countries as well that we have to work with. So we do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses we have on mobile. TV is back on after the outage that we had, but it takes us a couple of quarters. So as we said last -- at the half year results, we need a bit of patience before we also, from an EBITDA perspective, turn around this business. Operator: Our next question comes from Viktor Hogberg with Danske Bank. Viktor Högberg: So just a question on the new free cash flow guide. Just a clarification maybe. Given the assumption of SEK 650 million in spectrum CapEx annually included in the guide for this year, would you say that you still expect the real free cash flow that is including the higher spectrum CapEx to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question. Erik Pers Berglund: Thanks, Viktor. It's Erik here at IR. We don't guide for free cash flow, including the real spectrum cost as you might understand, simply because we're not able or allowed to speak about spectrum CapEx ahead of the auction. So we have to stick to the normalized spectrum when we talk about free cash flow guidance. But maybe it's worthwhile to add a comment to that. So SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year, we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay plus, let's see about the SEK 1,800 million in Sweden. Next year, we don't have any big auctions coming up. So it goes up and down. But yes, that's where we are. Viktor Högberg: Okay. Fair enough. On the second question, just another clarification, maybe if you were talking about the group or just Norway on Q4 group EBITDA growth, the trend being in line with Q3. Was that for the group or for Norway, so below 5% that is for Q4. Patrik Hofbauer: So Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. So that's for the group. And for Norway, we expect EBITDA improvement to take a couple of quarters, as Eric said. So we need some more patience for Norway specifically. Operator: Our final question comes from Siyi He with Citigroup. Siyi He: I have two actually. And my first question is on Finland. I mean, the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that put through by 2 of your competitors in Finland. And my second question is on service revenue growth in Sweden. And I just want to ask about how we think about 2026 and '27, given that the price is still doing quite well and have lower legacy drags and mission-critical revenues should also come through. Do you think it's fair to assume that the top line trend is next year and year after could be better than what we have witnessed this year so far? Patrik Hofbauer: So I can take the first question on Finland. I'm a bit surprised that we get the question all over and over again regarding the package, the security package. Look back in Finland, we have been driving the price increase raise there and the value creation agenda for many, many years. And remember, our position, we are the #3 mobile operator in the market. And if we look at the ARPU levels, they are very similar to each other. And we should be the challenger in the market, not the responsible leader in the market. So look at our position, I think, we are looking into different ways of driving price increases, i.e., ARPU increases. And we don't need to follow what our competitors are doing all the time. We have our own agenda that we are running and that we're looking into to make sure that we continue to grow and defend the position that we have in the market. And that you will see going forward as well. And I don't want to go into commenting on every package and price, et cetera. So we have our agenda. We are running that. We are #3 in the market. We should be the challenger. We have been too much more -- too responsible as a #3 player and acting like we were the incumbent almost in Finland or the leader. So I think we are well positioned. We have done a good quarter and good improvement during the year, and that will continue. I expect that will continue in the next year as well. Erik Pers Berglund: And to add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base cohort by cohort as certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices. And that's giving the results. You can see there. I think the 4% is roughly in line with the competition. So even though we don't do exactly the same thing on security add-ons. Eric Hageman: Yes. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first 9 months performance and what we're expecting for the full year. A little bit like our answer on CapEx, that's not something that changes overnight, right, when you have certain momentum. And clearly, we're guiding for a stronger Q4, driven by what we're doing in mission-critical, particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us. And on top of that, some price increases. So we expect that momentum to continue. Said in a slightly different way, if you think about a medium-term guidance, the 2% and the 4%, that would not be possible without Sweden delivering that, right, because it's roughly half of our business. So again, we feel comfortable with that medium-term guidance, and we're very encouraged by the performance that we're seeing in Sweden. Operator: There are no further questions. Erik Pers Berglund: All right. Thank you very much, everybody, for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you, and goodbye.
Odd-Geir Lyngstad: Hello, and good morning, and a very warm welcome to Elkem's Third Quarter Results Presentation. My name is Odd-Geir Lyngstad, and I'm responsible for Investor Relations here in Elkem. In today's presentation, we will go through the highlights for the quarter and give an update on the markets before we go through the outlook for the fourth quarter. CEO, Helge Aasen, will take us through this first part of the presentation before CFO, Morten Viga, will present the third quarter results in more detail. We will open for Q&A after Helge and Morten's presentations. So with that, I give the word to CEO, Helge Aasen. Helge Aasen: Thank you, Odd-Geir, and good morning, everyone. Very nice to see the turn up today. Yes, we seem to be repeating ourselves when it comes to describing the markets we operate in. The story about weak and challenging conditions doesn't seem to go away. And the market does actually remain much the same as it has been for a while now. However, despite challenging macroeconomic environment, Elkem's results are relatively good, but of course, below our financial targets. The EBITDA for the third, I'm sorry, the EBITDA for the third quarter ended at NOK 829 million, which gave an EBITDA margin of 11% for the group. If you exclude silicones, the operating income ended at NOK 4.1 billion with an EBITDA of NOK 586 million, which then represents a margin of 14%. This result is to a great extent, explained by good operational performance and ongoing cost improvements. Silicon Products was impacted by low silicon and ferrosilicon prices in the third quarter. But Specialty segment as Foundry alloys and Microsilica, which is a silica powder, delivered improved results. Carbon Solutions continued to deliver good margins, but the operating income and the following EBITDA is impacted by the lower sales. Silicones has improved on cost and market positions and delivered a higher EBITDA compared to the same period last year. The strategic review is ongoing. We gave an announcement some weeks ago, and I can just confirm that this is moving ahead as planned with an exclusive sales process, and we are still aiming for closing this transaction within the first half of next year. So before we go on to the market update and the results, I'd like to say a few words about our ESG work. It's built on two main pillars: reduce CO2 emissions and to supply the green transition with critical materials. Our aim is to reduce and ultimately remove fossil CO2 emissions from the smelting processes. Elkem supports the green transition through the supply of critical raw materials, and we work systematically to cut emissions and reduce waste throughout the entire value chain. Circularity is also playing an increasingly important role in this world. And we have introduced a new, actually a breakthrough method for recycling silicones through a mechanical recycling. And this then goes back into what used to be waste now is going back into new formulations. Our efforts within ESG are also recognized with strong ratings from EcoVadis and CDP. And in the third quarter, we received a gold rating from EcoVadis, and this puts us among the top 5% of all the companies they are assessing globally. And over the past years, Elkem has consistently received either gold or platinum ratings from EcoVadis, which places us among the top of the companies they are rating. Here, we show a couple of examples from Silicon Products and Carbon Solutions, illustrating some of our strong cost and market positions. I mentioned Microsilica initially. It's SiO2 silica powder, a byproduct from the ferrosilicon and silicon metal smelting processes. And over decades, we have developed this into a portfolio of specialty products, which go into quite a wide range of end applications. To mention some of them, construction, well drilling, cementing, refractories and also polymers. Over the past years, this product area has consistently grown and shown stable high margins. And I think it's a very good excellent example of how we are able to specialize on the basis of commodity production capacity. We're also a leading producer of electrode paste, electrodes and refractory materials coming from Elkem Carbon. This goes into the metallurgical industry. And these products are probably not very familiar to you, but they are critical consumables and lining materials, which are very important for stable operations and lifetime in furnaces and electrolyser cells in the aluminum industry. Also here, we are focusing on product development, and we have developed a more environmentally friendly product. With bio-based binders, which greatly improves working conditions. This solution has a proven performance record, and we have installed the product in more than 15,000 aluminum electrolytic cells. And we are gaining market share. Competitive cost position can, of course, be explained by many factors, operational knowledge, operational excellence, economies of scale, upstream integration, et cetera. However, electric power is another, of course, very important cost factor in the production of most metals. We have long-term supply agreements for renewable hydropower in Norway, Iceland, Canada, Paraguay. And access to long-term competitive energy contracts is a prerequisite for achieving competitiveness and also, of course, predictability in order to plan investments, et cetera. And renewable sourcing of energy also gives us a low carbon footprint, which clearly is, if not gaining or achieving premiums on end products, it gives us a preferential supplier status. CRU, a global business intelligence company, have published their analysis of the 2025 cost curve, which is illustrated on the graph here. This is for silicon 99, silicon metal. And as you can see from the chart, this puts our Salten and Thamshavn plants in Norway among the lowest cost producers in the western part of the world. Then coming to another important frame condition, which is trade barriers. That's affecting several markets and industries these days. And as you know, a highly dynamic and quite unpredictable environment. We are affected by this directly and indirectly. Two relevant examples are EU's ongoing safeguard assessment on silicon and on ferrosilicon and potentially silicon metal and also a U.S. countervailing duties assessment on silicon metal imports. EU safeguard measures could come into effect from November 19th. It's so far unclear how this is going to affect Elkem and how it will be structured. The potential measures will be aimed at raising prices, obviously, and protecting internal production within the EU, but we don't know how Norway and Iceland will be positioned in it. The regulations appear to focus on ferrosilicon and foundry alloys in this round, and there's no clear indication if silicon will be included. But most likely, silicon will be subject to another process at a later stage. The U.S. has imposed countervailing duties on silicon imported from several countries, including Norway with a preliminary rate of 16.87%. The basis for these duties are the CO2 compensation and CO2 quotas that the Norwegian companies receive under EU's carbon schemes. And our position on this is that these policies are a compensation for CO2 tax and do not constitute countervailable subsidies harming the U.S. domestic industry. We have had similar cases in the past. And each time we have been able to document that there was no injury to U.S. industry. So, we don't know the outcome of this round. It's now introduced as a preliminary measure, and then it will be followed by a permanent decision later on. Unclear when, partly because of the shutdown of the U.S. government at the moment. A few more words on the strategic review process. It's underway, as I mentioned, and it is going according to plan. We cannot say much more about the process beyond the status update that we gave during the third quarter. We are in an exclusive sales process with a major industrial player with a significant presence in the global chemical industry. The process is well aligned with the strategic review and represents an important milestone. And in a challenging market environment. But we are confident that the potential transaction will represent the best possible outcome for the silicones division in Elkem. And we're also confident that this process will be the best outcome for the rest of Elkem and as such, benefit to all stakeholders.Subject to further negotiations, final agreement and necessary approvals, the closing of the transaction is, as mentioned, expected to happen during the first half of next year. Now let's have a look at the markets. Automotive continues to be an important sector for Elkem, driving demand for many of our products. The growth in this sector remains weak with the exception of China, where the production is up in 2025. This is mainly the case for electrical vehicles. During the first half of 2025, the overall production in the EU is characterized by weak order intake and consequently low number of new registrations. Forward-looking forecasts have been revised upwards as markets adapt to ongoing trade and structural changes. Europe's outlook is up, supported by improved expected demand in Germany, France, Austria and Turkey. China's forecast has increased due to incentives and export growth. But overcapacity and price competition clearly persist, especially for electrical vehicles. North America is also seeing upgrades driven by tariff relief and higher production. In South America, the gains are so far limited by very high import pressure. So, any improvement in the automotive sector will definitely have a positive impact for Elkem. Several markets have been impacted by weak demand and various trade regulations and governmental initiatives. In the EU, the silicon reference price dropped by approximately 20% in late June. This was mainly due to low import prices from China, which suffer from, I would say, a severe oversupply. Prices in the EU then recovered modestly again in September due to improved market balance. This was a result of capacity being taken out in Europe as well as higher prices in China. U.S. silicon prices have increased in the third quarter. This is expected to continue to rise due to trade regulations. And in China, we have seen some price recovery from very low levels, mainly due to signals that the government will launch initiatives to curb overcapacity. Discussions are ongoing there regarding new energy consumption standards for the industry, which seems to be aimed at reducing overproduction. The ferrosilicon markets have many of the same drivers as silicon. Also here, we have a market impacted by trade regulations and possible safeguard measures in the EU, which have resulted in price fluctuations. The market sentiment is still characterized by weak demand and downward price pressure. However, based on the expected safeguard measures in the EU in August, we saw ferrosilicon prices jump up. This didn't last very long. It dropped back down again when it became clear that no preliminary measures would be announced. Prices in the U.S. increased towards the end of the third quarter. This was mainly driven by trade regulations. And in China, we've also seen some recovery from very low levels, partly due to this government focus on reducing excess production capacity. It's also somewhat linked to higher raw material costs in China. The market for carbon products is much smaller than silicon and ferrosilicon. We don't have reference prices to compare with here. Quite a big difference between regions when it comes to demand. But obviously, the underlying driver is the production of steel, which again triggers ferroalloy demand and then, of course, the aluminum industry. Global steel production in the third quarter remained quite stable compared to the same quarter last year. Europe experienced a 3% decline, whereas North America saw a 3% increase, largely due to tariffs again.The steel and ferroalloys markets continue to face challenges. Carbon Solutions specialized product offering and wide geographic presence is, however, proving to be resilient and creating a stability in earnings. Then moving on to silicones. Also like in silicon metal, overcapacity is significantly hampering any meaningful price recovery in the commodity part of the business. Producers are actively trying to increase the prices, and we've seen quite a lot of fluctuations in China, in particular, during the quarter. DMC prices first rose from a level of around RMB 10,400 per tonne to up to RMB 12,250. This was a result of a fire at one of the bigger players. But due to the overcapacity, that was a very short-lived price uptick and prices subsequently lowered again because other producers are ready to fill the gap quite quickly. So, the current price level is around RMB 11,050 per tonne and quite sensitive to changes in raw material costs, where silicon metal obviously is one of the big input factors. Demand in China continues to be weak, especially in construction. Demand for commodity silicones in the EU and the U.S. is also negatively impacted by changing tariff policies. But I would say, in general, there's quite good and stable demand for specialties. So, coming to the outlook. Silicon Products are still going to face quite challenging conditions and low demand on a historical basis. But as mentioned in the presentation, our leading cost position and good performance in more specialized part of the business are mitigating the negative impact. Carbon Solutions benefits from good cost positions and geographical diversity, and continued weak demand will have some impact on the results. Silicone producers are actively trying to increase prices. But as mentioned, the markets are still hampered by overcapacity. Potential trade regulations and protective measures are expected to impact our markets going forward. And of course, we are very eager to see the safeguard measures in the EU and how that's going to play out. It's not yet concluded, and very hard to say the overall impact on Elkem from this. So I think with that, I'll give the word to you, Morten, and take us through the financials. Morten Viga: Thank you very much, Helge, and good morning, everybody. So it's a pleasure to go through the financial numbers for Q3. Our operating income for the quarter amounted to NOK 7.5 billion, and that's down 7% compared to the third quarter last year. All divisions had a decline in operating income this quarter, mainly explained by lower sales prices. Elkem's EBITDA for the quarter was NOK 829 million. This was also well below the third quarter last year, but it's slightly higher than Q2 this year. The reported group EBITDA margin for the quarter amounted to 11%, which is somewhat below our long-term target of 15% to 20% EBITDA margin. Having said that, we should also emphasize that the EBITDA margin for the continuous operations, i.e., excluding silicone's was 14%. And it is important to bear in mind that these margins are generated in a situation where sales prices in key markets are at or close to historical low levels. And as such, the EBITDA is not supported by market conditions, but it's held up by good operational performance and a very strong underlying cost position. There were no particular one-offs affecting the EBITDA in the third quarter. As usual, we provide an overview of some of the main financial numbers and ratios. I will not go into detail on all of them, but it's important to note that the Silicones division has been reclassified as discontinued operations and assets held for sale. In this presentation, we mainly focus on the financial numbers, which include silicones. However, the regular financial statements, including the profit and loss statements, reflects Elkem's results excluding silicones. And in the table to the right, you can see the comparable figures for Elkem with and without silicones. Including silicones, the group EBITDA amounted to NOK 829 million. The realized effects from the currency hedging program was minus NOK 16 million reported in the segment Other. Other items amounted to NOK 78 million and the main [Technical Difficulty] of minus NOK 17 million. Net finance expenses were minus NOK 34 million. And here, the main items related to net interest expenses of minus NOK 114 million, which was largely offset by currency gains on NOK 96 million, mainly related to translation effects on our external loans. The income tax was minus NOK 96 million, and this gives a very high effective tax rate of 65%. And the reason for that is that the Silicones division had a loss before income tax, which is rather high, and there is no tax in a major part of that division. Let's then take a look at the divisions and start with the Silicon Products division. So, the silicon and ferrosilicon markets remained difficult, but the division's EBITDA for the third quarter was supported by good operating performance. Total operating income amounted to NOK 3.4 billion, representing an 8% decrease compared to the same quarter in 2024. And the decline in operating income is mainly driven by lower sales prices for the commodity segments in silicon and ferrosilicon. EBITDA amounted to NOK 389 million, representing an EBITDA margin of 12%. The EBITDA is higher than the previous quarter, but significantly lower than Q3 '24, and this is explained by significantly lower sales prices, particularly for silicon. This is partly countered by good and stable results from the specialty segments, particularly foundry alloys. And as I said, in addition, the EBITDA is supported by strong operations and good cost improvements. Sales volume increased by 13% compared to the third quarter last year, mainly due to improved sales of specialty products. So, if we look at the Carbon Solutions, this division is once again presenting a good margin, and it reached an EBITDA margin of 28% in the third quarter despite very challenging market conditions. Total operating income amounted to NOK 822 million, which was down 7% from the third quarter last year. And this decline here is mainly explained by lower sales prices. The EBITDA was NOK 231 million, which represents an EBITDA margin of 28%. The EBITDA margin is in line with the previous quarter, but it's somewhat lower than Q3 '24, mainly explained by lower sales prices and somewhat higher raw material costs. The sales volume for the third quarter was in line with the previous quarter, but is negatively affected by low steel production, particularly in the EU. As mentioned, and very well known, the Silicones division is under strategic review. The division has a good portfolio of specialty products, which provides to a large extent, stable sales and margins. But also, the division's exposure to the commodity market is still very significant. And particularly in China, we have seen strong price pressure hampering our margins. The division has, however, been able to compensate for lower commodity sales prices in the quarter through higher sales volumes and good cost improvements. Total operating income amounted to NOK 3.6 billion, which was down 6% from the third quarter last year. Higher sales volume in the third quarter was more than offset by lower commodity sales prices. The EBITDA amounted to NOK 248 million, representing an EBITDA margin of 7%, and this is in line with the previous quarter, but it is significantly 23% higher than the third quarter last year, mainly driven by cost improvements and better sales volume. Sales volume was up 10% compared to the third quarter last year, mainly due to higher sales volumes in the Asia Pacific region, where we also have introduced a new production line, higher capacity, and significantly stronger underlying cost position. Let's now take a closer look at some of Elkem's key financial ratios. The earnings per share, EPS were quite low also in the third quarter with NOK 0.05 per share, and that brings the EPS year-to-date to minus NOK 0.77 per share. And we are, of course, not satisfied with this, and we are working on further cost reductions and other improvements to mitigate the market situation. The EPS was also this quarter negatively impacted by net losses from the Silicones division, which is under strategic review. And if you exclude the Silicones division, the EPS for the third quarter would have been NOK 0.34 per share plus, and it would have been a positive NOK 0.40 per share year-to-date.The balance sheet remains very solid. Total equity amounts to NOK 24 billion by the end of third quarter, which equals an equity ratio of 50%, very stable level. Elkem's financing position is well managed, and we have a very good and robust maturity profile. However, as you can see, the interest-bearing debt has continued to increase, and the current leverage is above our target level of 1 to 2x EBITDA last 12 months. By the end of the third quarter, our net interest-bearing debt amounted to NOK 11.7 billion, and that's up by NOK 0.3 billion from the previous quarter. And based on the last 12 months EBITDA, the debt leverage ratio is now 3.1. Our target is clearly to bring down the leverage, and Elkem has a plan to deleverage the company after the strategic review process has been concluded, which we plan to achieve during the first half of next year. By the end of the third quarter, Elkem's interest coverage ratio was 6x, which is well within the covenant of 4x, which is the covenant in our loan agreements. The cash flow from operation was NOK 526 million in the third quarter. We have a high emphasis on preserving and generating a good cash flow despite underlying market weaknesses. And this was a clear improvement from the previous quarters. It's explained by lower reinvestments and also positive working capital changes. As already mentioned, the markets are weak, and we will definitely continue to focus on a very disciplined capital spending as long as the weak market conditions prevail. In the third quarter, total investments were down to NOK 312 million and reinvestments were NOK 244 million, which amounted to 39% of depreciation. Strategic investments are very much down and amounted only to NOK 68 million as we have completed all major strategic CapEx projects previously. So let me take the opportunity to wrap up this presentation by summarizing the main headlines and takeaways from the quarter. We will continue to focus on cash generation and a very disciplined capital spending in response to the challenging market conditions. We're very happy to see that Silicon Products has leading cost positions and strong performance within the specialty segments. And I think this is very important to bear in mind when the markets are really, really, really tough out there. Also, Carbon Solutions is in a very good position, and we benefit from good cost positions and a very geographically diverse customer base. Silicones, also a very tough market, but we have improved our cost and market positions based on specialization and also based on new and more modern production lines, both in China and in France. The safeguard measures for ferrosilicon and ferroalloys in the EU and a new trade defense regime for steel in the EU could lead to improved market conditions if these measures are successfully supporting increased industry production in the EU, which is the intention. The strategic review process is progressing as planned with an exclusive sales process ongoing. And as we said, we expect to have the transaction closed within the first half of 2026. So I think that summarizes the presentation, and then I hand back the word toOdd-Geir for the Q&A session. Odd-Geir Lyngstad: Thank you, Helge, and Thank you, Morten. We have a good audience here today. So I think we will start and see if there are any questions from the audience. There is Marcus? Marcus Gavelli: Marcus Gavelli, Pareto Securities. So you talked about the safeguard measures, and clearly, we have no visibility right now. But could you try to provide some color on how you think about potentially worst-case scenario with higher tariffs and with Elkem potentially not being as competitive in the EU market. What sort of flexibility do you see having to redirect volumes and do other sort of measures to fight that? Helge Aasen: I think if we are left on the outside of this and have to compete on the same basis as everybody else, EU is a big net importer of ferrosilicon. And I would claim that Norway and Iceland are among the best position to continue to supply that market. So I don't think we will have to redirect volumes. Obviously, we are very uncertain about how the price protection mechanism will be constructed or put together. But that could, of course, I would say, I don't see a big downside, but there is quite a significant upside if this is done in a way that favors us. Marcus Gavelli: And also just to follow up on the, you mentioned the cost reductions that you're currently looking at. Could you also provide some color on what sort of measures that is? Is it, we've seen some ferrosilicon production now being curtailed? Is it more trying to optimize the production? Or is it actual larger reductions you're looking at? Helge Aasen: This is a wide range of different measures. Obviously focusing on fixed cost reductions continuously, but it's also linked to a lot of optimization in production, producing campaigns where we have the best cost position in different plants and furnaces, and yield improvements. And yes, there's no one particular program that's yielding this, but a very big effort ongoing, and it's giving results over time. Magnus Rasmussen: Magnus Rasmussen, SEB. You have an improvement in the Silicon Products EBITDA Q-on-Q despite lower silicon metal prices, as you said in Q2. Our understanding is that after the decision that you were to be allocated more CO2 quotas, which you reported in early July, you have to purchase less CO2 quotas on a running basis to cover what was previously a deficit. Has that been a positive driver this quarter, and by how much? Helge Aasen: Sounds like a CFO question. Morten Viga: Yes. You're absolutely right. We have got the ruling from the Norwegian Ministry, securing equal treatment with our European competitors. And that's very important. We have not yet received any additional quotas. Such things takes a bit of time, but we are very sure that we will receive a good amount of new quotas. And of course, that will put us in a much better position. There are no particular significant, let's say, CO2 quota P&L elements in our Q3 results. Magnus Rasmussen: When you, on a running basis, start to receive quotas on equal terms as your peers in Europe, then I assume you will not have to purchase quotas to cover that deficit as you've done in the past. Doesn't that imply that you will get a cost saving? Morten Viga: That is correct that in the future, there are 2 important things about this. First of all, equal treatment that's very important as a principle. And certainly, we will have significantly lower CO2 quota costs in the future when we receive those quotas, either late this year or early next year, we assume. So for our long-term competitiveness, it's good news, very good news. Magnus Rasmussen: And also, I see that your net interest-bearing debt in silicones is increasing by about NOK 375 million quarter-on-quarter. And it seems to me like more or less half of that is driven by you repaying what you label as bills payable in your balance sheet, and bills payable has come down by more than half over the past year. So, I'm just wondering why you are repaying that working capital financing ahead of the sale of the division? Morten Viga: No, that is kind of a working capital management done by the Chinese operation. So, I'm not able to give a precise answer to that. But they're managing this position. And as you rightly say, they have decided to repay some of that and reduce some of the bills outstanding. Magnus Rasmussen: Should we expect bills payable to be repaid ahead of the sale? And/or should we look at bills payable as interest-bearing debt when the sales price? Morten Viga: You should not look at bills payable as interest-bearing debt. So, it's part of the working capital management done locally in China. Odd-Geir Lyngstad: Are there any further questions among the audience? If not, I think the questions are quite well covered from what I see here, but one additional question maybe that could, and that is how long you expect curtailments at Rana in Iceland to last, and also if any of our competitors are reducing capacity to the same extent? Helge Aasen: Yes. We had an idle furnace in Rana, and we decided to postpone starting it up again. We are closely monitoring what's happening now. It's obviously inventory management, but it's also in anticipation of what will be the outcome of the safeguard decision in November. And then we have, we're going to stop one furnace in Iceland in mid-November, and that will be idle for 2 months, approximately, and what was the other part of the question? Odd-Geir Lyngstad: Competition. Helge Aasen: Yes, competition. Interestingly enough, Ferroglobe, which is our biggest competitor in silicon products in the conference, I think a couple of weeks ago, announced that they are now stopping all production in Europe. So, it says something about Elkem's competitive position. Odd-Geir Lyngstad: Very good. Thank you very much. And that also concludes our presentation here today. So, thank you very much for attending. Helge Aasen: Thank you.
Danny Younis: Good afternoon, and welcome to the Weebit First Quarter 2026 Investor Update. My name is Danny Younis, and I handle Investor Relations for Weebit. With me today, we have the CEO of Weebit, Coby Hanoch; and for the first time, the VP of Marketing and Business Development, Eran Briman. Before I hand over to Coby, just a reminder, we will be having a Q&A session today. If you have any questions, if you're in the room, just put your hand up or if you're online, just type them into the Q&A box that you see at the bottom of your screen. We're expecting a lot of questions, but we've provided enough time, I think, to go through most of those questions. We've got roughly an hour, but we can run a little bit over if we need to. I would now like to hand the webinar over to Coby. Jacob Hanoch: Hi, everyone. To me, so good to be here, as always. I guess we came here because of the Semiconductor Australia conference that was yesterday. I think it was a very good conference. It was well attended. I don't know if anyone here -- was anyone at the conference? It was really -- I think there were like roughly 300 people or so. This time, we had a booth there. So you see the sign from Semiconductor Australia up here where we're using it kind of and show the demo. I guess we'll be bringing the demo to the AGM, and we'll be showing it there as well. So we'll be back -- I'll be back in a month. And yes, I guess, let me share the screen again with this. So just a few slides, not really much. I think everyone knows, knows Weebit and knows what's going on. So, okay. So we'll just go through the slides like this. So I just thought I'd show you an update. I found this very interesting how just a year ago, the prediction of the size of the semiconductor market was the blue line here and people were saying, yes, it's going to hit USD 1 trillion by 2030 or a little bit later and stuff. And now with AI just going wild in just one year, we see analysts already updating their predictions and the size of semiconductor crossing the $1 trillion mark already in 2028 and so on. So it's -- again, every time I come to Australia, I have this challenge of trying to explain to people how big this market is, how important it is. You guys know, but like yesterday at the conference, even though a lot of people knew what semiconductors are, we still had to emphasize it and of course, with other institutions and other people that we meet here. So I think this really shows you what's going on. It's crazy, the level of investments in this market, I always repeat it because the numbers are just mind-boggling. Every time you see it more investments and more strategic deals, Intel now -- on the one hand, Intel is struggling. On the other hand, they have a new CEO who's really a magician. He's amazing. I know the guy, and he's just capable of doing amazing things. And now he's managing to get investments from the U.S. government, from NVIDIA stuff. India now is starting to invest a lot. They're setting up foundries in India. In terms -- I'm sorry. I need to do this. In terms of the ReRAM market itself, that every once in a while, I refer to the old slides, and it's interesting to see how year after year, the numbers evolve. I think the interesting thing here is to see they are talking about ReRAM being today about 27% of the market. And I think this is already what we've been talking about for a long time. ReRAM is being accepted now as the new standard. And you can see how the ReRAM market share is growing quite a bit, actually more than doubling or just about doubling in just a few years. But also look at the size of the market, it's like 20x. So not only is the market share growing double, but it's 20x the market. So it's actually ReRAM section is 40x in just four years. And that's a huge growth. That's a huge growth. Right now, the companies who are addressing this are basically TSMC and Weebit. The companies that are commercializing the ReRAM that actually have customers that people are buying it, it's TSMC and Weebit. UMC has a ReRAM that's been qualified, but it's been qualified for years, and it's only at 105 degrees, which is really not accepted in the industry as high enough. And to the best of our knowledge, they don't have any customers. Even the owner of the ReRAM actually, Nuvoton is using TSMC. And there's a new entrant. We all knew that GF is looking for ReRAM. We were trying to be the ones who get in there. Their internal R&D has been pushing strongly that they make it happen and the management gave them a chance. So they announced that they have a ReRAM. I think the good news is you can see that people see ReRAM is really needed. They haven't qualified it yet in their announcement, mentioned automotive. I think they still have some way to go. I personally think they made a big mistake because they just don't have the resources to maintain this. At a certain point, it will have to collapse. That's my personal belief. And so I think both UMC and GlobalFoundries are definitely high on my potential customer list still. I still believe TSMC is going to be a challenge even though they are on my customer list, and I believe eventually we can get there. But this is kind of showing you the market. Notice. You can see, by the way, the split between different markets, analog, MCU and ASIC. And you can see that the initial users are the analog guys. I think you guys already know, we started talking more and more about analog. onsemi is basically an analog company. Even with DB HiTek, it's a BCD process, which is mostly for analog companies. And you can see the adoption. It's no surprise that Weebit's first fab customers are analog. But then after that, the MCU market starts going up. And then after that, you have the ASIC and SoC margins going up. So this really shows you, by the way, that it's reflecting also what Weebit is doing. The fact that we signed up with analog companies. I think that's part of the thing that Yole has been looking at and saying, okay, we can see the money coming in. I mean, you already saw the revenue number for the fiscal year, the $4.4 million. And I guess now we're very happy with the recent announcement of the quarterly that -- this quarter, we got $7.3 million from customers. Now I think it's important for me because I know some people were really getting excited and oh my God, it's already cash positive and look at these numbers and everything. It's important for me, and I like to be honest with things. We're getting paid based on achieving milestones. And sometimes some quarters have more milestones, some quarters have less or whatever. And some of the milestones are bigger and bigger payments and some milestones are smaller. So I want people to understand it's great, and we're obviously very proud and very happy of the money that came in. I just don't want people to think, okay, now that's how it's going to keep growing, and we're going to see record quarters every quarter and whatever and extrapolate stuff. So we need to keep it in proportion. It's good. I mean you can obviously see from these numbers that the revenue numbers, I guess, for this year are going to also grow somewhat. And we're not giving any guidance, of course. But that's -- I think this is a good map of what is happening, and you can see how the Yole numbers are changing and growing. And Yole is finally accepting. Yole is close to STMicro, which is which is the only PCM provider actually. And they always -- at least in our mind, they kind of tend to grow the PCM market just because of that influence from STMicro. It's the only supplier of PCM. But anyway, that's kind of -- again, I need to click on this thing. So, recent highlights. You guys know everything here, the AEC-Q100, that's already old news for you guys. Record revenue for the fiscal year, then taped out at onsemi. That was a -- you can see onsemi has a team of I estimate at least 30 people, almost full time working with us. It's a big team. It's a big effort. They are really focused on pushing this forward as fast as possible. It is strategic for them, and it's great -- it's just a great cooperation. It's -- you can see with IDMs, it's really great because they really want to get this out and they want to get their products already moving and they want to. So it's really been a great partnership and this tape-out, and we now have to sit and wait for the wafers, and we'll see how long that goes. We, obviously, we just talked about the record quarterly customer payments. And obviously, that's nice to see there. And by the way, I want to point out, I mean, people are looking also at, oh, this was a positive quarter and stuff. You need to note that there was also the yearly refund payment from the French government that they gave us. So I'd just like to be as transparent and as clear as possible on things. And then you know that we have a target of three fabs and three product companies to sign up this year. I'm very glad that we actually achieved the three product companies already, and that was really nice. We started announcing the first one, and then we have two more now that are -- so there are three products that are already being designed with our ReRAM in them, embedded in them. Obviously, again, the design takes time and they need to manufacture the prototype wafers and test and see and qualify their products. But the clock starts ticking towards revenues eventually. So that's kind of the update. I always like to point to why Weebit is actually managing to make this progress. What is the difference between Weebit and all these other companies that are trying to build ReRAM or work in this nonvolatile domain. And I really think it's this combination of we have the company that is -- I think we're strong. By the way, the cash position is obviously something that is very important. We have $91 million in the bank, and that really enables totally focused on let's improve the technology, let's get the business, let's close these deals. I'm not worrying or spending time on how am I going to raise money now, and that's very important for us. We have money. Again, you start doing extrapolation in fiscal year '25, the spend was about $25 million roughly. So you can see we're feeling good about it for several years now and that we can totally be focused on getting the business, closing deals and in parallel, growing -- improving the technology. The people, you guys know our Board, which I'm extremely proud of each and every one of them. But beyond that, the company now is about 50 people already. We've grown. Obviously, we need to start supporting more projects and these things. We do have roughly 1/3 of the R&D is PhDs in physics and chemistry. I mean we really have a very strong team. You look at the VPs, I think the average experience is over 30 years in this industry, very experienced, very well-known people in the industry worldwide. I'm not talking about just in Israel and even the levels below, I mean, the average age in Weebit is much higher than you see in normal high-tech companies. And it reflects that you need that level of experience. You need that level of know-how of these things. So, really, that's very important. And Leti, of course, is supporting us. So I think it's great to have that. Obviously, we have a very good technology. It's part of it is all of this R&D that is going in with very smart people. We managed to make the technology work and I can tell you, we've hit endless obstacles along the way, but what's important is that you have the team that knows how to overcome them and move forward and fix things. And so really amazing technology, AEC-Q100 and all and so on. And we're providing the solutions now for the customers. And there's actually -- you have onsemi and the analog guys, and we're working a lot with analog guys. There's quite a bit of activity going on now with companies that want edge AI and want to see how we bring in ReRAM there, and there's activity around there and all these other things. And then it's really the customers. We have a very good relationship with the customers. Yes, some of them are just still hesitant. There still is that perceived risk. They still haven't seen this in mass production and so on. So each one at their own pace, but we are pushing forward. We are -- we still have to sign two more agreements. We're working hard on this, trying to get them in this year, and we don't have a lot of time. I remember last year, at this time, I was sitting and people were saying, you don't have time left. You said you're going to have a deal, you don't have time left, and we got it done at the last minute. We're pushing as hard as we can to get this done this year. We are engaged with a lot of companies with a lot of fabs, okay? I mean it's just fabs. I think it's definitely more than 10 that we're engaged right now in discussions, in evaluations in all of this stuff and each one of them with their own story, why and whatever. And -- but there is a very good -- we're in a good place there. And onsemi definitely helped having that deal. And I believe that when we sign another one or two, it's really going to start -- I don't want to say, opening the floodgates, but it's going to get us moving forward. So, and the customers, by the way, the product companies, they -- we have a huge advantage. We have a huge advantage in the design side. People don't realize. We talk about the PhDs and physics and chemistry and stuff. But we have an amazing design team, which is recognized in the industry to the point where sometimes people who try to develop ReRAM ask us, can you guys take our ReRAM bit and do the design around it because we don't know how to do that. And so we have an amazing design team. Customers realize and these product companies, obviously, our goal is to eventually have enough standard modules that people will just come and use them, and we won't need to do manual work there. I mean the goal is to have high margins and then not be doing services. But it's -- the customers know that if they need that support, if they need that design service, we can give it to them. And that's a critical thing. And especially the first customers, they always need some more handholding and stuff. So we have that team. I strongly believe that when you build the brand name that with Weebit, you're going to be successful. That's what really gets the market going. If you look -- if anyone checks my history and the different companies that I was in, almost all my life, I've been competing with companies that gave competing technology for free, literally for free. They were big players. The customers would buy these huge packages from them and then they would tag on, on top of that for free, the competing product. And I had to go and compete with that. And the only way I could do it was just give good service. The customers knew. And I would meet the CEO and I would look him in the eye and I would say with the companies that I was at Verisity or whatever, we're going to -- I'm telling you, no matter what happens, you have a problem, you call me up, I'm bringing in the cavalry. We're coming in, you will be successful with our product. And I was -- we were selling Verisity was selling more than $100 million per year when Synopsys gave its competing technology, which was good for free. And we got more than $100 million a year because people value good service. And that's really what we're doing here. I go and I look at the CEOs in the eye and I tell them, with Weebit, our team will make you successful. We are there. We have a very experienced team, and they are there for you, and we will make sure that your product won't fail because of us. It might fail because of you, but it's not going to fail because of us. And that's a key thing. So that's really just to give you guys where we are, what the status is, if I'll stop sharing, and we can probably go to Q&A side. Danny Younis: Yes. Thank you, Coby. So we will now move to the Q&A part of the session. Once again, for all those online, and there's quite a few of you, if you have any questions, please type it into the Q&A box at the bottom of your screen. I can see they're starting to come through. But I think just to start off with, we might start in the room. Are there any questions from any of the attendees in the room. Unknown Analyst: Question on next year. We obviously -- I mean, you're too early into the commercialization journey to be giving earnings guidance, as you said. This year, I think it was really helpful for the investor community when you issued those targets around the product customers and the fabs. Is it relevant to have a similar target or goal that the investor community can look at and measure against next year, given we don't have that earnings guidance status, if you like, yet? Is that something you've considered? Jacob Hanoch: This guy is on my case saying, what are you going to announce on the AGM? I mean during this trip, how many times have you asked me that question, we're thinking about what we can do. It's very difficult to actually -- I mean, the targets that we set for this year were, a, very aggressive; and b, I mean there's a big risk on achieving these kinds of targets. And it's very hard, especially when you start growing to keep saying how many customers do you expect to have. And I think it's going to be hard for us to talk about number of customers, but we know you guys need some sort of targets or guideline or whatever, and we trying to figure out what would be the most meaningful goal for you and to keep going. So we're discussing this, and I guess we have a month until the AGM, and we'll figure out what we want to present there. By the way, can you mention the names? I'd like to get to -- David, I know. Unknown Analyst: Just regarding these -- the deals that you've made with the product companies, can you give me an indication of the scope what one may entail? Is it just particularly one particular model of chip that they're looking at? And if it is one, how much extra negotiation or whatever that has to go on if they decide to do another one or expand what's existing? Jacob Hanoch: I think we have you here. Eran Briman: Well, I think in the quarterly activity report, we mentioned also the specific markets that these guys are targeting. Battery management was one of those and then some security-related applications and products. These deals, they differ from one another. It's not one deal that fits all of them. In most cases, they get a license to use the technology in a specific product, while others would like to have this in a complete product line. So, entire products. But I think at this stage, we won't be able to give any specific details about these. Jacob Hanoch: I guess what I can say is right now, they're mostly coming with one product. They want to test the waters, right? I mean nobody jumps head first to the deep end without knowing enough. So the deals that we have now, I guess, basically are, again, I can't talk about all of them. But in general, let me talk generality a bit. Most of the companies that we talked to and we're already engaged, obviously, with more product companies. Most of them are basically thinking of one first product. And we have that negotiation. Some of them want some NRE work and stuff, others are actually willing to use the more standard module. Now obviously, once they do one product and they feel comfortable, they'll want to do more. So it's -- we look at it as we're opening the door to that customer, and now we want to go and expand. So now once you sign the first license agreement, normally, you can just add addendums and it becomes much easier. And that's -- again, that as you grow, the overheads start shrinking because a lot of things you did already and now you can. So the customers you already have agreements with, you normally just add an addendum and you specify the new product. And I mean, if it's a different manufacturing node, there are a lot of parameters, by the way, in these license agreements that you define. And the license fee to give everyone a feel for this thing, the license fee varies by 1 million different parameters, by the size of the memory, by the node that they're using, if it's 130 or 65 or if in the future, it will be smaller nodes, it kind of changes. So there are a lot of parameters. It's hard to give a guidance on, okay, this is what it's going to look like. But the key thing is once the company starts working with normally, they will -- they get to know your technology, their designers get to know it. And then they can just start using it more and more and more products in parallel and you start having a lot of addendums to that license. Unknown Analyst: In November last year, you indicated that once you felt once you had two or three customers that FOMO would sit in. And you've also talked about in the past, crossing the chaser. So, on those metrics, where do you consider you are now? Jacob Hanoch: So we were just talking about it this morning. We're right now in that crossing the chasm bowling. We're at the point where DB HiTek helped us drop the pin of onsemi, onsemi definitely now got others moving. I think we're getting closer to that tornado. I think that, I don't know, one, two more agreements, we'll see it going. So it's -- we're sensing it. We're sensing the fact that, I mean, we're talking to all of these foundries, IDMs, et cetera, and people know they need ReRAM. I mean, by now, TSMC has it in mass production. They need to compete. Now that GlobalFoundries announced it, it got more attention. The market is moving. It's moving at semiconductor pace, but it's definitely moving. Unknown Analyst: Yes. Last one for me. I was just interested in understanding the difference between the fab and the IDM. Obviously, with DB HiTek, we know you've got to go through the tape-out, the wafer production, qualification, et cetera, and then start talking maybe some in parallel, but then start talking to customers about their design and then going through that process to get to a customer chip. With the IDM because they are their own customer, is it safe for us to assume that, therefore, the time to a product and market is shorter with the IDM because you don't have that secondary design, test, qualify process? Jacob Hanoch: The answer is yes. The answer is yes because the thing is when you're working with two independent companies, there's that trust level that I mean the product company, the issue is how much they trust the fab or the foundry in this case, that everything will go well and it will be ready and whatever. So they tend to want to wait until qualification. Now sometimes, and you can obviously see companies actually end up signing up before qualification because they can already see the qualification happening and stuff. But it still takes time. I mean there is still -- it's two different companies, and they need that trust level. The thing in an IDM is it's one company. When it decides to sign up to manufacture, it's because it knows that it wants it for its own products, okay? So there's -- you kind of skip that phase of convincing because the only reason why they sign a manufacturing license is because they know they want it for their end products. I mean, otherwise, why would they sign up with you. So, in that sense, that doesn't exist and you can parallelize more. Now where and how and what's happening onsemi has been very strict with us on don't talk about anything. So we can't go into specific what's happening with onsemi. But in general, you're absolutely right. Unknown Analyst: What's your confidence? I'm sorry, my name is [indiscernible] Jacob Hanoch: Okay. I just -- normally I meet you every time, so I need to know. Unknown Analyst: What's your confidence level in achieving or in signing the two remaining IDM fabs and the qualification of the South Korean company, DB HiTek? Jacob Hanoch: So, qualification is actually moving. We had some.... Unknown Analyst: Sorry, if I may just add by 31st December. Jacob Hanoch: 31st of December, yes, of course. That I understood very well. So, with DB HiTek, we had some hiccups on the way. I mean, always expected that you have some issues, but we are continuing. We believe that the qualification will be done by December 31. Right now, whatever big surprise happens. But in general, we're on that path. With the fabs, we are in advanced stages with one, with others. We're also moving forward. We're really trying to get more done by the end of the year. I guess I can say some might slip into 2026. I can't -- the 31st -- the problem is it takes two to tango, right? And these guys sometimes drag things. So we believe we can definitely close -- one of them we can definitely close. The second one, we are really pushing hard. And actually, there's, again, we're engaged with a lot of them. I don't even know who -- sometimes who it will be because we're talking to several. But the goal is really to push as much as we can to have these things done by the end of the year, and we'll see. It's work in progress. Unknown Analyst: The equity incentives of the other directors are hang on. Jacob Hanoch: Well, my equity incentive, believe me, I'm thinking about that a lot. Believe me, I'm thinking about that a lot, mine and his. We all -- our equity is tied to this, and we're really pushing as hard as we can to get it done. You can imagine. Unknown Analyst: Wishing you the best. Danny Younis: Are there any questions still inside the room? We can revert back to you at the end, okay? So if you think of any more. We've got quite a few online questions. I'll also try and pull them where possible, Coby. The first one is actually from an e-mail from Stuart that we got. It's in regard to the pipeline. Would you mind talking a bit more about the pipeline as part of your presentation? Specifically, you have mentioned previously potential signings are being held as no one wants to go first. Is that a comment in relation to fabs, IDMs or product companies? And now that customers are signing, is that helping discussions with others? Jacob Hanoch: So, first of all, human nature is such that we don't like change. And people like to -- what they're comfortable in to stay in their home, in their environment. So whenever change come, people resist it. And that's true for everyone, right, and in any domain. Specifically in this domain, it's true for the fabs, for the product companies. We had a situation where I can tell you with one of the fabs, I thought we were going to sign a long time ago. And then they were already convinced and wanted to go forward and then their product customer told them, hey, we're still not comfortable with this new stuff and whatever, and we want to do flash for another project and stuff. And suddenly, the whole thing comes to us screeching halt and they focus on flash and they come back to us almost a year later. So that's part of the challenge that we have in giving these guidelines and things. You never know how it will work even when the fab is already telling you, we're totally convinced we want to run with ReRAM. Suddenly, their product company tells them, "no, no, no, no. We really prefer flash first. Let's let someone else do that product. We'll do ReRAM the next one, right? So it happens. And -- but I think, again, and this is also true. The more people you see around you starting to use something, the more at ease you are with using it. And that's what's happening. onsemi really helped us. I mean it's -- there's before onsemi and after onsemi. And after onsemi, when people see such an important player in the market, that's signing up with this technology, they say, okay, they're talking. They're talking. Now again, some of them are dragging their feet and saying, oh, until we don't see DB HiTek with a product in mass production, we're just not going to move forward. We want to see it in mass production. And there are several like that. Others are saying, okay, we understand that if onsemi analyzed it and took that risk, we can feel more at ease and they still do evaluations and they still go through all of this stuff, but we're progressing. These negotiations, by the way, are just -- they take so long and their lawyers. I can tell you, let me go back to onsemi. If we go back more than a year ago, I was sure onsemi was going to close before September. It was literally ready for closure. And then suddenly, they tell me, oh, the lawyer is busy now. We're doing an M&A. I think they announced some acquisition in November or something like that. The lawyer just disappeared, and we were so close and the lawyer disappeared. And that's why it ended up closing in December. Now you asked me December 31, it could have been that the lawyer would have been busy two more weeks, and we couldn't have closed onsemi on time. So it's that kind of thing. It's -- we're doing our best on these things to push these forward. Danny Younis: Okay. There's a few questions on DB Hi-Tek. Two or three investors online have asked about an update on the quarter. You've already answered that, so we don't need to answer that again. But Stuart's got another question in terms of DB Hi-Tek. Are there still a lot of fabs, IDMs and/or product companies waiting for DB qualification? That is. Will that be the dam wall bursting when that's completed? Jacob Hanoch: It's going to be definitely an important milestone. There are some companies that are telling us, we just want to see that happen. We just want to see that you actually close that qual. So I don't want to say it will open the wall, but it's going to be another crack in the wall. I think that the big thing will be some more major players signing up and we're pushing on that. I mean that's the big push, but it's definitely going to help us push forward. Danny Younis: All right. There's a few questions onsemi. Can you provide a little bit more detail on the final qualification with onsemi? Jacob Hanoch: I guess onsemi, we can't really talk -- what we can say is we taped out, okay? Now this is now being manufactured, guess where, in onsemi, okay? And you can understand that they consider it a high priority. So now I don't control their priorities in the fab. I mean it takes many months to manufacture. They can give it higher priority. I don't know what other stuff is running through their fab line right now and where they're putting these wafers relative to products that they manufacture for their customers to actually get revenue. So, but they're manufacturing them, and we'll get them back. Once we get them back, as you know, we start doing all the testing and verifying and then seeing that everything is in a good shape. And hopefully, at that point, we can start qualification. The good news is because it's, again, it's the fab that is also the customer and so on, when we want to run more lots, if you remember, we need to do qualification on 3 separate lots that run independently. So, I mean, those kind of things, I imagine. Again, I'm not committing to anything, but I imagine they will probably give priority to get these lots through so that we can do the qualification and they can get their products out. Danny Younis: Some of the investors are pushing a little hard at it, Coby. I know you probably can't answer this, but given onsemi was talked out in early October, is there a chance you could be receiving royalties from onsemi in full year 2026 fiscal year? Jacob Hanoch: I guess Unfortunately, again, they will -- you can assume that they'll want to have this in their products and they'll want to push this forward. But their schedules, we know some of them. By the way, we don't know a lot. They keep it secret from us as well. And even what we do know, they made it very clear that it's under NDA, and we shouldn't be talking to anyone about it. Danny Younis: Maybe to rephrase it as Warren does here, once qualification is finalized, how soon will you have products ready-for-sale potentially? Jacob Hanoch: I really try -- I try to be as transparent as I can with you guys, but onsemi was very clear, don't talk about these things. Eran Briman: Maybe we can just say in general, it takes between 18 months to 24 months for. Jacob Hanoch: Yes. From the day they start doing a design of a product, it's -- the rough schedule in general, again, talking generalities, it's I would say, between 18 and 24 or 30 months. It depends on the product and the complexity and whatever. But that's kind of the time scale to get product out to mass production. Danny Younis: Okay. Maybe a final one on onsemi before we go into other matters. The current tape-out with onsemi, is that the end design final product that's taped out in order to reduce the time? Jacob Hanoch: No, no. No, it's the test chip. You need to remember, this is the first ever tape-out of ReRAM. So it's a test chip that we designed. I think I presented it a while back. It's a complete test chip. It has a processor. It has SRAM on it. It has a bus and everything. I mean it's a complete basically, it's a complete SoC, okay? We did a complete system on a chip, which has our ReRAM in it where you can really load programs in and run them. And so it's a real system that is going out, but it is our design for test purposes at this point. Danny Younis: Okay. We'll move on to other topics. So, from Chris, Coby, firstly, congratulations on a great quarter. How are things progressing with automotive companies? Will this be a slow burn in terms of them putting pen to paper? Jacob Hanoch: You can answer that one also, right? Eran Briman: Well, I want to say automotive is definitely one of the key markets and a lot of interest in that domain. We get -- in modern vehicles today, you get thousands of chips in there and they are more advanced than what you might find in other IoT devices. There's the push over there, we feel it very clearly. I think onsemi is a very good application. onsemi is all about automotive applications. So I feel very confident with these prospects over there. Jacob Hanoch: I would add just the thing about automotive is human lives depend on. And that's something you need to remember, the regulation that you have in different countries related to it, the standards that you need to meet. It's not just AEC-Q100 that you need to meet. There's ASIL and there's ISO 26262, and there's 1 million different qualifications, if you want to call it, that they need to pass and they need to show that people won't die because, right? So it's very, very critical automotive projects normally take much longer than an average SoC. And that's something that people need to understand. They will engage with us now, and they see the potential. And I mean, a lot of these automotives are actually analog. Remember that graph there, a lot like onsemi. So a lot of these automotive guys are analog and they will engage with us now. They can already see the AEC-Q100, they can already see the potential. But how long will it take until it's actually in mass production, automotive projects take longer. Eran Briman: Maybe just to add on that, it's also stickier. Jacob Hanoch: Yes. I mean once they work with you, the cars -- the same model of car, and it's not just the same model of car. The subsystem is used in many future generations of that car. So once you're in, you're in for decades. I mean those are the type of projects that you sign up and you know royalty is now going to come in for a long time, you're going to have that royalty stream. Danny Younis: Okay. The next question from Jason is around the security product. Can we get a sense of what a security product means in terms of the use of a Weebit chip? Eran Briman: Well, secured products mean one of the advantages that ReRAM has is the security. The fact that the NVM is integrated with the main SoC means it's much more difficult to hack the products. You get secured products in payments, secure payment. You get this in your NFC products in your smartphone. Also secured products in automotive, right? It's extremely important to make sure that there's no way to hack into your autonomous vehicle or whatever it is. So these are the types of products that we're seeing over there. And the NVM is a critical part there, right? It's one of those. Jacob Hanoch: The NVM also -- I mean, ReRAM has some unique characteristics about no two ReRAMs are identical. And so people use that, for example, for security keys or things like that. So it's used in many different security applications. But that variability that you have between ReRAMs and the fact that no two ReRAMs are the same is something that a lot of people like and use that in the security. Danny Younis: Okay. The next question is around the architectural agreement. So is the architectural agreement still alive? And if yes, can you comment on what nodes would be part of the architectural agreement? Jacob Hanoch: So is it alive? Yes. One of those fabs that we were talking to is, again, an architectural agreement is also much more complex than a regular agreement, and that's one of the things that's causing it to drag forever. But yes, I never -- if you would have asked me in 2023, do I think I'll be sitting here at the end of '25 and still saying, yes, it's alive, and we haven't signed it yet. I would have said you're crazy. How long will it take? But unfortunately, it's definitely alive. It's definitely alive, and we are working with those guys. But once we announce it -- yes, I mean, once it's done, we'll announce it. I can't talk about it before that. Danny Younis: Maybe on GlobalFoundries, there' a question here. Maybe can you provide an update on if the GF chips were qualified? Jacob Hanoch: The best of our knowledge. I mean, in their announcement, they didn't mention qualification. If it were qualified, I imagine they would want to say that. So they didn't mention it. They also didn't mention the word automotive anywhere in that announcement. So, two things that we didn't see in their announcement. Now they started much later. They are putting a lot of emphasis. I know that they are putting a lot of emphasis to push this fast through. But still, it's a lot of work, and we don't really know beyond that where they stand. But we're relying on their announcement. If I were them and it were qualified, I would say it's qualified. I want the customers. Danny Younis: Christian is pretty keen to know, are you working with any mobile phone product companies? Jacob Hanoch: Also, our... Eran Briman: Among enough. Jacob Hanoch: Among, among, yes, we're talking to so many different product companies, and there's also those. Eran Briman: Yes, smartphones, they have tens of different chips inside from the big SoC that runs the application processor that's usually much more advanced in terms of process node to a lot of power management devices that you have there and smart payments and all these things. So, I'm sure eventually, we'll find ourselves in one of those smartphones, yes. Danny Younis: Okay. Turning to SkyWater. Maybe just an update there on the current relationship status. Jacob Hanoch: I think right now, it's pretty obvious they are totally focused on their R&D services, and we're a customer there. So, I mean, we definitely -- we're a customer right now of SkyWater. The fact that we're qualified there is great because now R&D can actually do a lot of testing there, and they are faster and cheaper than Leti. So a lot of things we're actually running through them to save money and to do things faster. In terms of working with them, to be honest, right now, they've disappointed me so much that even they acquired a new big fab in... Eran Briman: In Texas. Jacob Hanoch: In Texas. I don't know what they're doing there. I don't see I don't want to bash whatever. But right now, there's no real discussion about that. And by the way, we're talking to such bigger fabs right now. To me, they are lower priority. I mean I'd rather close agreements with some of the big guys than with SkyWater anyway, so. Danny Younis: There's a couple of questions around discrete. So the first one is, do we risk our competition beating us to discrete ReRAM while we focus wholly on embedded? Jacob Hanoch: So, first of all, we're not focused wholly on embedded. There is work in the background. It is low priority, admittedly, but there is work going on all the time. I mean just in September, I was at Leti with the R&D team, and we were talking about discrete and how we push this forward and looking at the different options and so on. So it's definitely not dead. It's definitely something that we know is important and we want to push forward. I personally believe we -- I am not aware of any other company that is working on discrete ReRAM right now. So I don't think we're risking someone beating us to it. I haven't seen anything anywhere about a company that's trying to do discrete ReRAM right now. So it's something that people would love to have, but it's a big challenge. I think that's -- again, going back to Weebit's differentiation, it I'm hesitating to say this, but I really can't think of another company in the world right now that has the combination of team, technology, resources, management focus that can actually do discrete ReRAM. I really can't think of that. Eran Briman: We had the Fujitsu that was doing some ReRAM for some time. Jacob Hanoch: Yes, they were trying to do, but that was it. Yes. So there's -- I think we're definitely -- I don't think anyone is going to bypass us. It's true. It's not a high priority right now, but it's still working all the time in the background. Danny Younis: And given it's not high priority, the next question sort of alludes to this. So can you give an indication of the time line to discrete? And have you yet identified a preferred selector architecture? Jacob Hanoch: I can't give any time line. It's still a lot of work. It's really a lot of work to do, and it's going to require R&D and we are exploring all kinds of talking about architectures. We're still at the phase of -- we're trying one and then we're thinking maybe there's another potential. And so there's different options that we're looking at. And yes, so it's still work in progress, and it will take time. Danny Younis: Stephen's got an interesting question here. So are there any restrictions on Chinese companies obtaining or manufacturing ReRAM? Jacob Hanoch: The U.S. has a black list of companies that you can talk to. So those are definitely off of our target list. But beyond that, we don't have a real restriction. I can tell you that I'm just giving preference to anyone who's not Chinese right now because of the risk. I mean you don't know if a company that you're working with might end up on the black list later on or things like that. We've already seen situations where companies that we were considering working with that actually kind of ended up in the black list. So I'm very cautious. We have so much potential right now in the rest of the world. And China is a huge market, and you can't really ignore it. But at the same time, Weebit is just entering this huge vacuum. There's an unbelievable vacuum out there that we can fill. And there's no -- I mean, why take the risk of trying to work with a company where there might be an issue when you have so many others. Danny Younis: There's a couple of questions from Jason and Serena on EMASS. So maybe just to make the generic. Has the EMASS collab progressed? And can you maybe just talk to the talk that they're progressing towards a 16-nanometer form factor, which seems to be beyond Weebit's announced capabilities. Maybe just comment on that. Eran Briman: Yes. Well, we worked with EMASS, it was earlier in the year towards this demonstration that we have. It's a beautiful demonstration. I think recently, we also uploaded a video that shows this demo. I think it's very nice. It has great potential. They were using a 22-nanometer process node, and they have the option to continue and work with us. We're in discussions, but there's nothing much to actually report at this stage. So, let's see how this progresses. Danny Younis: Okay. We'll go to more market general questions. So anything happening on the AI front? Eran Briman: A lot. Jacob Hanoch: This guy and his team are -- I think that's the biggest activity. Eran Briman: There's a lot going on, on AI. AI is divided into multiple steps. We're seeing a lot of interest in integrating our ReRAM into an AI SoC, just to get the memory closer to the processing elements and reduce the amount of data movements. And at the same time, we're seeing increased interest also in what's called in-memory compute -- this is where the computation is done within the memory element themselves. We're seeing a lot of interest from research institutes. I would say that for the past five, six years, maybe five years ago, this in-memory compute was just a concept that people were talking about. Nowadays, this is in real research, but not just within universities and research centers, but also large corporations and companies are investing heavily in this domain. I think it's still not ready for production, but we're getting there. We're getting there every year. It's getting closer and closer. I wouldn't put any time line on this, but it's there and the interest that we get from customers and from such partners is very high. Jacob Hanoch: And I guess I would just add, Edge AI, I talked about it, I think, in the previous period time that I was here in Australia. ReRAM is really a natural fit for Edge AI, and that's a domain that's really growing rapidly and the demand there is growing. The challenge is a lot of these guys want to work at 22 and below. And right now, we actually don't have that to offer them. But some of them are working in larger geometries, and we are relevant. So, but in general, there are a lot of calls even from big name companies who say, hey, we saw you were working with ReRAM. You have ReRAM. We're looking at it for Edge AI and what do you think? So I mean, it's definitely something that a lot of people are looking at ReRAM for Edge AI. Danny Younis: Speaking of Edge AI, I've got a question here from Jason on Edge AI. So can you maybe just clarify, has this been signed as a product company or in negotiations? Jacob Hanoch: So, unfortunately, we gave all the information we could on the product companies in the quarterly. Companies are still trying to be more -- I mean, eventually, they will be announcing their products. And I think these things will become public. Hopefully, they'll let us start talking about it more. I guess, beyond the fact that right now, the three product companies, what we mentioned are U.S.-based, I can't really talk about which application -- I think we -- for the first one, we mentioned they were a security company. The others right now we need to be really careful with them. So that's what we can say. Danny Younis: Maybe touching on Samsung. So what's Samsung's focus these days with regarding NVM? Are they MRAM focused? Jacob Hanoch: So, Samsung, I mean, what they have in mass production right now is MRAM. And what they're offering their customers is MRAM, I guess. Eran Briman: I think it was public that they had some ReRAM. Jacob Hanoch: They had a big ReRAM project, which they ended up shutting down because it just -- they couldn't get it off the -- working. Beyond that, I don't think we can comment. Danny Younis: Michael's got a technical question here. How are you going in terms of reducing the process node to 10 nanometers? Jacob Hanoch: Well, I said we're talking to a lot of fabs. And obviously, that's the direction we want to go, and we want to get fabs that work in the smaller nodes. So, eventually, we'll be there, right? It's a matter of pushing. And you can see -- again, that's part of that "perceived risk thing that in the beginning for the companies, the smaller the geometry, the higher the perceived risk. And so that's why you've seen that we started with 130. Now we're at 65 and then we're trying to push down, and we'll be getting there. Danny Younis: Okay. The next question is around your technology. So once it's in a customer product, will the performance results help sell that Weebit technology to other possible customers? Eran Briman: Definitely. Jacob Hanoch: I mean the ReRAM has big advantages over flash and people will see it and people will see the competitive advantage of the products that have ReRAM in them. I'm sure that, that will help us. Danny Younis: Yes. And when are you looking at reducing the smaller nodes? Jacob Hanoch: Well, as soon as these guys will sign that damn paper. Eran Briman: But we're confident there's no technical barrier to a 1x geometry, knock-knock. Jacob Hanoch: At the 1x, definitely not. Below that, there's more work to be done. But at the 1x, we've already done quite a few -- yes, I mean, I'll even say we have PDKs. We did simulations. We've seen that there's no issue. Danny Younis: Is ReRAM a good fit with the new generations of humanoid robots under development? Jacob Hanoch: Definitely. Definitely. Eran Briman: Definitely. For multiple functions. Jacob Hanoch: Yes, for exactly. I'm thinking for a lot of different functions there. We talked about AI, which is part of it. It's really for many different functions. Eran Briman: AI, it's the motor control that you need to run, which is it's a power management. There's many different functions within this. Danny Younis: Maybe a question on one of your competitors. What are the key differentiators between Weebit's ReRAM and TSMCs? Jacob Hanoch: From what we know, and again, we don't know enough about TSMC from what we know. I would say, first of all, it's the company focus. It's not the actual technology. We -- I don't think we can really comment on speed or performance or power or whatever. We don't know enough, and I don't want to go into that. But I think the real difference is the company focus. Weebit has the design team that is there to help -- and we know because we had customers who actually called us up and said, we talked to TSMC, we wanted to use their ReRAM, but we wanted them to do some modifications for us, and they wouldn't do it. They said, God help, basically. TSMC is a fab. They want to manufacture. They don't want to start dealing with modifying. I mean this whole ReRAM is just an enabler for them to sell wafers. So they have several versions. It's a good ReRAM. First of all, let's make it clear. TSMC is TSMC, and they have a good ReRAM and people are using it. And I'm not going to say it's anything bad about the ReRAM. But Weebit, the advantage is that we have everything around, and we will work with the customers to give them what they need to tailor it to give them a better solution. I believe that the investment that we're making in R&D, and we are working on new concepts in manufacturing ReRAM and on improving the whole manufacturing process. I don't know how much TSMC is continually investing in it. Again, it's not their core competence. It's not something that they plan to make a lot of money off of. I mean it's -- right now, they are making a lot of money off of it because they're the only ones who have ReRAM. So they put this big margin on there. We tell people ReRAM doesn't add more than whatever, 7%, 8% to the cost of a silicon wafer, they say, but TSMC is asking for 40% like, well, because they can, right? So, but in reality, they're not -- this isn't what they're going to make money off of. And at a certain point, there's a limit to how much they'll invest in this R&D. So I believe that over the years, we will continually improve the technology. And at a certain point, and it's not going to be immediate, but at a certain point, I believe we have a good chance of having a better ReRAM that some customers will want and will push TSMC to license the ReRAM from us. Danny Younis: We're on the last four questions online, and then I'll throw back to the room for any final questions. Very general questions. So are we going to see any takeover offers in the near future? Jacob Hanoch: I guess everyone knows what my answer to that. Danny Younis: And on the topic of cap raises, any cap raises in the future? Jacob Hanoch: With $91 million in the bank, I'm focused on getting the deals done. I really don't think I need to think of cap raises. Danny Younis: There's maybe more of a comment here rather than a question in terms of maybe getting other directors like Atiq to join these webinars maybe once a year. It's good having Eran on, maybe introducing other directors as well maybe. Jacob Hanoch: Honestly, I never thought -- I mean, we have Dadi coming every year to the AGM, and he's there. The others are nonexecutives, so I normally don't think about getting them involved, but that's -- let me think about. Danny Younis: A couple of more have come in at the last minute. Outside of the foundry deals and partnerships you've already talked about, is there any other area, potentially a new market or application that you think could quietly become a big growth driver for Weebit over the next few years, something that's not really on the radar at the moment? Jacob Hanoch: We look around. I mean that's this guy's job, right? Business development is his title, right? And we're always looking around at how -- first of all, how ReRAM can be used in different places. And then every once in a while, there are ideas of complementary things. I mean this is the type of thing that I think any company is always looking at, at what's happening in the market happening around. And I mean, when things happen, they happen, right? Eran Briman: I think one interesting market that we're seeing that we get a lot of questions about data centers, AI, but data center side, right? So very focused on Edge AI, and we're doing a lot of stuff there, and I hope soon we'll be able to talk more. But on the data center front, what we're seeing is not necessarily the NVIDIA chips, which run at a much more advanced process node, but the power management, which is a critical issue when it comes to data centers, right? The amount of power and the air conditioning that runs in there and all that. So power management is critical. And one of the markets, for example, for semi is data centers, power management for data centers. So this is definitely an interesting way into those data centers for resistance. Danny Younis: Okay. We've probably only got time for two more questions, maybe one from the room. Eran Briman: All right. Danny Younis: Okay. So the third last question. From your perspective, how should shareholders best interpret the information that you shared? And what are some of those indicators that you can suggest that investors should focus on to understand your future momentum? Jacob Hanoch: I think Yes. I -- honestly, it's hard to talk about yourself and whatever. But I think Weebit is a very conservative company, which is just focused on doing the job. We basically try -- I think you can see -- first of all, I try to be as transparent as I can. Second, you can see the targets and how we progress from year-to-year and slowly. It's -- actually, in semiconductor terms, we're really moving fast. So I know it looks like forever and -- but we are moving, and it's really steady as she goes, right? So I think that more than anything, I hope that shareholders are looking at how things evolved and are seeing that we went -- I remember when I joined the company, we had just the first bit cell and then the array and then we got to the full chip and we qualified and we went to SkyWater and we went to DBH and we got to onsemi. And so I hope you can see that trajectory. Now you can also see the cash. I mean, fiscal year '24 was $1 million revenue, fiscal '25 was $4.4 million. Now just this quarter, you can see already how much cash is coming in. So you can start understanding where it's heading. I really just hope that people see that we're serious. We're doing the work. I don't like to blow things out of proportion. I don't like to go -- when things don't work well, we don't go into, oh my God, everything is falling apart. We're -- it's a very experienced team. We've been through endless hurdles in our lives. And at Weebit, believe me, we've gone through quite a few. And we just -- we hit the hurdle, okay, what do we need to do? We fix it, we move on, and we continue to progress. So I just think people need to look at that and see how every quarter things advance. Danny Younis: And this is a good one to finish off from the online questions at least, 10 years, with your crystal ball, where do you see the company in terms of scale or size versus your peers? Eran Briman: Or the market. Jacob Hanoch: Yes, I'm not giving any guidance because this -- in Hebrew, we say prophecy was given to the falls. I mean that's what's written in the Bible, prophecy was given to the falls. So -- and I don't consider myself such of it. So -- but I mean, obviously, I believe Weebit will be growing. My goal. I can say what my goal is. My goal is to be the leader, the #1 ReRAM company. And I think in 10 years, it's going to be not just ReRAM. We will expand beyond ReRAM. There is a lot more out there. I mean, who knows -- again, people asked about M&A. Things happen when they happen and when you have opportunities. But over 10 years, who knows, you can assume that there might be some opportunities. the whole market, AI, we don't have a clue where it's going to head. ReRAM is a natural solution for AI. So I believe you're going to see a big AI market and you're going to see Weebit as a big player there. That's, again, my belief and my goal, what I would like to do, no guidance or any commitments or whatever. Danny Younis: Do we have a final question in the room? Unknown Analyst: Just regarding the test chip that's been manufactured and in some cases, qualified. Is there any commercial viability to sell that as it is since it's already gone through the full process? Jacob Hanoch: It's a very simple system on a chip. I mean some people might want to actually use it. I don't know. Eran Briman: There is a possibility, I think. For certain applications, some IoT applications, it could be a good fit. But I definitely believe that for a true product, you would need at least to add some kind of interfaces and real-world interfaces into the chip or... Unknown Analyst: I thought that actually was the idea that was made quite generic and versatile for people to test out. Eran Briman: Yes. It's very generic and versatile. I agree. Jacob Hanoch: But for commercial purposes, they'll probably want to tag on some more. And to be honest, I haven't really thought much about it. But if a customer comes and say, "Hey, your test chip is really interesting. I just want to tag on some things. We have no problem to license the full test chip. Unknown Analyst: A quick question about patents. Could you tell me or tell us roughly how many patents you would have covering ReRAM compared to your main competitors like TSMC? Eran Briman: So we're not following up on specific patents from competitors. I think... Unknown Analyst: Just numbers. Eran Briman: Yes. So I think in the last quarter, we announced six new patent applications were made and we were at more than 90 patents for us. With regards to competition, I don't have the answer. Jacob Hanoch: Yes, we actually -- it's -- in the industry, people try to avoid researching the patents of others because you can only get into trouble. So... Unknown Analyst: We took get someone else to do it for you. Jacob Hanoch: I guess it was less interesting for us. As long as we know that to the best of our knowledge, we're not infringing on anything, and that's what we care about. That's what's important. Danny Younis: Unfortunately, we've run out of time. So that concludes the Q&A session. I'll now hand back to Coby for any closing remarks. Jacob Hanoch: Well, I guess, first of all, I'm always glad to meet you guys and the people that are out there. as I said before, Weebit is moving forward, progressing, making good progress. You can see it. We definitely plan to close more deals this year. We -- that's the big focus right now next year to already get into that tornado and really get this thing moving. We have an amazing team, and we have amazing shareholders that stick with us in the ups and downs and all. And yes, I mean, the numbers, again, what happened this quarter, I'm repeating, don't expect every quarter to be like this and going up, but it's good, and we are going to continue to get money from customers and the numbers will grow over time. So, it's good, and we're moving forward. Danny Younis: Okay. Thank you, Coby. Thank you, Eran. Thank you to all the people who attended in person, and thank you to all those online who can now disconnect. Thank you. Eran Briman: Thank you everyone. Jacob Hanoch: Thank you.
Operator: Hello everyone, and thank you for joining us today for the Southern Missouri Bancorp Earnings Conference Call. My name is Sammy and I'll be coordinating your call today. [Operator Instructions]. I would now like to hand over to your host, Stefan Chkautovich, Executive Vice President and CFO, to begin. Please go ahead, Stefan. Stefan Chkautovich: Thank you, Sammy. Good morning, everyone. This is Stefan Chkautovich, CFO of Southern Missouri Bancorp. Thank you for joining us today. The purpose of this call is to review the information and data presented in our quarterly earnings release dated Wednesday, October 22, 2025 and to take your questions. We may make certain forward-looking statements during today's call, and we refer you to our cautionary statement regarding forward-looking statements contained in the press release. I'm joined on the call today by Greg Steffens, our Chairman and CEO; and Matt Funke, President and Chief Administrative Officer. Matt will lead off our conversation today with some highlights from our most recent quarter. Matthew Funke: Thanks, Stefan. Good morning, everyone. This is Matt Funke. I'll start off with some highlights on our financial results for the September quarter, which is the first quarter of our fiscal year. Compared to the June linked quarter, we had relatively stable earnings and profitability with solid growth in net interest income, which stemmed from loan growth and further net interest margin expansion and the decline in operating expenses. These improvements were offset by a larger provision for credit losses and a decrease in fee income. The larger provision was attributable to the evolving economic environment, additions to individually renewed loans and loan growth. We feel we have good momentum on pre-provision net revenue to start the year, and we're optimistic about how we'll perform in the new fiscal year. The diluted EPS figure for the current quarter was $1.38, down $0.01 from the linked June '25 quarter but up $0.28 from the September quarter a year ago. During the quarter, we continued working with the consultant to complete the renegotiation of a significant contract. We have recognized some expenses on this renegotiation in the linked quarter. But because this was on a contingency basis and because the renegotiation worked out well for us, we had additional expense to recognize in the current quarter. These totaled $572,000, reducing after-tax net income by $444,000 or $0.04 per fully diluted common share. Between the linked quarter and the current quarter, we have recognized right at $1 million in consulting expenses related to the contract renegotiation. But with the expected increase in revenues, which will flow through bank card interchange income, we estimate a less than 18-month earn back of the expense. Reported noninterest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower noninterest expense of $925,000 or a 3.6% decrease quarter-over-quarter. Stefan will give some more color on these drivers in a bit. Net interest margin for the quarter was 3.57%, up from 3.47% and for the fourth quarter of fiscal '25, the linked quarter and from 3.34% in the year ago quarter. Net interest income was up 5.2% quarter-over-quarter due to the NIM expansion and loan growth. As we indicated last quarter, we have updated our quarterly NIM calculation to annualized results for the actual day count, which should reduce volatility in the reported NIM due to differences in quarterly day counts. Under the old methodology, the current quarter's NIM would have been reported at 3.60%, but we're reporting at 3.57% due to the September quarter having 92 days. By contrast, the June quarter is reported at 347 under the new methodology, but under the old methodology was 91 days, it was originally reported at $346 and we've carried this updated annualization method over to all our profitability ratios for the current and historical periods in the earnings release. On the balance sheet, gross loan balances increased by $91 million or 2.2% during this first quarter, which would be 8.8% annualized. Loan balances increased by $225 million or 5.7% over the last 12 months. Growth in the quarter was led by nonowner-occupied CRE, 1-4 family residential, C&I and multifamily loans. We experienced strong growth in our East region where we have much of our ag activity and our South region was just behind with good growth in those markets. Even with solid loan growth for the last 2 quarters, our loan pipeline anticipated to fund in the next 90 days remain strong, totaling about $195 million at September 30. The September quarter is historically our strongest period of loan growth, and we would expect to see this pace slow next quarter as we start receiving ag line paydowns and a general slowing in new projects in the winter months. That said, we had a great quarter of loan growth and feel optimistic about achieving mid-single-digit loan growth in the fiscal year. Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months. Due to good deposit growth over the last year, we've been able to be less aggressive on promotional deposit pricing, and we've called some higher-priced brokered CDs prior to maturity. Looking at our core deposit base, excluding broker, we had an increase of about $14 million this quarter, driven mainly by savings account growth. We have $20 million in additional brokerage CDs maturing by the end of the calendar year and about $18 million in brokered money market deposits expected to move out in October at the beginning of this new quarter. We'd expect to replace that with seasonal inflow of funds from ag customers and public units in the second quarter. Tangible book value was $43.35 per share and increased by $5.9 or 13.3% over the last 12 months. This was mostly attributed to earnings retention, while improvement in the bank's unrealized loss in the investment portfolio from the decrease in market interest rates contributed a little less than $0.20 of that year-over-year improvement. Additionally, in the current quarter, we've repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000. The average purchase price was 127% of tangible book value at September 30. I'll hand it over now to Greg for some additional discussion. Greg Steffens: Thank you, Matt, and good morning, everyone. I'm going to start off with credit quality. Overall, problem asset levels have increased slightly since last quarter but remain at modest levels with adversely classified loans at $55 million or 1.3% of total loans, up $5 million or 0.1% since last quarter. Nonperforming loans were $26 million at September 30 and totaled 0.62% of gross loans, an increase of $3 million or 6 basis points compared to last quarter. This was primarily attributed to 1 commercial relationship consisting of 2 loans collateralized by owner-occupied commercial real estate and equipment as well as 3 unrelated loans secured by 1 to 4 family residential properties, all of which were placed on nonaccrual status during the first quarter of our fiscal year. Nonperforming assets were about $27 million and increased about $3.4 million quarter-over-quarter, which most of the increase due to the increase in nonperforming loans. As reported last quarter, we are continuing to work with the borrowers on the 2 specific purpose, nonowner-occupied CRE properties in different states with guarantors and common and originally leased to a single tenant who has since become installed. As of June 30, the balances on those loans totaled $6.2 million, but are now down to $2.8 million at September 30 after charging off the collateral shortfall with the appraisal on the other parcel of CRE this quarter. As we indicated last quarter, we had provisioned for these anticipated charge-offs on the relationship. And during this quarter, they accounted for roughly 75% of our total of $3.7 million in net charge-offs. Another item of note is one of these properties was recently leased at a higher rate than what was assumed in the appraise loans past due 30 to 89 days were about $12 million, up $6 million from June and 30 basis points on gross loans. This is an increase of 15 basis points compared to the linked quarter. Overall, total delinquent loans were $29 million, up $4 million from the June quarter. The increase in the 30- to 89-day past due bucket was due to an increase in past due loans under 60 days, primarily in our owner-occupied CRE and C&I loan segments. In the owner-occupied segment, the largest loan, 30 to 59 days totals $3.6 million. And then C&I, the largest is $2.1 million. These 2 loans are the relationship discussed earlier that went to nonperforming status during the quarter. Despite the increase in problem loans experienced over the last 2 quarters, these issues remain at modest levels, and our asset quality has moved to be more in line with industry averages. In combination with strong underwriting and adequate reserves, we feel comfortable with our ability to work through our problem credits and any potential wider deterioration that could occur as a byproduct from the general economic conditions. So I don't want to give the impression that we're accepting of these trends, and we have been focusing on improving our credit quality. Our agricultural update, from June 30, our ag real estate balances were up about $11 million over the quarter and up $16 million compared to the same quarter a year ago. While production loan balances increased $23 million for the quarter and are up $29 million year-over-year, we have seen a general increase in ag production line utilization due to increased input cost. Our agricultural customers experienced a mixed growing season in 2025. Early planting was possible as a result of favorable weather but heavy rains in several markets delayed progress on crops such as cotton and soybeans. As the summer turned dry, growing conditions improved for early planted crops, though irrigation costs rose adding to an already expensive production year. Harvest has progressed well with most corn and rice acres complete and significant progress on soybeans and cotton. Yields have generally been above to -- have been average to above average on most of our ground, especially on the irrigated ground. The dryer fall has allowed our farmers to begin field work early in preparation for the 2026 crop season. Our overall crop mix for consisted of roughly 30% soybeans, 30% corn, 20% cotton, 15% rice and 5% specialty crops. Commodity prices, however, remained a headwind across most sectors. Lower future pricing for soybeans, corn, rice and cotton, combined with elevated input and interest costs, has pressured producers' margins despite generally strong yields. Many farmers are relying on storage strategies, which could lead to some reduction in what might have normally been paid down in the current quarter on credit lines and USDA programs such as CCC loans to bridge cash flow gaps, make required payments on credit lines. At present, we are hoping for government support payments to help provide needed relief later in the year. Land values are currently stable while equipment values have softened slightly as producers scale back on capital purchases. Our ag lenders are working proactively with borrowers to assess their current positions, plan for restructuring where necessary and utilize FSA and USDA programs to mitigate risk and maintain strong long-term relationships with our farm customers as they plan for '26. Due to our stringent underwriting, including stress commodity pricing and assumed higher operating costs. We anticipate that our borrowers were generally be able to navigate this challenging year and should ensure satisfactory performance of these credits over the near term. In addition, due to prolonged weakness in the agricultural segment, we started to increase reserves for watch list ag borrowers in the March '25 quarter in our calculation for our allowance for credit losses. I'll pass things on to Stefan to add more color on our results. Stefan Chkautovich: Thanks, Greg. Going into a little more detail on the income statement. Looking at this quarter's net interest margin of 3.57%, that's up 10 basis points quarter-over-quarter and included about 7 basis points of fair value discount accretion on acquired loan portfolios and premium amortization on assumed liabilities. That impact is up compared to the linked June quarter of 5 basis points and down from 9 basis points in the prior year September quarter. As stated in prior quarters, we would expect to see the level of fair value accretion decline over time. The current quarter's bump resulted from a payoff of a relationship that had a larger amount of accretable yield. The net interest margin expanded over the linked quarter as the yield on interest-earning assets increased 8 basis points, primarily due to loan yield expansion, while the cost of interest-bearing liabilities declined 1 basis point. In addition, the net interest margin benefited from an increase in the loan-to-deposit ratio. Although our spread has improved meaningfully over the last 2 years, we still see some room for incremental improvement as over the next 12 months, we have about $550 million of fixed rate loans maturing with an average rate of about 6.5% compared to our origination rates for the month of about 70%. On the deposit side, we have almost 1.2 billion CDs maturing next 12 months with an average rate of $4.10 compared to our average new and renewed CD rate of about $3.90. With the improvement in the margin, growth of our earning asset base and the market outlook for further rate cuts, we expect to see continued net interest income growth through the year. That said, I do want to remind our audience that starting in the December quarter and peaking in the March quarter, we historically see a slowdown in loan growth and an increase in deposits that will weigh on the margin, but we still expect to see positive improvement in net interest income overall. Our average loan-to-deposit ratio for the March 2025 quarter was 94.2% for some perspective. Also with this, our balance sheet becomes more neutral from an interest rate risk perspective in these quarters due to the increase in interest-bearing cash. But overall, through the seasonal cycle, we expect to remain liability sensitive and a net beneficiary of rate cuts over a full year period. Noninterest income was down $707,000 or 9.7% compared to the linked quarter, driven by lower other loan fees and bank card interchange income. The prior quarter included $537,000 of annual card network [indiscernible]. Excluding that item, noninterest income would have been down about 2.5%. Other loan fees declined $723,000, primarily reflecting a refinement in our fee recognition under ASC 310-20 with a greater portion of loan fees now recognized in interest income over the life of loan. In total, for the first quarter of fiscal 2026, about $1.6 million of additional fee income is being deferred, but is more than offset by $1.9 million of deferred expenses, which drove a decline in compensation and benefits. Overall, we saw a decrease of $925,000 or 3.6% in noninterest expense quarter-over-quarter. The net expense that was deferred had a negative impact in interest income of $176,000 or a 1 basis point drag on the net interest margin. In total, these changes had a limited impact of recognizing 55,000 in additional net income in the quarter as we deferred more expenses than fee income, which will be realized through interest income over the life of a loan. With these changes, year-over-year comparisons are not truly comparable, but our first quarter results should serve as a baseline starting point for noninterest income and expenses. The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 124 gross loans and 200% of nonperforming loans, as compared to an ACL of $51.6 million, which represented $126 million of gross loans and 224% of nonperforming loans at our June 30, 2025 fiscal year-end. Net charge-offs in the first quarter were 36 basis points annualized compared to the linked quarter of 53 basis points. Both quarters experienced elevated net charge-offs, primarily due to the special purpose CRE relationship mentioned previously. The current quarter's charge-off on this relationship was previously reserved for in the prior fiscal year with no additional provision for credit loss attributed to it in the first quarter of fiscal 2026. Our provision for credit loss was $4.5 million in the quarter ended September 30, 2025, as compared to a PCL of $2.2 million in the same period of the prior fiscal year and $2.5 million in the linked June quarter. The increase in the provision this quarter, as Matt mentioned earlier, was due to our outlook on the current macro environment, as well as to provide for individually reserved loans, loan growth and a slightly higher reserve required for pool loans. Due to the charge-offs realized on a special purpose CRE relationship attributable to individually reviewed loans decreased compared to the linked quarter. Our non-owner CRE concentration at the bank level as defined by regulatory guidance decreased by just over 6 percentage points quarter-over-quarter to $2.96 of our regulatory capital. Although our CRE balances grew compared to the linked quarter and was surpassed by greater growth of Tier 1 capital reserves. On a consolidated basis, our CRE ratio was 285% at September 30. To wrap up, despite some carryover cleanup of problem loan relationship from the prior fiscal year, our strong pre-provision earnings led by expanding net interest margin and disciplined expense management have driven improved core profitability and we remain optimistic about sustaining this positive momentum and delivering earnings growth through the remainder of fiscal year 2026. Greg, any closing thoughts? Greg Steffens: Thanks, Stefan. I would like to highlight that we delivered another strong quarter of earnings, reflecting the strength and consistency of our core operations. While charge-offs and nonperforming loans have remained elevated over the last 2 quarters off of very low levels. Our level of nonperforming loans remains comparable to national averages for banks under $10 million. Our underlying earnings momentum remains solid and that strength has allowed us to prudently reserve for potential problems in the future quarters. We will remain diligent in monitoring and measuring risk, ensuring sound underwriting practices across the portfolio to support strong risk adjusted returns for our shareholders. Also, since last quarter, we've seen a modest uptick in M&A discussions, while market conditions have stabilized somewhat. We remain optimistic about the potential for attractive opportunities and with our solid capital base and proven financial performance, I believe we are well positioned to act when the right partner is ready. Notably, there are approximately 50 banks headquartered in Missouri and 24 in Arkansas with assets between $500 million and $2 billion, along with another meaningful number of others in adjacent markets, providing a broad landscape for potential partnerships. Lastly, with the profitability and earnings improvement over the last 2 years, we have continued to build capital in the absence of M&A activity. We were able to repurchase a modest number of shares in the first quarter of our fiscal year with a reasonable earn-back period. And with the recent market sell-off in bank stock prices, it has created a positive environment for us to potentially be able to repurchase additional shares. Thanks. Stefan Chkautovich: Thanks, Greg. At this time, Sammy, we're ready to take questions from our participants. So if you would, please remind folks how they may queue for questions at this time. Operator: [Operator Instructions]. Our first question comes from Matt Olney from Stephens. Matt Olney: I want to start on credit. And we saw some migration this quarter that you noted and that, of course, comes after some migration the previous quarter. So when you take a step back on credit, it feels like we're just seeing some broader deterioration. What color would you give us as far as an outlook for provision expense charge-offs from here? Should we just anticipate these metrics could remain a little higher the next few quarters, likely what we saw in the last 2 quarters? Any color would be appreciated. Greg Steffens: We would be surprised if charge-off activity remained at the level of the last 2 quarters. We would expect that to drop. We have seen rising trends in delinquent loans back to our current delinquency levels are running similar to what they did in 2018, 2019. And so I think we've basically trended back to more of a historical range on delinquencies. Charge-offs are just hard to totally predict. Would expect them to be down from what they were in the last 2 quarters Economically, we're just -- we're not certain what holds in the future. But we definitely hope for better charge-off ratios and would not anticipate based on what we know today, charge-off or provisioning to be as high as it was this quarter. Matt Olney: Okay. I appreciate that, Greg. And then I guess, shifting over towards the margin, Stefan, some really nice expansion that you noted this quarter. It sounds like there's a tailwind there from the repricing dynamics that you mentioned. Any other color you can provide as far as the bank's rate sensitivity. It sounds like you're still liability-sensitive, but can be volatile quarter-to-quarter. Just we're trying to size what the impact of additional Fed cuts, what that could mean for the margin at the bank. Stefan Chkautovich: Yes. Overall, as I stated earlier, we should still be overall liability sensitive. That could change a little bit with the positioning of our balance sheet. So given the influx that we're expecting in deposits, which will add to our Fed funds essentially. That will make us a little bit more neutral for a quarter or 2. But overall, we'll still be a net beneficiary of, call it, 1% to 3% net interest income per 100 basis points of rate cuts. Matt Olney: Okay. Perfect. So it sounds like for the margin, there's still the repricing dynamic tailwinds with flat rates. And if we want to assume additional rate cuts, that would be I guess, incremental from that dynamic? Stefan Chkautovich: Yes, sir. Matt Olney: Okay. And then I guess just lastly, Stefan, you hit on expenses briefly, really good just overall cost controls this quarter. And it sounds like this is a good run rate to go off of. Any more color on just what the drivers of the cost controls were in the third quarter? Stefan Chkautovich: Yes. The ASC 310-20 changes that we made were the main driver there for expenses. So this is a good baseline to use. We will see a little bit of a step-up come our 3Q with merit increases, but this is a good baseline to start from. Operator: Our next question comes from Nathan Race from Piper Sandler. Nathan Race: Curious just to get an update, and I apologize if you already touched on this as I hopped on late, but just an update just in terms of where the pipeline stands coming out of the quarter and just how you're thinking about kind of net loan growth and if you have any visibility if you're expecting any increase in payoffs as rates continue to come down in the short end at least over the next handful of quarters? Matthew Funke: Pay down? Yes, Nathan, we've got a pretty consistent pipeline September compared to where we've been in the last few quarters. We would expect things to slow down just seasonally into the December quarter, probably trailing into the March quarter as well, but still feeling good at that mid-single-digit growth for the fiscal year. And then as far as any payoff potential due to additional rate cuts, I wouldn't really see anything material on that generally, the stuff that we have that at a lower rate not as eager to pay us off. It's not going to be affected by 25, 50 basis points. Greg Steffens: The biggest unknown we have in potential payoff activity would be from the ag portfolio. We really don't know what's going to happen with ag prices and how soon farmers will market their crops. So that could have a $10 million, $20 million impact on loan growth one way or the other. Nathan Race: Got you. Okay. And then just given loan deposit ratio around 96%, 97% coming out of the quarter. Matt, is the expectation that deposit gathering can largely keep pace with that kind of mid-single-digit loan growth outlook for this fiscal year? Just curious to maybe get your thoughts on kind of opportunities to increase on the right side of the balance sheet from a deposit gathering perspective. Matthew Funke: Yes, I think we feel pretty good about our opportunity to maintain loan-to-deposit ratios where they've been over the last couple of years, seasonally adjusted, but we do look to reduce our broker reliance a little bit. We've worked on that so far, and we expect that to continue into the new year. Nathan Race: Okay. Great. And then is there any additional appetite on the buyback front, at least over the near term, it sounds like you're having a nice pickup in M&A discussions but just curious how you're thinking about allocating excess capital. Obviously, organic growth remains a priority, but I would love to just hear any updated thoughts on how you're thinking about the buyback over the next quarter or 2? And Greg, I would appreciate any commentary in terms of the size of potential deals you're considering and what that potential timing looks like. Greg Steffens: Buyback activity, we would anticipate to be more active given current pricing. We kind of target earnback on buying shares back of around that 3-year horizon, with current pricing, we would be within that 3-year earn-back period or a little less than that. So I would anticipate us being more aggressive buying shares back. We still have -- Stefan? Stefan Chkautovich: 200,000. Greg Steffens: 200,000 roughly of shares authorized for repurchase. So we would anticipate buying back some of those shares based on current pricing and earn back. Generally, on the M&A front, our ideal size would be more in that $1 billion asset range. And that's where we're most interested. And we are talking with some people, but I'm not anticipating anything to be immediately forthcoming. Nathan Race: And then I apologize if I could ask one more. I appreciate you guys cleaned up some of the commercial real estate loans that have been discussed over the last handful of quarters. So are those loans marked at a level coming out of the quarter where you don't see additional charge-offs? I believe you had mentioned earlier that you're expecting charge-offs to decline going forward, closer to your historical well below average levels, but just want to make sure I'm thinking about the future charge-off trajectory early in light of those 2 commercial loans. Greg Steffens: I mean we expect that the trajectory on charge-offs to move lower, absent any unforeseen circumstances. And we don't have -- we don't have anything that we know that's a problem coming up, but you never know. Matthew Funke: And specifically with those 2 loans, Nathan, those charge-offs have been fully realized as far as we know. Operator: We currently have no further questions. So at this time, I'd like to hand back to Matt for some closing remarks. Matthew Funke: Thanks, Sammy. Thank you all for joining us. I appreciate your interest, and we'll speak again in about 3 months. Have a good day. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Fredrik Wester: Hello, everyone, and welcome to the Paradox Interactive Quarter 3 of 2025 live stream. With me, my name is Fred and... Alexander Bricca: I'm Alex. I'm the CFO. Welcome, everyone. Fredrik Wester: Great. So as you can see, I'm not in the office today, so I'm on the road, but we will get this going anyways. And I hope you'll enjoy what you see. So let's start with the first slide. I can't control the slides. That's my name, so you know who I am or to direct the questions. So it's been -- it's been an intense period for Paradox. So a lot of the Q3 has been actually focused on preparing for Q4, which is the most intense and busy quarter in the history of Paradox with 2 new base game releases, one remaster of Surviving Mars. We have 7 DLCs, 4 ports and 7 content creator packs. So as you can imagine, our release team is put to the test as we speak. But Q3, speaking of that, it's a bit of a slower quarter as we come to see them, fewer releases. And also, you can see that the stronger kroner has worked in our disadvantage to a certain extent, which was expected because previously, we've seen a historically high dollar, also some temporary cost increases stemming from different sources of more of the onetime nature. On a positive note, we can see that Age of Wonders 4 and Victoria 3, both have shown very positive player numbers, very positive retention numbers and very positive sales numbers when it comes to DLC -- is an attachment rate on the DLCs. So we -- they continue what we call the path to endlessness. So we can continue to develop on these games for many years to come. And we continue to build capability in the Management Game segment with a couple of games coming out already next year, as you know. So very busy over here or maybe not where I am right now, but at least in Paradox office. So a couple of small releases in the quarter. You see on the strategy gains we had some releases for Stellaris, Age of Wonders 4, Victoria 3 and Crusader Kings III as well. And on the Management Games segment, there was a couple of smaller releases, content creator packs for Cities: Skylines. So overall, quite calm, good reception on what was released, but no big dent in any curve to be had right here. And you've all been waiting for and wondering about Vampire: The Masquerade - Bloodlines 2. It's a long awaited game, and we're super happy to release it. And those who play the game are really happy with what they see. And that's great. We're not going to comment on anything more than that because it's only been 48 hours since release. But we focus currently on giving us good post-launch support as we can. But we're going to comment more on this game before year's end, is at least our promise to you guys. A couple of the release, as I said, it was like 16 or 17 releases, I counted on the previous slide. So the big one, obviously, being Europa Universalis V, followed by Surviving Mars - Remastered and then big expansion packs and DLCs for basically all our key franchises, starting with Cities: Skylines 2, Crusader Kings III, Hearts of Iron IV, Age of Wonders 4 and Stellaris. So you have a lot to look forward to those who play our games. It's a fantastic quarter to be a Paradox Interactive gamer. And with that, I think I'm leaving the word to Alex, who is going to lead us through the numbers as per usual. Alexander Bricca: Thank you very much, Fred. And let's do exactly that. Let's go through the numbers a bit more in detail. So revenues in the third quarter came in at SEK 395 million. Last year, same quarter was SEK 434 million. So it's a decrease by 9%. And as often for Paradox, there are 2 main drivers of our revenue development, what we release and how the currency is moving. And if we compare the big currencies for us, which is dollars and the euros, compared to the same quarter last year, I think the dollar is down 9% and the euro is down 3%. So that in combination lowers our revenue. Looking at the releases, Q3 tends to be a slow quarter for us at Paradox, 2 summer months, July and August, where we don't normally release much. Same this quarter and the same last year's Q3, similar amounts of releases slightly higher last year because then we had a big release on Crusader Kings III: Roads to Power, which we didn't have this year. So that also explains why we are slightly down in revenues compared to last year. Top revenue contributors, no surprises there. It's Cities: Skylines 1 and 2, Crusader Kings III, Hearts of Iron IV, Stellaris, Victoria 3 and Age of Wonders 4. Very good to see that Age of Wonders and Victoria is up there and yet another quarter where they show that they have established themselves as long-term providers of substantial revenues and strong profit margins. So that is very good to see. Operating profit came in at SEK 112 million. This year's Q3 compared to SEK 143 million Q3 of last year. Revenues is the main difference. And that flows through the entire P&L. So profit after financial items, SEK 116 million this year compared to [indiscernible] ] last year and profit after tax, SEK 93 million this year compared to SEK 120 million last year. Profit after financial items margin, 29% this year compared to 35% last year. If we look at the last 12 months combined, we are at a profit margin of 40%. Equity through asset ratio has come down a little bit from 80% to 78%. That has to do with the fact that -- I think on the very last day of the quarter or the day before, we prolonged our office lease contract here for the headquarter in Stockholm. So we added 5 years to the contract, which means that the contractual value of those 5 years comes up on the balance sheet both as an asset and as a debt. So therefore, the equity through asset ratio goes down a little bit, but still very strong and solid. Employees. Average number of employees during the quarter was 654 million this year, compared to 584 million last year. So we have increased some 70 colleagues. The main reason is the addition of Haemimont that we were happy to see in Q1 this year. I think that added some 55, 60 colleagues to us. On top of that, it's mainly the studios abroad from Swedish terms spoken that have increased. So we have Tinto in Barcelona that has increased a little bit and Triumph and Iceflake. Let's move on and look at the costs. Revenues we've already discussed, but what this chart shows is that the revenues are very volatile with the releases. And the ones of you that have followed us during the last quarters now that in Q2 and Q1 as well, we haven't released that much. So this is a very Q4-heavy year for us. We tend to be more spread out with every second quarter. Q2 tends to be big for us. But this year, we have a lot of concentration into Q4. Fred mentioned 2 new games -- 2.5 new games with Surviving Mars 1.5 and content releases, DLCs and expansions are on pretty much all the big franchises for us. So -- but Q3 was slow. So therefore, you see the green line dipping down in Q3. Cost-wise. So biggest cost, as always, is cost of goods sold, SEK 204 million this Q3, compared to SEK 217 million last year. It's built up of a few different items. So let's go through the main of them. Amortizations of capitalized game development is a big one. So SEK 71 million in Q3 this year compared to SEK 96 million in Q3 last year. The amortization level has to do is correlating with what we are releasing in the quarter, especially, but also the quarters leading up to the quarter we are in. And last year, we released a big expansion for CK III, which we didn't this year. So that explains a big reason why amortization has gone from SEK 96 million Q3 last year to SEK 71 million this year. Also, a year ago, we had released Millennia, I think we did it in March or April, but that also came with significant amortizations in the third quarter last year, which it did this year. Let's move on to the second kind of sub-row within COGS, write-downs, 0 write-downs this Q3 and 0 write-downs last year's Q3, so no difference. Then we have amortizations of acquired businesses and assets. So we have SEK 9 million there today for Q3 this year, which is down from SEK 14 million last year. So amortizations of acquired businesses and assets is exactly that. When we acquire companies or games or IPs, we put them on the balance sheet, and we tend to depreciate them over 5 years. It's a bit different. But in general, you could say we'll do it over 5 years. So it went up, you might remember in Q2 from Q1 because in Q1, we added Haemimont, which increases our depreciation. And in Q2, we added Stranded: Alien Dawn, the game, which we also amortized over 5 years. So that also pushed up the depreciation. But it's down compared to last year, and that's because Plerion, the mobile studio we acquired a little more than 5 years ago, that has been fully depreciated in our book. So we have taken the full acquisition value. We have taken that as cost over 5 years. Now that is done. So in our consolidated accounts, the book value is 0, and therefore, we don't have any more depreciation. So therefore, Q3 has come down. We have other amortizations as well in the COGS line, which is mainly -- it's SEK 7 million. That's no change. It was SEK 7 million in Q3 last year as well, that's mainly how the rent for our studios is accounted for. Royalty is another main item in COGS, SEK 23 million in Q3 this year compared to SEK 20 million in Q3 last year, so very similar. The main change -- difference is that we released an expansion on Age of Wonders IV, this year's Q3, which added to the revenues, and therefore, it also added to the royalty costs. Noncapitalized development and tech costs in our Publishing business, that went up from SEK 80 million last year's Q3 to SEK 93 million this year. Two things that have changed. One is development costs for games that are in early stages or high-risk stages has gone up a little bit. That fluctuates from quarter-to-quarter, but that is one of the explanations. The other is that back in Q4 last year, we changed -- we did a reorganization here in Stockholm, where we changed or moved some functions that were within the Stockholm-based Studio Organization to our publishing best tech organization, still at the very same offices, but the difference is that it's not capitalized anymore, but it's taken us cost directly. So I think that pushed up the direct cost and decreased the capitalizations with some SEK 6 million per quarter. So that we see the effect in this year's Q3, if we compare it to last year's Q3. So that is it about COGS. Selling expenses went up from SEK 44 million to SEK 50 million. Similar expense costs for games that have been live during the quarter. But the main difference is that this year's Q3, we started to have costs for games that are being released in Q4. So it's Europa Universalis V Bloodlines 2. So therefore, you see increased cost for selling expenses. Administrative expenses stays normally flat and they are often around SEK 22 million, SEK 23 million. This year's Q3, it went up SEK 29 million. We have had a few different cost items of onetime nature. One was that we we gathered the whole 600 staff plus here in Stockholm for a very nice staff conference. So we don't expect that one to be at SEK 29 million going forward. Then we have other income and other expenses. There you have movement in currencies. And during -- or its movement within the quarter, especially of the dollar. And so it doesn't move that much this year. Last year's Q3, it had a much more negative movement. So it's minus SEK 1 million this year compared to minus SEK 8 million last year, if you add income and expenses together. Financial items below that is mainly the interest we have -- we get from the banks on our excess cash holdings. And that has gone down from SEK 8 million to SEK 4.5 million, mainly because the interest has come down, but also because we have slightly less excess cash on our bank accounts compared to last year. All right. This chart shows the 4 quarters group together to show a bit more of a trend line. You can see that up and down, but the trend both for revenues in the green bars and profit in the yellow line, this drives upwards, which we like to see. All right. Let's talk about cash flow. We had a positive of SEK 195 million positive cash flow from our operating activities in Q3, and it fluctuates a bit. It's, of course, mainly driven by our operating profit, but then it can shift between quarters a bit. So if you compare it to last year's Q3, we are actually up. It was SEK 154 million then, now it's SEK 195 million. Even though we had better profit last year. And one of the reasons is timing on -- I think it was a large VAT tax payment we did this or last year's Q3 that we didn't have this year. Cash from investing activities, SEK 182 million, compared to SEK 115 million last year is Q3. So this is game development, investments in game development, live games that we do expansions and DLCs for but also new games. This has gone up quite significantly compared to Q1 and Q2. And the main reason is that we got a substantial invoice for Bloodlines 2 in Q3 this year. We had almost had no invoices earlier this year. So pretty much everything came now, when the game was completed by our partners at the Chinese room. Finally, I think of the slides No, that's it. Those were all -- very good. Fredrik Wester: That's very quick and efficient. And to the point, I think we'll have more to talk about in the quarter that's coming that is more busy as well. So we'll move over to the Q&A. I guess, then. Alexander Bricca: Yes. Fredrik Wester: And we do it per usual that one will read the question and the other one will try to answer as good as they can. Alexander Bricca: Yes, and I'm not sure whether you can see the questions. So Fred, I can read all the questions and we can answer every second one. Fredrik Wester: Sure. Sure, we can do it that way. Alexander Bricca: I'll do the first one that goes to you, Fred. What effect do mods have on the success of your games? Fredrik Wester: That's a very good question. And I would say that mods is an integral part of our gaming ecosystem, and it plays a big role in keeping the games up and running, keeping the retention high and the creativity among our gamers are helping other gamers as well to come into our universe. So modding is absolutely an important and integral part of what we do with our games, and we welcome -- we also try to support our modders as much as we can to -- well, by making the pilot structure to our games quite accessible. And we'll see, maybe we'll develop more tools to make it even easier to moding in the future because it is important. That's right. Alexander Bricca: Good. All right. I'll take the next question then. Which quarters or sales seasons have historically been the most or least successful for Paradox? And how does that inform future release planning? I mentioned it a bit. We tend to have very strong Q2s and Q4s. Q3s are, as you can see this year and last year, normally slower because we have July and August, so 2 months with a lot of vacations in them. So game releases tend to be pushed either earlier to be released in Q2 or later to be released in Q4 from that reason. But then we also have more marketing activities in the second and fourth quarters. So we tend to have our Steam Publisher Weekend in Q2, at least the last 4 or 5 years, I think it has been in the second quarter. We also have the start of the summer sale in the second quarter. And similar for Q4, we have the Autumn Sale with the Steam and the Winter Sale start in Q4 as well. So -- and quite often it can be good to release not only new games, but DLCs and expansions in relation at the same time as we have these quarterly marketing activities. So that is the reason why we tend to release more in Q2 and Q4. It's not always optimal for how we plan and how we do the publishing. But the focus is to release the games when they are done and when we have a good marketing bid to accompanying them. All right. Question to you, Fred. Will Paradox future strategy place greater focus on internal development through Paradox Development Studios, or will publishing external titles remain a key pillar of the business? Fredrik Wester: Good question again. We foresee that the majority of our projects in development work will be done by fully owned studios within the Paradox Group. And we are taking steps to ensure that we have a strong capability within both strategy and management games. Recently, the acquisition of Haemimont Games in the Management Game side. So we feel that we we want to own and control most of the things that we do. We do not totally walk away from publishing third-party either, but we will do it in kind of a different way than we previously have done, placing smaller bets and scaling up when we see that the concept works. So yes. So we will do both, but I would say the vast majority of the revenue -- or the cost will come from our internal studios going forward. Alexander Bricca: Okay. I can take the next one. How do you judge the success of Victoria 3 as of right now? From the outside, it looked like the 1.9 Update and Charters of Commerce was quite a success. Is this true from your perspective as well? And do you think that this access will have a longer-lasting effect on Victor 3 success as a whole? Yes. So we are very happy with what Victoria 3 has turned out to be. Charters of Commerce was a milestone for sure. But also in this third quarter, we released content that was appreciated by the players, and we can see the player activity is high. But there was also quite a lot of work going into the base game before Charters of Commerce as well, which we think has had a very positive impact to the game. Victoria 3 is a project that if you look at the whole project up until now, it has had the kind of poor financial performance, everything accumulated or aggregated. But as of now, the financial performance is quite strong. And so it has been quite a long investment for us that we are now finally seeing the benefits from. So it is very good. And I think Victoria 3 will continue to be successful for us for many years. But I don't think it's -- Charters of Commerce has helped us to take it to a certain level, but if it's going to continue to be successful, we need to continuously come out with qualitative content that the players want and with a good pace as well. And I'm confident that the team will be able to do that. Fredrik Wester: Yes. I mean, the Victoria team has done a tremendous job in turning the tide on the game and from all perspectives, I mean quality-wise, gameplay wise, retention, if you look at it from who are playing the game and how much. So we're super happy with the trajectory of the game at the moment, for sure. Alexander Bricca: So one more question to you, Fred. What are Paradox plans for Paradox Arc? The labels announced schedule is currently limited, should we expect adjustments to its release cadence or portfolio approach? Fredrik Wester: Right. So Arc is working in a bit of a different way. So -- which means that they start more projects, but they also kill off more projects along the way. And if it's one thing that we learned at Paradox, sometimes the hard way is not to announce any projects too early. So we will announce the Arc projects when they're ready to be announced. So they have a really promising catalog of new games, but we will not announce any of them until we are 100% sure it's going to reach the market at the quality level we expect on release as well. So expect more, but we're not trying to hype anything. We're not -- we're just -- it's a lot of experiments and some of them look really promising. Alexander Bricca: Great. Are there more questions? Yes. This is one, I think, for me, maybe. What is the historical correlation between Steam Wishlist numbers and actual sales for your major franchises? Have you ever considered communicating to the market an expected conversion range from Wishlist to sales as some independent publishers do? No, we don't because our experience is that the correlation is quite spread out. So it's very difficult for us at least and probably for you too, to use Steam Wishlist numbers projecting sales. And that's the reason -- I mean, we don't provide forecast at all. And this is the main reason, it's very uncertain. And then projecting or releasing forecast on projected sales is something that we avoid. And Bloodlines, for example, I think we've had record high Wishlist numbers for Paradox game. But taking that as an example, I think the Wishlist opened back in 2019. So that means that, that Wishlist is very old. So that also makes it very difficult to compare one Wishlist to another. Do we have more questions? Here's one for you, Fred. Is Paradox exploring opportunities to expand its games into physical formats or other types of consumer experiences? Fredrik Wester: I'm sure what you mean physical formats, but I guess it means different media formats -- sorry about that -- different media formats like television series or movies or other forms of entertainment and licensing. And of course, we have explored for many of our brands, where I would say that the World of Darkness portfolio is one that lends itself the best to external licensing, but we're doing smaller licensing deals right now, but we're exploring opportunities all the time. And it's a great way to strengthen our brands. It's financially safe and sound. The upside is limited, but it's a great way to expand small steps with a low risk. So we're currently working with a small-scale licensing operation, and we'll see if we scale that up over time. But nothing that we have that is worth mentioning at the moment, might pop up in the future. Alexander Bricca: All right. Thanks, Fred. Was that the last one? No, we have one more. Yes, we have few ones. How should we view selling expenses in Q4? Have most of the marketing costs for new games and expansion release has been recognized in this quarter? I can take this one. No, we have most of the selling expenses we have in the quarter when we release the game. So for Bloodlines 2, for Europa Universalis V, we have had costs in Q3, but they will most likely be bigger in Q4. And especially for the live games where we have expansions and DLCs, then the kind of allocation of expenses to the release quarter is much higher. So Q4 should be a big spending quarter in terms of marketing costs. Fred, what is your confidence on the pipeline beyond Q4? Fredrik Wester: That's a good question. Beyond Q4, we're so into Q4 operationally right now, it's hard to sometimes hard to think beyond it. But if I put it this way, without being banging our own drum too much, I think we are one of the best positioned gaming companies in the world right now. We have a strong cash flow. We have money in the bank. We have very strong games within certain niches that we're dominating. I think we have a strong customer base. So I think there are very few companies that have the huge opportunities that we have right now. And what it's all about is taking advantage of these opportunities. If you speak about the pipeline specifically, I think we have a strong pipeline with a healthy mix of smaller, more experimental titles through Arc with some games like Prison Architect 2, that is fully developed externally, to some super heavy hitters that comes from the internal [indiscernible] . So I say 2026 just bring it on. We're ready. So that's going to be great. Alexander Bricca: Sounds good. And I think those were all the questions that we have got so far. If we haven't answered -- if we missed the question, we will make sure to find them in the e-mails and the form post and also send them separately. If you come up with questions after this stream, feel free to contact us, and we will try to answer them. But that's it for this stream. So we have the next one coming up. That will be for the fourth quarter, much more action full quarter compared to this third quarter for sure. I think it's at the very beginning of February next year, so quite some time until then. Fredrik Wester: Up until then it will be even colder and more unhospitable than ever, but we look forward to it anyways. And thank you very much for watching and hope to see you next time as well. Alexander Bricca: Thank you for watching.
Operator: Good day, and welcome to the Packaging Corporation of America Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Mark Kowlzan. Please go ahead. Mark Kowlzan: Thank you, Elissa. Good morning, everyone, and thank you for all of you for participating in Packaging Corporation of America's Third Quarter 2025 Earnings Release Conference Call. Again, I'm Mark Kowlzan, Chairman and CEO of PCA. And with me on the call today is Thomas Hassfurther, President; and Kent Pflederer, our Chief Financial Officer. I'll begin the call, as usual, with an overview of our third quarter results, and then I'll turn the call over to Tom and Kent, who will provide further details. And then after that, I'll wrap things up, and we'd be glad to take any questions. Yesterday, we reported third quarter net income of $227 million or $2.51 per share. Excluding the special items, third quarter 2025 net income was $247 million or $2.73 per share compared to the third quarter of 2024 net income of $239 million or $2.65 per share. Third quarter net sales were $2.3 billion in 2025 and $2.2 billion in 2024. Total company EBITDA for the third quarter, excluding special items, was $503 million in 2025 and $461 million in 2024. The third quarter net income included special items expense of $0.22 per share. The $0.22 were costs related to the acquisition of the Greif Containerboard business, including step-up of the acquired inventory, integration-related expenses and transaction expenses. Details of the special items for both the third quarter of 2025 and 2024 were included in the schedules that accompanied our earnings press release. We completed the acquisition of the Greif Containerboard business on September 2. Our results included 1 month of the acquired operations from Greif, which impacted earnings per share by $0.11 after special items. These include depreciation and amortization after preliminary purchase accounting and additional interest on new borrowing to finance the acquisition. Excluding the special items and the impact of the acquisition, our earnings increased by $0.19 per share compared to the third quarter of 2024. This increase was driven primarily by higher prices and mix in the Packaging segment for $0.73, lower fiber costs of $0.16, higher prices and mix in the Paper segment, $0.02 and a lower maintenance outage expense of $0.01. Partially offsetting the improvements were higher operating costs, $0.33; lower production and sales volume in the Packaging segment, $0.16; higher depreciation expense, $0.07; higher freight expense, $0.07; higher fixed and other expenses of $0.07 and higher interest expense, excluding the Greif acquisition debt of $0.02 and lower production volume in the Paper segment for $0.01. Because of the uncertainties of the Greif closing date, our third quarter guidance did not forecast any impact from the acquisition. Excluding special items and acquisition impact, the results were $0.04 above the third quarter guidance of $2.80 per share, primarily due to favorable price and mix in the Packaging segment and lower freight costs. Looking at our Packaging business and including the acquired business, EBITDA, excluding special items in the third quarter of 2025 of $492 million with sales of $2.1 billion resulted in a margin of 23.1% versus last year's EBITDA of $446 million and sales of $2 billion or a 22.2% margin. Corrugated volume was largely on plan and continued to reflect the cautious ordering patterns we've seen most of the year. We ran to demand during the quarter and produced 38,000 fewer tons of containerboard than the third quarter of 2024 and 59,000 more tons of containerboard than the second quarter of 2025. Our containerboard inventory in the legacy system increased by 15,000 tons during the quarter in preparation for the fourth quarter DeRidder outage. From the operational standpoint, we ran very well the entire quarter and with strong performance in terms of cost and production efficiency across the entire mill and corrugated system, which is a testament once again to the successful investments across our business. We continue to look every day at opportunities to take out cost and optimize production capabilities with the support of our considerable in-house technical and capital execution expertise. The acquired mills produced 47,000 tons during the month. Having closed the acquisition on September 2, we used the initial month of ownership to our advantage. While our activities impacted the September results, they will improve long-term productivity and efficiency. Massillon had a scheduled annual outage -- maintenance outage, which we extended to 5 weeks and completed earlier in October. We did a comprehensive refurbishment of the mill, including reliability improvements on the paper machines, the OCC plant and the power plant. All mill infrastructure and unit operations were cleaned and inspected. We took the 2 paper machines at the larger Riverville facility down for 5 days a piece to implement the first phase of our reliability improvements. We'll have additional work to do to implement our efforts and expect to have achieved the first phase by the end of the fourth quarter. We're already seeing the benefits of improved performance and quality with both mills running at higher performance. We'll continue to manage and invest in these facilities to achieve operating performance in line with the legacy PCA system. I'll now turn it over to Tom, who'll provide more details on the containerboard sales and corrugated business. Thomas Hassfurther: Thank you, Mark. The performance of the Packaging business was largely as we expected, and it was another strong quarter. Domestic containerboard and corrugated products prices and mix were $0.72 per share above the third quarter of 2024 and down $0.02 per share compared to the second quarter of 2025, which was all attributable to containerboard mix. Export containerboard prices were up $0.01 per share versus last year's third quarter and flat with the second quarter of 2025. As Mark mentioned, while customer ordering patterns have continued to reflect market conditions that have persisted throughout most of the year, corrugated demand improved as the quarter progressed. In the legacy business, shipments per day in our corrugated products plants were down 2.7% versus last year's record third quarter when per day shipments were up more than 11% over 2023. We will continue to see tough comparisons going into the first quarter of 2026. Total shipments were down 1.1% in the third quarter of 2025 versus last year, reflecting 1 more workday this year. For a little context, on a per workday basis, July shipments were about 6% down from last year, while August was less than 1% down and September was less than 2% down. Margin performance was very strong again with Packaging segment EBITDA margins improving to 23.1% versus 22.6% in the second quarter and 22.2% last year. Including the acquisition, shipments were up 3.7% over last year per day and 5.3% overall. The acquired plants had a strong September with volume growth and good price realization. We're working very hard to integrate the operations into the PCA corrugated system, and we like what we see so far. The culture is highly compatible with PCAs, and our new colleagues have gone beyond the call of duty to continue to develop strong customer relationships and serve those customers. Greif has historically carried relatively more inventory in its corrugated system than we do. With the acquired plants being part of a much larger integrated system, we can more efficiently and nimbly supply them now that they are part of PCA. We have the opportunity to bring inventory down to lower levels, and we'll manage our operations to do so over the next couple of quarters. As expected, export sales volume of containerboard was down 8,000 tons from the second quarter of 2025 and down 32,000 tons from the third quarter of 2024. I'll now turn it back to Mark. Mark Kowlzan: Thanks, Tom. Looking at the Paper segment, EBITDA, excluding special items in the third quarter was $40 million, with sales of $161 million or a 24.9% margin compared to the third quarter of 2024 EBITDA of $43 million and sales of $159 million or 27.1% margin. Sales volume was 1% below the third quarter of 2024 and 10% above the second quarter of 2025. Prices and mix were up 2.1% from the third quarter of 2024 and 0.5% from the second quarter of 2025. Performance reflected the seasonally stronger third quarter and sales volume was higher than expected. I'm now going to turn it over to Kent. Kent Pflederer: Thanks, Mark. Cash provided by operations was an all-time quarterly record of $469 million. And after $192 million of CapEx during the quarter, free cash flow was a record $277 million. In addition to CapEx and funding the Greif purchase price, the primary payments of cash during the quarter included dividends of $113 million and cash tax payments of $19 million. Our quarter end cash balance, including marketable securities, was $806 million with liquidity of approximately $1.4 billion. To update you on annual shutdown expenses, we now expect $0.45 in the fourth quarter for the legacy PCA system and $0.02 for the acquired business. The legacy system expense is expected to be $0.29 higher than the third quarter of '25 and $0.17 higher than the fourth quarter of '24. We are revising our capital forecast for the year to be approximately $800 million from our previous forecast of $840 million to $870 million. This is primarily as a result of timing of expenditures, and we have not changed our overall capital plan. This revision includes incremental expenditures for the acquired business. As part of the Greif acquisition purchase accounting, we are required to record the acquired assets on our books at fair value. Our valuation is preliminary and is subject to change over the 1-year period after the acquisition. Our preliminary evaluation in addition to working capital includes approximately $870 million of property, plant and equipment, $530 million of intangibles and $280 million of goodwill. We recorded $12 million of depreciation and amortization of the acquired assets during the third quarter, and we expect an annual run rate going forward of approximately $130 million. As a reminder, annual net interest expense is expected to increase by $95 million, and we recorded $8 million in additional interest during the third quarter. We were a significant containerboard supplier to Greif before the acquisition and shipments of containerboard that were recorded as third-party sales in the past are now integrated. This affects the timing of recognition as shipments are now recorded as inventory with sales and profit being recorded when that inventory is converted and sold to a customer. We estimate that this affected results by about $0.03 in the third quarter, which will not recur going forward. I will now turn it back over to Mark. Mark Kowlzan: Thanks, Kent. For the fourth quarter, we expect per day corrugated shipments to be higher than the third quarter with 3 less shipping days. Export containerboard sales will be higher than the third quarter, but relatively low when compared to traditional fourth quarter volume. Containerboard production in the legacy system will be slightly lower than the third quarter with the maintenance outage at the DeRidder mill, and we expect inventory levels in the legacy system at year-end to be similar to levels entering the fourth quarter. Outage expenses will be $0.29 higher than the third quarter. We expect prices and mix in the Packaging segment to be lower as a result of seasonally less rich mix. In the Paper segment, we expect seasonally lower production and sales volume and flat pricing. We also expect seasonally higher energy and fiber costs as well as slightly higher freight and other operating costs. We expect significant improvement in the results of operations from the acquired business. We will be impacted by lower production and higher maintenance expenses from the Massillon mill outage that did continue into October and seasonally lower volume and mix in the corrugated business. We will benefit from a full quarter of improved operations at the Riverville mill. We will be managing production to achieve lower inventories, as Tom mentioned. Considering these items, we expect fourth quarter earnings of $2.40 per share, excluding special items. And with that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constituted forward-looking statements. The statements were based on current estimates, expectations and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Elissa, I'd like to open the call up for any questions, please. Thank you. Operator: [Operator Instructions] First question is from George Staphos, Bank of America. George Staphos: I guess maybe the first question as it normally comes up during Q&A. Can you talk about bookings and billings as we're starting fourth quarter? Obviously, you have fewer shipping days, but what are you seeing on a per workday basis or however you want to frame it? And then we had some other questions. Thomas Hassfurther: George, this is Tom. Right now, kind of the blend of bookings and billings that we see so far is a little over 1% up. And again, I'll remind you, very tough comps. Okay? George Staphos: Got it. And you said the tough comps just factually will be difficult through 1Q, that was part of your script where we're done by the end of this quarter in terms of what you think tough comps are? And is any -- or [indiscernible] strength in any of the end markets that you would point us to or anything that's particularly challenging right now? Thomas Hassfurther: Actually, George, outside of a couple of end markets, our business has been very, very good. Those couple of markets that were -- that we've struggled -- it's not we've struggled. They've struggled in the marketplace. I mean, everybody has read about beef. That's a big segment for us. And the cattle herds are down to a 70-year low. So there's a lot of struggles going on there, and we even have the administration looking at other ways to solve that problem. And then the other area is the building materials. We all know what's happened with housing starts and where that stands. So those 2 segments have been a drag on us. Other than that, we've been very pleased with the results in all of our other sales segments. George Staphos: As regards to Greif, I know we'll get more color over time, but any big picture, any large sort of boulders you could tell us about in terms of what you're finding with Greif relative to the deal model? And is there any way at this juncture you can give us a view on what the maintenance might look like? So in that regard, again, is $300 million of EBITDA reasonable for the combined business? What does maintenance look like? And then I had 1 or 2 last follow-ons. That will be quick. Mark Kowlzan: Well, again, I think as we talked about this, the CorrChoice side of the business that we acquired, the converting side was very well capitalized in very good condition. The 2 mills, we've had -- from September 2, that day, we've had upwards of -- on any given day, 100 of our PCA personnel in the mills at Massillon and the same number of people in the mill at Riverville, assisting in doing what we do, and that's operational expertise. Tom, do you want to comment about the corrugated? Thomas Hassfurther: Yes. Let me just say in total, what we've -- I think the best way to summarize this, George, is probably that it is an organization that is very customer focused. And as I mentioned, the culture of the business fits very well with ours. That's a great bolt-on. Operationally, not nearly as strong as PCA and because we've had many, many more resources, and we've got this great team to address those issues. But in typical PCA fashion, we get on it right away, right upfront, not trying to manage to a quarter or anything like that. We're looking at the long haul. And I think given that organization and their focus on the customer and the end markets that they supply, this is going to be very, very accretive to our earnings going forward. Mark Kowlzan: One note, George. We took the machines down at Riverville for basically about a 5-day period, each machine in September. But during the time we ran in September, we improved operations. We were running like 97.2% for the month of September in Riverville, and that's up dramatically from prior to the acquisition. And so we've seen immediate improvements in both efficiency and quality. But the good news is we'll continue to see a lot more benefits as we work through things. And as far as your question about some of the accretive value, I think, Kent, you and I are talking this morning. Kent Pflederer: Yes. So George, going into the acquisition, historical Greif performance, $240 million was about a good annual run rate for the EBITDA -- our projection for synergies on a run rate basis after the second year was about $60 million. We're well on target for that. We're looking probably in about the 20-ish range by the second quarter of next year to give you a little bit more clarity on that on a run rate basis. George Staphos: Quickly, $0.20, maybe a sequential increase in D&A as part of the $2.40 is kind of rough math. And any way -- I know it's kind of tough on live mike, but any way to talk about what the inventory strategy quantify what the tons coming down might mean in the Greif system relative to where you've been? Mark Kowlzan: The comment about inventory, again, it was mentioned, we've got 10 mills now in the system. We've got incredible opportunity to take care of all of our box plants nationwide. So we will quickly incorporate that strategy into the CorrChoice operation. And it will take some time to work the inventory down. We've already started that. Thomas Hassfurther: Yes. Also, George, I'd just add that mix is a part of that equation also. So we've got to do both at the same time, but very good opportunities there. Mark Kowlzan: All right. With that, next question, please. Operator: [Operator Instructions] Next question is from Mike Roxland, Truist. Michael Roxland: Congrats on closing the acquisition. I just wanted to follow up, Kent, with you, one, on the numbers that you just mentioned in relation to George's question, the $240 million of EBITDA and the $60 million of synergies. Now that you've owned the assets for roughly 6 weeks, can you talk about any potential upside to those numbers that you foresee from those assets? Mark Kowlzan: Right now, again, I'd rather just let you know that we're -- every day, we're seeing positive results from the work we're doing. So again, I think a lot is going to depend on the marketplace in the future and what we can do to take advantage of the footprint on the converting side. The mills will continue to be improved upon and continue to deliver in much the same way that the Boise assets delivered over the last 10 years. So again, I think I'd rather just be conservative and say we're going to stick with the with the numbers that we've already given you and just say that there's always upside, but it does depend on what the market does. Michael Roxland: Got it, Mark. Any comments you can make in terms of the improvements, whether in terms of efficiency costs went out with respect to Massillon, you extended -- you mentioned in your comments and also in the press release that you extended the maintenance outage to 5 weeks. So can you talk about maybe some of the benefits that you're receiving from that extra work that you put into the mill? Mark Kowlzan: Yes. I mean it's quite remarkable that with the capability we have in PCA, we've got upwards of 200 people in our technology engineering organization. And again, from September 2 that morning at both mills, we were working simultaneously, and we had for at least a 6-week straight period of time at least 100 PCA personnel in Massillon working full time to assist the mill in improving their capability. I don't think there's anything in that mill that hasn't been touched. We undertook the first week of just cleaning the mills, inspecting, taking apart major equipment bearing changes all the way down to lubrication systems, hydraulic systems, role changes, power equipment, boilers, turbine generators. So I feel very good that comprehensively, we understand the opportunities we need to take advantage of going forward. Massillon as an example, we understand the limitations. We understand the upside. So some of it's going to be dependent on ordering some equipment and getting it delivered. The good news, I still feel though what we told you is that it's -- when we converted some of the Boise acquisition, we're spending $0.5 billion, i.e., DeRidder, Jackson, Wallula for these conversions. But I told you before, we expect to be -- the work at Massillon, the work at Riverville, it will be the tens of millions of dollars. So over the next couple of years, $10 million here, $10 million there for system improvements, upgrades and technology and capability. But the bones of the mills are good. We just need to update them and then, like I say, run these mills the way PCA looks at the business and takes care of the business. So I'm feeling very bullish on what we've seen just in 1.5 months. As an example, both mills, we saw -- we started at Massillon the week before last, and we saw at least a 50% improvement just in the quality of the profiles, moisture profiles, basis weight profiles, physical test profiles. So huge improvement there, and that translates into customer experience with the product through CorrChoice. So again, feeling very good about it. Michael Roxland: Got you. I appreciate the color there. And one last question before turning it over. Greif EBITDA for the 1 month you owned the assets came in a little lower than we expected given recent performance prior to your ownership. Was that all due to the outages, these will get Massillon and Riverville? Or was there any economic downtime that you took due to choppy backdrop or as you manage elevated inventories? And then any initial thoughts on 2026 CapEx? Kent Pflederer: Mike, I'll take that one. It was largely from the outages and the timing effects of the revenue and profit recognition that hit us by about $12 million during the quarter. So it was those. In terms of economic downtime, no, we didn't factor that in, the Greif results for September. No. Mark Kowlzan: The other part of your question about CapEx into next year, we'll update you in January for the plan for next year. But I think we're on track with taking advantage of our opportunities. I would like to say that just to remind everybody, the biggest pieces of capital spending this year right now are a couple of big projects on the converting side. We've got one big project going on in Ohio right now, and that's a new facility. And then in upstate New York, we're totally upgrading one of our facilities as a big CapEx project that will -- both those projects will finish into next year. But we're always taking advantage of these capabilities to insert new converting lines and upgrade converting operations. But we'll give you a better feel in January what we're looking at. We do have some very interesting energy opportunities that we'll give you more detail with next year in the January call. Operator: Next question is from Gabe Hajde, Wells Fargo. Gabe Hajde: I wanted to ask, I see this number, and I think you kind of strip out input costs. So it's -- I'm going to call it the frictional inflation treadmill, but running kind of around $1 year-to-date. So I think in this quarter, it was $0.33. So if I annualize that, we're looking at kind of $170 million. Is that something that's particularly elevated this year or kind of post pandemic when we think about labor inflation and insurance costs, things like that, that's a good run rate on a go-forward basis for maybe the combined entity or maybe legacy PCA? Mark Kowlzan: Let me -- one good piece of that, that we're dealing with, but everybody is dealing with it even at your household is energy costs, electricity rates. Just in the last year or 2, we've seen some of our facilities, electricity rates are up 50% to 75%. So that's one good example of what the world is dealing with, and we're part of that world. That's why I was alluding to the fact that we've got 3 significant projects that we're going to introduce into early next year that will take 3 of our mills essentially electricity independent within the next 2.5 years. Kent Pflederer: And then, Gabe, on the others, it's the usual. It's the labor inflation. It's chemicals. It's any kind of supplies, insurance, rent, those sorts of things that have been going up at a fairly healthy clip in the last few years. Gabe Hajde: Okay. But is that -- is it particularly elevated this year? Or is that something that sort of… Mark Kowlzan: Well, again, it's just I think the biggest factor was electricity rate increases nationwide. If I take one element of cost, it would be electricity. Gabe Hajde: All right, Mark. But when you're planning for next year and you're looking at that number, maybe it's down a little bit because we don't expect more energy price increases and maybe we do because we've got to build data centers. Mark Kowlzan: On the contrary, I don't see energy -- electricity cost flattening out with the demand from all of the data centers that's ongoing. The electricity rate increases, I just don't see that it's going to abate anytime soon. That's why we've taken upon ourselves that we've got the plans to -- I would say, 3 more of our mills. We've got a couple of our mills are in very good shape right now with electricity independence. But within 2.5 years, we'll take 3 more of our mills and essentially get them off the grid, and we'll be in good shape. Gabe Hajde: Mark, I feel like you've got me on the hook, so I have to ask. Are you referencing maybe some biogenic carbon capture opportunities? And I think we've read in some outside articles that, that could contribute up to $85 a ton that you produce. Mark Kowlzan: No, that's a separate issue. We're talking about essentially gas turbine technology. We've moved ahead, and we've got some great projects that we're going to be executing. We've got some facility -- I mean without getting into the details, Gabe, we've got some facilities that already burned a lot of natural gas and power boilers, but we're not getting the advantage of the downstream electricity generation. So on a combined cycle through efficiency, you're not getting all of the upside opportunity for each therm of gas that you burn. The gas turbines will give us that complete efficiency on the combined cycle from steam generation and electricity generation. -- and these will be projects, again, we'll introduce to you early next year. A lot of discussion on the January call, will give you a lot more details. Gabe Hajde: Yes, sir. Tom, one, we've read recently about, I'll call it, price elasticity on corrugate. I'm just curious in your conversations with customers, broadly speaking, how sensitive are customers in terms of potential price increases or trying to do more with less, whether it's lightweighting and how that's showing up maybe in your own volumes, not necessarily specific to price increases, but more thinking about lightweighting on that front? Thomas Hassfurther: Gabe, obviously, we don't talk about any forward pricing at all. So I'm going to pass on that one. But I will tell you that the -- again, you hear Mark talk about, as I indicated, that we expect our mills and acquired mills to run at a tremendously efficient rate, and we expect them to meet some very stringent specifications. And those specifications relate to a lot of the technology that we have put into our boards, proprietary technology that gives us lightweighting capabilities that we believe is unique to the marketplace. Those are solutions that we take to our customers. And given this inflationary environment we're in, given the fact that costs are constantly going up, we're doing everything we can to help ourselves and our customers to fight those. However, at the end of the day, I mean, it is an inflationary environment. But I think that's a real competitive advantage we have in terms of our offerings to the marketplace. Operator: Next question is from Mark Adam Weintraub, Seaport Research Partners. Mark Weintraub: First, I just wanted to just follow up on Greif, the big increase in D&A from purchase accounting. Just want to reconfirm in terms of CapEx related to those assets, I think you in the past talked about $50 million to $60 million. And with that type of spend, you can get them up to Packaging Corp efficiencies, et cetera. Is that still a reasonable number, which obviously would be a lot lower than the $130 million D&A you had talked about? Mark Kowlzan: Yes. I mean, after what we've seen with the efforts at Massillon and then the work at Riverville, it's that type of capital that we're going to spend. It's very similar to what we did at International Falls over the last 14 years. We did not have to spend massive amounts at [indiscernible]. We just had to improve the capability on a lot of little systems and taking care of some of the technology, but we're well on our way, but it is in that tens of millions of dollars, and it will happen over the next year or 2. So I'm really confident that, that number is still good. Thomas Hassfurther: Mark, this is Tom. I would also add that, as we indicated before, the sheet feeders and corrugated box plants are very well capitalized, and we're very pleased with that. And although we've got some maintenance costs and some other things that will take place there, we're not going to invest huge amounts of capital in those facilities. Mark Weintraub: Right. So obviously, cash earnings from Greif are much stronger than what the book earnings are going to be. But I'm also kind of curious whether or not -- is there much in the way of tax shield benefit that you're getting through accelerated depreciation? Or is that sort of not something to call out specifically? Kent Pflederer: Well, I think you saw it in our cash tax payment for the third quarter that we called out in the script. The allocation that we had to PP&E, we were able to take bonus depreciation on and reduce our cash taxes out pretty significantly this year. So yes, I think you see that in our cash for the third quarter. Mark Weintraub: Okay. And presumably, you'd see that next year as well. But -- so kind of shifting gears, if I could. Obviously, it's sort of been a pretty difficult environment industry-wise, box shipments, et cetera. In the past, you've been able to, through business wins, grow a lot faster than the industry and fill out these new box plants, et cetera, that you are building. Have you had business wins of late that you have visibility on that can give us confidence that you can continue to outperform on the volume side? Thomas Hassfurther: Mark, this is Tom. We haven't changed anything that we typically would do. Absolutely nothing. We've been -- as I mentioned, we've been hurt in our numbers from a couple of big segments of ours that we can do very little about. However, we continue to grow within existing accounts in a big way. And yes, we continue to have wins, but these are wins that we earn. They're not -- these aren't wins that you just go out and have something to offer that nobody else is doing necessarily, but we have to earn these wins. And we're just continuing to do the things we're doing. We're just not getting -- we're not getting a lot of lift, obviously, from the economy and the starts and stops that we've seen consistently go on throughout the year relative to tariffs and a bunch of other things certainly are impacting the business. Mark Weintraub: Great. And then lastly, we've had this extraordinary year in terms of magnitude of capacity closures in the North American containerboard business. And box demand hasn't been good. But are you actually feeling any more tightness because of the closures of containerboard capacity? Any color you could give would be appreciated there. Thomas Hassfurther: I think the containerboard capacity, I think you're seeing a consistent trend in this industry that it right sizes to demand and we run to demand. We do. That's what PCA does. And I think in addition, even on the corrugated side, we've closed some facilities. We've rationalized some poor assets, things like that, and we'll continue to do so. And again, it's -- we will run to the demand that we see out there. Mark Weintraub: Okay. Tom, just since you mentioned it, I apologize, I know I'm going a little long here. But I think you have 2 box plants, which not -- which you're going to be closing in the fourth quarter. Can you give us a little color around the decision to do that? Thomas Hassfurther: Well, they just happen to be box plants that are not -- that we can't -- capitalization isn't going to be the answer for those box plants, and they have to be in markets where we have other facilities and bigger facilities and better equipped facilities to handle those customers. It's not as if we're abandoning any of those customers. We're keeping all those customers, but it's just a matter of rightsizing to the demand we see in a particular market. Mark Kowlzan: I think people tend to forget, Mark, if you think about the last 16 years, we probably made 25 acquisitions. And during that period of time, we probably shut 20-some-odd plants. Thomas Hassfurther: 20-some-odd plants, yes. Mark Kowlzan: During that period of time, and we've built a number of new plants and essentially recapitalized the rest of our footprint. But as Tom said, we run to demand and we -- but people lose sight of the fact that we have gone ahead and closed a number of our older plants that just don't fit our needs anymore. Operator: Next question is from Anthony Pettinari, Citi. Anthony Pettinari: With Greif, your mix into recycled will increase. And I'm wondering if it's possible to say how many tons of OCC PCA might buy kind of with the Greif assets. And as you look at your end markets and talk to your customers, as you think about the next 3 to 5 years, is there any reason to think recycled demand will grow faster or maybe slower than kraftliner? Or do you not necessarily think about it that way? Mark Kowlzan: I look at it as an opportunity. Quite frankly, I look at Massillon and Riverville as an opportunity to make more medium, which we need. And our plans run very well on the recycled medium, but combining that with our high-performance liner grades, we get the best of both worlds. And so it's not on a total percentage basis. It's really just taking advantage of the opportunity, and we'll play into that in the marketplace. But the recycled medium work very well with us. Thomas Hassfurther: Yes, Mark, the key is that we do need the medium and 100% recycled medium is a good run rate in our facilities and stuff. And so trade for some of that and those sorts of things. But as far as end markets go, we attack every end market with whatever the best solution is. Anthony Pettinari: Okay. And any quantification of like OCC consumption tons or I'm not sure if you disclosed, but... Kent Pflederer: Anthony, we were flexible beforehand. We could flex the system a little bit, but we typically ran around 20 -- low 20 percentage furnish OCC. That's going to move up about 10% on the whole to 30-ish going forward, if that helps. Anthony Pettinari: Got it. Got it. That's very helpful. And then just a couple of quick questions on CapEx. I mean, understanding you'll give us more detail in February. But the box plant projects that you referenced, does the CapEx spend for that from '25 to '26, is it sort of directionally similar? Or does it sort of ramp down modestly or maybe ramp down more sharply? And then I guess second question, Mark, you've got us really interested in these energy projects. Are there currently PCA mills that are selling meaningful amounts of electricity back to the outside utility company? And could that be potentially an opportunity or part of the projects that you'll tell us more about next year? Mark Kowlzan: First part on your CapEx, we would expect as we finish up the 2 bigger projects, the one in Ohio and the one in New York State next year, CapEx will continue to be kind of flat in that range. We would probably take advantage of that opportunity. The good news is, and Tom has mentioned this and I've mentioned it, Greif gave us the opportunity with the CorrChoice converting side of their business. It's going to help us minimize what we have to do in some of these regions. We will avoid having to spend some major pieces of capital on any new plants for the next couple of years. So in that regard, we'll continue to do some converting installations as far as EO, [indiscernible] rotary die cutter type stuff, some corrugator opportunities. But as far as major plant projects, that will mitigate itself. And then I see the next couple of years, the big projects are going to be some of these energy projects. We'll take advantage of that. It's probably a 2.5-year process. We'll get into the details in January and the first part of next year. But these are projects that have 1.5 years payback type projects, very, very high-return projects. But as far as the level of CapEx, we'll be in a very comfortable range, the amount of cash we're generating. I think, quite frankly, people are going to be asking us, what are you doing with all the cash on hand? That's going to be the high-class problem we get into. And so I'm not worried about the CapEx. All of our capital that we've been spending over the years -- we've got a very good track record of return on our investment with this CapEx spending. So as far as what you're modeling, just I would just continue to model what our trend has been, and we'll update you next year. There was one part -- your part of the question on electricity. No, we're not wheeling power into the grid at any of our facilities. We are -- we do have one facility in particular that's essentially 100% independent, but we're not wheeling power into the grid. Operator: Next question is from Philip Ng, Jefferies. Philip Ng: Appreciate all the great color. So Mark, you talked about potentially some of these energy projects in the next few years. And then obviously, you're going to do some great work at these Greif mills kind of get it up to PKG levels. And then you called out some of the inventory where it's a bit more elevated at Greif. So curious, when we think about '26, does that translate to more downtime than we should kind of be appreciative, which could potentially mute some of the EBITDA contribution from Greif. I think Kent gave a number in that $240 million range plus synergies. So I just want to be mindful just because it was extra noise in the back half of this year. Is there a friction that we need to be thoughtful of that could be impactful next year? Mark Kowlzan: I think, again, the work we just did at Massillon for approximately 6 weeks really gave us a comprehensive look at the mill because we literally touched everything in that mill from the ceilings down to the U-drain sewers, everything was clean, touched, inspected, new lighting. And so in doing so, we understand what it is in terms of components, motors, pumps, rolls, systems on paper machines that we want to upgrade to the PCA standards. So we've already got our plan in place. But these changes will take place on monthly outages. It's not the 3-week outages required. It's the 24-hour outage and the annual outage for 5 or 6 days a week type of thing. So no, we'll be in good shape next year. Riverville is in a similar situation. We've got to just continue to take care of the mills, and we'll invest appropriately. And -- but no, I'm bullish on the -- what we've got facing us for the next few years. No major -- we went through a 40-some-odd day outage at Jackson a few years ago, and we don't see any of that type of situation. So we'll be in good shape. Philip Ng: So it sounds like you would largely be able to do the work that you want to do, whether it's energy projects and then, I guess, even taking down the inventory at Greif within the scope of your normal managed outage. It shouldn't be an outside year next year. Mark Kowlzan: Yes. No, I mean the inventory management, that will happen over the next couple of quarters as we work our way down. And like I say, that's just future upside for the business. Philip Ng: Okay. Helpful. And then a question for Tom. You called out building math and beef being more problematic. Tom, can you size up how much of that of your box business is tied to those end markets? Are trends in those end markets getting worse, it's kind of bouncing along the bottom in the other categories, are you seeing order patterns pick up a bit? And how do you kind of envision your customers managing inventory to kind of close out the year? Thomas Hassfurther: Okay. Philip, number one is, I'm not going to give you what -- how much these segments are. I'm just -- I just told you they're relatively large segments for us, and those are the ones that are impacting us the most in beef and building products being down. But beef is more of a long-term thing. So it's going to take a little while. As I told you, the herds are down to 70-year lows, and these things take 2 to 3 years to rebuild, and we're only a year into the process. So that's going to take a little while. Building products, very reliant on what happens with interest rates and they're coming down and what the cost of materials are and how quickly things can be approved and those sorts of things in the nation. And the remodeling bottoming has begun to go the other way. So that's a good thing. The other segments that we're in have been pretty steady and steadily growing. And the -- our customers are pretty bullish on things going forward. So I think overall, I mean, our portfolio is in really good shape. Philip Ng: I mean I'm hearing from many of your customers that they have desires to kind of work down inventory to close out the year... Thomas Hassfurther: Yes. Yes, Philip, I forgot that part of your question. But our customers are already operating at very low inventory levels, and I think they would tell you that across the board. So that inventory is about -- is peeled down about as far as they can do it because, again, it goes back to all these things that have taken place during the year and the bumpy road we've been on with tariffs and all these other sorts of things. So I think our customers have been very cautious. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Mark Kowlzan for any closing remarks. Mark Kowlzan: I'd like to thank everybody for joining us today and appreciate it and look forward to talking with you all at the end of January. We're very, very pleased with where we are today with the acquisition and looking forward to having a good conversation with you in January. With that, have a good day, and have a great holiday period. Take care. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to Getty Realty's 3Q '25 Earnings Call. This call is being recorded. [Operator Instructions] Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker. Joshua Dicker: Thank you, operator. I would like to thank everyone for joining us for Getty Realty's Third Quarter Earnings Conference Call. Yesterday afternoon, the company released its financial and operating results for the quarter ended September 30, 2025. The Form 8-K and our earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made during this call are not based on historical information and may constitute forward-looking statements. These statements reflect management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2025 guidance and may include statements made by management, including those regarding the company's future operations, future financial performance or investment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2024, as well as our subsequent filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of today. The company undertakes no duty to update any forward-looking statements that may be made during this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of adjusted funds from operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer. Christopher Constant: Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the third quarter of 2025. Joining us on the call today are Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will lead off today's call by highlighting our quarterly financial results, tenant performance and recent investment activity. Mark will then discuss our portfolio investments, and Brian will provide additional details on our earnings, balance sheet and the increase in our 2025 AFFO per share guidance. Getty had another productive quarter, resulting in more than 10% year-over-year growth in our annualized base rent and a 5.1% increase in our quarterly AFFO per share. This performance was supported by the continued health of our in-place portfolio of convenience and automotive retail properties, which is essentially fully occupied and producing both durable rental income and stable rent coverage. For the trailing 12 months, rent coverage for our tenants that report site level financials was consistent at 2.6x. This reflects steady performance from our convenience store portfolio and a third consecutive quarter of increased rent coverage from our Express tunnel car wash assets. The latter is being driven by the maturation of new-to-industry sites and our operators' continued focus on profitability. Turning to our growth initiatives. We are pleased with our year-to-date investment activity and the platform's ability to source relationship-based sale leasebacks at accretive investment spreads. Notably, year-to-date highlights include investing more than $235 million, which exceeds our full year activity in 2024, expanding the breadth of our investment activity, in particular, by gaining traction in the drive-thru QSR segment, where we have acquired more than 25 properties across multiple transactions. We've also diversified our tenant base by transacting with 10 new tenants in 2025, and we continue to backfill our committed investment pipeline, which currently stands at more than $75 million under contract and can be funded without having to raise additional capital. In early October, we announced a $100 million 12-unit sale-leaseback transaction in the Houston market with regional community store operator now and forever. This transaction is representative of how our platform capitalizes on our knowledge of the convenience store sector to identify established growth-oriented operators and enter into long-term unitary net leases that provide strong reliable returns. Now & Forever is a privately owned regional community store chain with a cohesive network of sites located in densely populated Houston submarkets. Houston, as an aside, is a unique market, which is largely dominated by regional convenience store operators who have established best-in-class locations. While there are some national players, none have established a significant presence or a major share of the market. As part of this transaction, we worked with Now & Forever to select a portfolio of approximately half of their locations. These stores average more than 8,500 square feet and include substantial food offerings, many featuring drive-through food and beverage windows. The Now & Forever portfolio also includes a large-format convenience store also referred to as a travel center. As we've mentioned previously, certain of our tenants have been exploring these large-format stores that have all the consumer-facing attributes that we value, including a large selection of grocery and household items, multiple fresh and prepared food offerings, branded QSRs, large coffee and beverage presentations seating inside the store and drive-through lanes and also generate additional visits and income from commercial drivers and the services they use. We've evaluated several travel center opportunities in 2025 and including the Now & Forever property, have acquired 3 assets year-to-date at an average purchase price of $11 million at yields consistent with our overall investment activity. We continue to enhance our knowledge of this growing subsector of the convenience store space while cultivating relationships with operators to partner with on future transactions. We expect to selectively add travel centers that meet our underwriting criteria to the portfolio going forward. In general, our acquisitions team continues to do an excellent job of identifying new investment opportunities that fit our portfolio and strategy. We have effectively broadened our investable universe while maintaining the distinctive advantages of our platform, including our broad network of operators, thorough underwriting process and unmatched knowledge of the convenience and automotive retail sectors. As we think about the current state of our business, we continue to be excited about the platform we've been building here at Getty over the last several years. We've evolved significantly from our days as a Northeast gas station REIT by expanding our investment thesis, adding resources to our investment team, improving our access to capital and demonstrating that we can consistently deliver strong financial results while maintaining an investment-grade credit profile. And we've achieved this during a period of market disruption, uncertainty and volatility in both the transaction and capital markets. Looking ahead, we remain focused on acquiring well-located convenience and automotive retail properties leased to growing regional and national operators and leveraging our underwriting expertise, real estate selection and lease structuring capabilities to support our investment decisions and mitigate credit risks. Finally, I am pleased that our Board approved an increase of 3.2% in our recurring quarterly dividend to $0.485 per share. This represents the 12th straight year we've grown the dividend alongside our earnings. With that, I will let Mark discuss our portfolio and investment activities. Mark Olear: Thank you, Chris. At quarter end, our leased portfolio included 1,156 net lease properties and 2 active redevelopment sites. Excluding the active redevelopments, occupancy was 99.8% and our weighted average lease term was 9.9 years. Our portfolio spans 44 states plus Washington, D.C., with 61% of our annualized base rent coming from the top 50 MSAs and 77% coming from the top 100 MSAs. We received site level financial reporting from tenants representing 73% of our ABR and have additional visibility into 21.5% of ABR that is derived from publicly reporting companies. For rents, our rents for sites where we received site level reporting continue to be well covered with a trailing 12-month tenant rent coverage ratio of 2.6x. Turning to our investment activities for the quarter. We invested $56.3 million at an initial cash yield of 8%. The weighted average lease term on acquired assets for the quarter was 18.2 years. Highlights of this quarter's investments include the acquisition of 15 drive-thru QSRs for $18.4 million, 5 convenience stores for $19.4 million and 2 express tunnel car washes for $11.1 million. We also advanced incremental development funding in the amount of $4.5 million for the construction of 2 auto service centers and 3 express tunnel car washes. These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the project's respective construction periods. Subsequent to quarter end, we invested an additional $103.4 million, including the 12-site now travel sale leaseback transaction that Chris discussed, bringing our year-to-date total investment $236.8 million at a 7.9% initial cash yield. Beyond our disclosed pipeline of more than $75 million of investments under contract, the majority of which we expect to fund over the next 9 to 12 months and average initial cash yields in the high 7% area, we continue to source opportunities that are priced at accretive spreads and will be added to our portfolio as we look to further scale and diversify our business. Moving to our redevelopment platform. During the third quarter, rent commenced on one redevelopment property located in the Philadelphia metro area that is now leased to a Take 5 Oil franchisee. We invested $1.2 million in this project and expect to generate a return on invested capital of 11.6%. At quarter end, we had 3 signed leases for new-to-industry oil change locations, one of which is currently under construction and additional projects in various stages in our pipeline. Continuing with our asset management efforts. During the quarter, we sold 1 property for gross proceeds of $1.8 million. And year-to-date, we have sold 6 properties for gross proceeds of $5.5 million. With that, I'll turn the call over to Brian. Brian Dickman: Thanks, Mark. Good morning, everyone. Yesterday, we reported AFFO per share of $0.62 for Q3 2025, an increase of 5.1% over Q3 2024. For the 9 months ended September 30, AFFO per share was $1.80, an increase of 3.5% compared to the prior year period. A more detailed description of our quarterly and year-to-date results can be found in last night's earnings release, and our corporate presentation contains additional information regarding Getty's strong earnings and dividend per share growth over the last several years. Looking at G&A expenses, management focuses on the ratio of G&A, excluding stock-based compensation and nonrecurring retirement costs to cash rental and interest income. That ratio was 8.8% for the quarter ended September 30, a 30 basis point improvement over the prior year period and 9.7% for the 9 months ended September 30, a 10 basis point improvement over 2024. For the full year 2025, we expect to see an improvement over full year 2024 and anticipate this ratio will improve further as we benefit from continuing to scale the company. Moving to the balance sheet and liquidity. At quarter end, net debt-to-EBITDA was 5.1x or 4.6x, taking into account unsettled forward equity. We continue to target leverage of 4.5 to 5.5x net debt to EBITDA and are well positioned to maintain these levels going forward. Fixed charge coverage for the quarter was 3.8x. As of September 30, the company's weighted average debt maturity was 4.8 years, and the weighted average cost of our debt was 4.5%. As a result of our financing activity earlier this year, we have no debt maturities until 2028. During the third quarter, we settled approximately 1.2 million shares of common stock subject to forward sale agreements for net proceeds of $32.5 million and entered into new forward sale agreements to sell approximately 1 million shares of common stock for anticipated gross proceeds of $29 million. At quarter end, we had approximately 3.7 million shares of common stock subject to forward sale agreements, which upon settlement are anticipated to raise gross proceeds of $113 million. We continue to be in a strong capital position with more than $375 million of total liquidity at quarter end, including unsettled forward equity, availability on our revolver and cash on the balance sheet. We have capacity to fund our committed investment pipeline and incremental investment activity as we head into next year. We also remain focused on balancing the return of capital to our shareholders through our growing dividend and retaining free cash flow to support continued growth and long-term value creation. With respect to our earnings outlook, as a result of year-to-date investment activity, we are increasing our full year 2025 AFFO per share guidance to a range of $2.42 to $2.43 from the prior guidance of $2.40 to $2.41. As a reminder, our outlook includes completed transaction activity at the date of our earnings release, but does not include assumptions for any prospective acquisitions, dispositions or capital markets activities, including the settlement of outstanding forward sale agreements. Primary factors impacting our 2025 guidance include variability with respect to certain operating expenses, certain transaction-related costs and the timing of our anticipated demolition costs for redevelopment projects, which run through property costs on our P&L. With that, and with a moment for some of the background noise to clear, we will ask the operator to open the call for questions. Operator: [Operator Instructions] Our first questions come from the line of [ Daniel Behan ] with Bank of America. Unknown Executive: 15 out of 24 acquisitions were drive through QSRs. Could you provide your thoughts around the business as it relates to the health of middle to lower end consumer? Mark Olear: Yes. So we've been gaining momentum in the quick service restaurant as evidenced by the number of properties acquired over this last quarter. We have broadened our reach into that industry, developed a lot of relationships. We feel that the quick service restaurant concept is right in with the -- some of the macroeconomic pressures across the country, the price points that they offer, the quality of food, the convenience factor that we like and the automotive experience kind of all just fit our model. And we're going to continue to press hard to grow that as part of our efforts to diversify the portfolio. Unknown Executive: And then just separately, can we get more color behind the 3Q environmental expense adjustments? Should we expect additional adjustments going forward? Brian Dickman: It's Brian. For those that may remember, about 3 years ago, I think in 2022, we had similar activity at a much larger magnitude. I think it ended up being $23 million, $24 million, $25 million. But effectively, what's happened there is we determined that whatever risk we may have previously had available for environmental contamination at some of our legacy sites that, that risk has been alleviated and that falls squarely on our tenants at this point. And so as a result, we removed certain reserves that we had on the balance sheet around those environmental potential unknown environmental liabilities. And that's really the story behind those and very similar with activity we've had over the last couple of years. Operator: Our next questions come from the line of Mitch Germain with Citizens JMP. Mitch Germain: When -- how long does the engagement with now and forever, how long did that begin? And then basically the process ending with an acquisition? Is it a several year process to learn about their business and talk about the merits of your financing options? Christopher Constant: Yes. I think each transaction, the time line can be a little bit different. If you recall the last year, we spent some time down in Houston and did another portfolio transaction down there. So we spent actually a lot of time in that market. So we've got to know them as an operator. And this particular transaction, I think, was probably less than 6 months start to finish. But again, we've had certain opportunities, Mitch, just to be honest with you, where it's been years of getting to know somebody and underwriting potential deals, and we finally get one done and others that can be maybe faster like than now and forever team. So it really is a range. Mitch Germain: Great. That's helpful. And then maybe, Brian, if you could talk about for the back part of the year, obviously, you've got this $100 million transaction, another $75 million behind that. Maybe -- and I know you've got liquidity, but maybe discuss the funding plan in terms of maybe for 4Q and then as you approach growing that pipeline into 2026? Brian Dickman: Yes, absolutely. I mean you hit on the major sources there, Mitch. In the immediate term, as we do each quarter, we're typically funding investment activity on the line and then settling forward equity towards the end of the quarter to manage leverage and revolver availability. That's the same process and cadence we follow every quarter, so that won't be any different here. And then as you pointed out, we have additional equity beyond that. We have capacity on the revolver. We are generating more free cash flow each year as we continue to grow the platform and expand the company. And looking into certainly the early part of next year, looking into our pipeline, looking into the timing of when we think capital needs to be deployed, we feel very well positioned. And we'll assess additional capital sources as the pipeline further materializes and we time passes as we move into next year. Operator: Our next questions come from the line of Rob Stevenson with Janney Montgomery Scott. Robert Stevenson: Just to follow up on Mitch's question. Brian, no near-term debt maturities, but if you do more deals and want to move some debt off the line, what's your best source of debt today? And where is that pricing versus the line? Brian Dickman: Yes. It's a great question, Rob, because I think it is reasonable to assume, given the constructive debt markets that there may be an opportunity to term out some of that revolver balance. As a reminder, $150 million of that is fixed at 6.1%, the balance close with the line. We've been very active in the private placement market for well over 10 years. some great relationships there. So that would be the likely route. I would put forth that right now, on a new 10-year, we're probably in the high 5s all in, given where treasuries are and where spreads are. So call that 5.9% area, plus or minus is where we see new tenure today. Robert Stevenson: Okay. And then, Chris, the Board has been increasing the annual dividend by about $0.02 a share since late 2019. This year, they decided to do $0.015. Can you talk about the thought process they went through here to retain more cash internally? And arguably, the dividend yield was already high enough, how you guys sort of went through that process on the evaluation of the dividend this year? Christopher Constant: Sure. Yes. I think it's representative of the Board's view that retaining capital to help us grow and scale the business is critical right now. And we're cognizant of the fact that we've grown earnings and the dividend should follow that. But again, if we look to grow at scale, that's an attractive cost for us to be able to redeploy that capital. Operator: Our next questions come from the line of Upal Rana with KeyBanc Capital Markets. Upal Rana: Would you like to provide some details on how you're able to source the Now & Forever acquisition? And how do you plan to source even more of some of these travel center transactions in the future? Christopher Constant: Yes. I'll take maybe the first part, Mark, you can talk about travel center. But again, I think very similar to how we've grown in other markets over the years, Upal. Yes, we did a couple of transactions down in the Texas market at the end of last year in Q4. We are constantly trying to establish new relationships and build on our network, particularly in the C-store space. It is -- it's a large market, I'd say, just given the breadth of the Houston market, there's -- these sites happen to be in the western and southern areas of Houston. So they didn't really overlap with the deals we did last year, but really just relationship building. We're down there driving the market and got to know the Now & Forever management team and are happy to get that deal done. You can touch on travel center. Mark Olear: Yes. As far as continue to source travel centers, there's a number of opportunities. One is many of our current relationships and tenants that operate traditional convenience stores are branching out into the travel center sector and exploring ways to grow their business. So we have that had a built-in relationship to kind of grow that relationship. Secondly, there's the old fashioned business development, the trade shows, dedicated brokerage networks, deal advisers that are dedicated to the space. And lastly, what I'd say is there's about 5,000 in -- what we call in our profile travel centers in United States. The top 3 operators own about 30% of those units. So it's still a very highly fragmented industry, which typically is good for sale leaseback or those type of aggregators and consolidators use sale leaseback to help grow that business. We're making a lot of great inroads with those consolidators. We've got great early returns from kind of expanding our strategy early this year, putting a few deals in the close category. So we think there's a lot of opportunity for us to be active in that space. Upal Rana: Okay. Great. That was helpful. And then, Brian, maybe you could provide us with an update on the bad debt so far this year and what you currently have baked into your updated guidance? Brian Dickman: Yes, absolutely. As you can see from the collections and I guess, the lack of any other commentary beyond the Zips situation from the first quarter, which we had fully resolved by the end of the second quarter. There has been no rent collection issues this year. In terms of what's in that number, it's the typical kind of 15 basis points or so that we roll through down the quarterly number there. So that's really just math, but nothing specific and nothing has risen to any level of concern since Zips earlier this year. Operator: Our next questions come from the line of Wes Golladay with Baird. Wesley Golladay: Sticking with the tenant health, are you seeing any more an uptick in request to substitute assets in your master leases? Christopher Constant: Well, the short answer is not at this time, Wes. We do have a few larger unitary leases that are set to expire in '27. Each of those has different notice periods. Probably a little too early for us to assess or comment on the specifics there. But again, those are profitable leases. And I'd say we expect the vast majority of those properties to remain on our portfolio for the long term. Wesley Golladay: Okay. And then when you look to go to like a new segment like the larger format centers, are you comfortable taking that exposure up to 5%, 10% of the portfolio? Or do you have a sort of governor in the first few years where you want to just monitor what you buy? Christopher Constant: Yes. And I think I said we bought 3 of these are slightly larger purchase prices than maybe a typical 5,000 square foot C-stores for us. We really view this as an extension of the C-store space, particularly as some of our tenants that we know really well are getting into them. I think we'll -- we're getting ourselves a lot smarter on some of the dynamics on the commercial side as opposed to the consumer that we feel very comfortable with. I don't think we've established a specific target at this point in time, but I think there is a bit of a learning curve before we would significantly expand the portfolio, the concentration in our portfolio. Operator: Our next questions come from the line of Brad Heffern with RBC. Brad Heffern: On the travel centers, can you talk about maybe how the underwriting is different there? I would think a traditional small format store is a little easier to re-tenant than a large one with branded food and beverage, but they probably cover better as well. I guess, is that right? Or is there anything else that you would call out about the differences in the risk profile? Mark Olear: Yes, it's Mark. So certainly, as you said, the land component of the overall value of these centers is a little smaller in relationship to the total investment than we would have in a traditional C-store. That said, though, we're developing the model underwriting as we learn more and more about these businesses to be specifically a total value approach to any acquisition. But with the risk mitigants that you highlighted there on the travel centers, these tend to be anywhere from 2 to 4 acres upwards of 10 acres versus the 1 to 2 acres we have been acquiring. The store size is anywhere from 2 to 3x the size. But that said, the breadth of the services that these operations offer. And again, think of it less about being just a stop for the professional driver. These operations attract the recreational driver, families on vacations, commuters. So the investments we'll make will be with operators that offer goods and services to all of us, not only the typical retail customer, but the professional driver. They're going to be more focused about maybe on the fringes of the MSAs because they need to leverage the high traffic count of the interstate system, so less around internal or community type centers. But yes, I think all of that being considered, -- we are -- we have developed and we'll continue to perfect our underwriting model for a total value approach to get comfortable with the higher value per unit investments. Brad Heffern: Okay. Got it. And then, Brian, can you walk through the puts and takes on the new guide? Obviously, you have a lot of deal activity that probably wasn't in the old guide, but it's also pretty late in the year for that to move AFFO much. So just wondering if there was anything else that contributed. Brian Dickman: No. I mean I think you hit it, right? We're still a relatively small company, small denominator, $100 million deal at the beginning of a quarter that wouldn't have been in our prior guidance, right? That alone could actually have that kind of impact even in only a quarter, just given the relative sizing. We also had a fairly active third quarter overall. So I think if you look there's probably upwards of $140 million plus or minus of acquisition activity that's in this guidance that wouldn't have been in our guidance 1 quarter ago. That's the big driver. And then obviously, just crystallizing any expenses, right, that had estimates around them, had ranges around them coming in at the mid or lower end of what those estimates have been. But really acquisition activity driving earnings growth given the magnitude of it relative to the size of the whole. Operator: [Operator Instructions] Our next questions come from the line of Michael Goldsmith with UBS. Michael Goldsmith: First, just given the moderating tenure in the last couple of weeks, is that impacting the cap rate discussion in any way? And do you think there's been enough of a move that it may shake some sellers loose and want to come to the table to deal? Christopher Constant: We haven't seen a big move in cap rates, I'd say, over the last several quarters. And my initial reaction, Michael, is that this move is a little too quick to say it's going to have a Q4 impact on cap rates. I think, a longer-term shift. And you're correct, you may start to see some different asks. Michael Goldsmith: Got it. And then another question we had is just how do you think about transacting in volume versus acquisition cap rates and just trying to think about the trade-offs between how much -- how accretive a deal is versus kind of the volume of transaction activity that you're completing? Christopher Constant: Yes. I'd say our mandate has always been about selecting the right assets for this portfolio in the sectors that we like. I don't think I would categorize Getty as a "volume shop. And to the extent that we do close more volume, we're certainly looking to grow and scale the business, but it's got to be transactions that are priced accretively for Getty. So I think we'll continue to be focused on the sectors that we like on the sale leasebacks where we can drive a little bit of incremental price, and you'll continue to see us deploy capital in around the same range that we indicated for our pipeline and that should produce future earnings growth. Michael Goldsmith: And maybe one more for me. We've gotten this far we haven't talked too much about Car Wash, which I presume is a good thing. But can you just talk -- I think in the prepared remarks, you talked a little bit about some of the newer car washes and they've kind of stabilized as they've ramped up. So maybe you can provide a little bit more color about what you're seeing in the car wash industry more recently. Christopher Constant: Yes, sure. We feel good about the increase in rent coverage in Car Wash this quarter. Many of the sites that we've acquired were new builds, which requires a ramping period, right, to get up to what we'll call a stabilized level of profitability. We generally underwrote those on a 3-year basis where we say it would take the operator 3 years to get to a fully mature site. And what we've seen to date is they're kind of trending ahead of schedule as they reach stabilization. But to the extent these assets continue to come online, we're always going to be monitoring the trend, right, in terms of whether it's visits, memberships and how much time it's taking them to stabilize. But again, for the last several quarters, what we've seen is a very healthy ramp for those new builds that are coming online. And obviously, that's good for our portfolio, and it's great for the health of our tenant as well. Brian Dickman: And Michael, I'll just add one thing or perhaps clarify. The operators project 3-year stabilization period. As Chris just said, we underwrite a 3-year stabilization period, but we do put them in our reporting after 12 months. And so to some degree, the car washes can act depending on the particular point in time as a little bit of a drag on coverage. But what we've seen over the last 3 quarters, in particular, and that's what we're really emphasizing is as these car washes have been ramping up, as they've been stabilizing, many of them not at that 3-year period yet. right, you're starting to see that impact in a more material way to the point where the car wash side of the business is actually covering greater than the C-store side of the business, although it is a much smaller weight on the whole. So even as we go forward and we continue to bring more properties into the coverage calculation into the presentation that we put out there, you'll continue to see that dynamic. If there's things that are open a year that are on the lower end, that will come into coverage that way. We'll disclose that as it comes in. But the expectation even for those assets to the extent there are any, is that as they move into year 2 and 3 and beyond, that it will match the performance we've been seeing from the other facilities and closer to where we're underwriting them. Operator: I'm showing no further questions at this time. I would now like to hand the call back over to Christopher Constant for closing remarks. Christopher Constant: Great. Thank you, operator. I just want to thank everybody for joining us this morning, and we look forward to speaking with everybody when we get on the phone in February and report our fourth quarter and full year earnings for 2025. Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Torbjorn Skold: Welcome, everyone, to BONESUPPORT's Q3 2025 Results Call. My name is Torbjorn Skold, and since September 1, I'm the CEO of BONESUPPORT. With me here today is our CFO, Hakan Johansson. And together, the 2 of us will use the next 25 minutes to guide you through the Q2 report and then open the line for any questions. Before starting the presentation, I would like to draw your attention to the disclaimers covering any forward-looking statements that we will make today. Next slide, please. So let's look at the financial and operational highlights from the quarter. Q3 was another strong quarter with solid execution across the business. Net sales came in at SEK 294 million, corresponding to a growth of 24% versus Q3 2024. Sales growth at constant exchange rate was 34%, showing that there is continued strong currency impact on our figures for the quarter. Our operating results, excluding incentive program effects, was SEK 79 million, corresponding to an adjusted operating margin of 27%. Reported operating results was SEK 65 million, and we saw strong cash generation with operating cash flow reaching SEK 71 million, leading to a cash position at the end of the quarter of SEK 379 million. One highlight in the quarter was the publication of the long-awaited CeraHip study, which now kicks off our market penetration efforts in this market segment, revision arthroplasty. We will look deeper into this later in the presentation. We continue to see strong traction for CERAMENT G in the U.S., where both new accounts and increased use among current users contributed to the strong progress. CERAMENT G sales in the U.S. reached SEK 192 million for the quarter. Furthermore, the proposed NTAP for CERAMENT G in open trauma has now been decided upon as well as a 6% general increase in CERAMENT relevant DRG codes by CMS for orthopedics. So all in all, an eventful and successful quarter. As I've transitioned into my new role and reflect on the business, I find our strategy sound and that the business develops very well. What really stands out is the solid evidence base supporting the CERAMENT platform and the significant long-term opportunity of CERAMENT globally in several clinical segments. This spring, we're planning to host a Capital Markets Day, where we'll share a structured overview of our key initiatives and our path forward. We'll follow up with more details on the official dates later. Operator: This is the moderator speaking. We are having some technical issues, but we are going to try to get the speakers back as soon as possible. [Technical Difficulty] Håkan Johansson: So the speakers have connected again. Can the moderator please confirm whether the sound and technology is up again. Operator: Yes, everything is great. Håkan Johansson: Thank you very much. Torbjorn Skold: Thank you, moderator. Moderator, can you please inform us how long did you listen to us? Operator: We came to -- you were at like the third slide in the third quarter report. Torbjorn Skold: Okay. I assume that we have gone through Slide 3, and we move over to the sales development. This chart shows the last 12-month sales in Swedish krona by quarter since 2019 in stacked bars by region, by product category. As you can see, the launch momentum for CERAMENT G in the U.S. is exceptionally strong. However, in the last 2 quarters, we've seen strong influence from the U.S. dollar to Swedish krona depreciation. Last 12 months growth in Q3 of 37% in the graph corresponds to an even stronger 41% at constant exchange rates. So most of this quarter-over-quarter slowdown in last 12 months' sales is due to the strong currency impact. CERAMENT BVF last 12 months dropped 2% year-over-year in constant currency. In total, antibiotic eluting CERAMENT grew with 59% last 12 months in the quarter in constant currency. Next slide, please. In U.S., sales amounted to SEK 246 million, representing a growth of 40% at constant exchange rates. There was some general variability during the quarter due to the usual stop and go dynamics, a reflection of the strong pace of new customer recruitment over the past 6 to 8 months. As part of our mission to modernize an outdated standard of care in the U.S., we have successfully opened one market segment after another. We started with foot and ankle, then we followed with trauma, and now we're moving into revision arthroplasty. Revision arthroplasty and the subsegment of periprosthetic joint infections are areas we have not specifically focused on in the past. Each year, approximately 1.5 million primary joint replacements are performed in the U.S. with just over 70,000 revision procedures requiring bone graft. The CeraHip results are groundbreaking. Although the study is not very large, patients have been followed for an average of 3.3 years with no infections reported. I'll speak more about CeraHip on the next slide. We have expanded our U.S. organization, and we plan to recruit additional team members with specialized expertise in revision arthroplasty to support the market entry and the medical education programs. We are expanding our presence in the market to introduce CERAMENT BVF for use in spinal procedures in Q4 2025. Several distributors are now in place to begin engaging with spine surgeons. Some of these distributors are already our partners today on the extremity side, while others represent new collaborations. The spine segment is new for us, and we will begin generating clinical data during 2026 to establish a foundation for further market penetration. We have also made strong progress in evaluating and preparing the regulatory pathway for introducing CERAMENT G into the spine segment. We have reached a stage where guidance from the FDA on the regulatory path is required. We plan to meet with the FDA at the beginning of 2026. The path forward will be shared and communicated at the Capital Markets Day this spring in 2026. The team have been working diligently with assembling data in reply to FDA's question on CERAMENT V, and we expect to send in the supplementary data pack in November. The material relates mostly to clarifications and making sure that the evidence is presented in the way that FDA wants to have it. Being a pioneer technology, there is no template as how to bring forward the evidence. The thoroughness of the process testifies to the rigor of solid data required to qualify a product into the unique category of antibiotic eluting bone graft. And we should remember that this category is defined by another CERAMENT product, namely CERAMENT G. So let's turn to Europe. Next slide, please. Sales performance in Europe continues to be influenced by the same dynamics observed in Q2. The third quarter typically shows some volatility due to seasonal factors. Additionally, the contraction and disruption in Germany have persisted as anticipated. Sales in EUROW came in at SEK 48 million, representing 5% year-over-year growth and 7% at constant exchange rates. Hybrid markets in Southern Europe, Australia and Canada are performing strongly. We're beginning to see positive traction from the investments made during the first half of 2025, reflected in improved sales performance. In the U.K., the previously announced prioritization of hip and knee surgeries is gradually restoring procedure volumes, which bodes well for the future of BONESUPPORT in U.K. However, the pace of recovery varies by region and is largely dependent on staffing levels. During the quarter, the European Bone and Joint Infection Society held its annual meeting. Several podium presentations and posters highlighted the efficacy of CERAMENT G and CERAMENT V in single-stage procedures and demonstrated improvements in patient outcomes. A poster presentation by Dr. Meller from Charite showcasing results from the CeraHip study attracted significant interest and a large audience. We'll review the detailed findings from the now published study on the next slide. Also, Professor Ferreira from University Hospital, Stellenbosch presented results from his study involving 103 trauma patients with bone infections. These patients were treated with a single-stage procedure using CERAMENT G or CERAMENT V. After an average follow-up of 11 months, 96% remained infection-free and no amputations done. [Technical Difficulty] Operator: Sorry for having some technical issues again. The speakers will be back as soon as possible. Torbjorn Skold: Annual Meeting of the American Association of Hip and Knee Surgeons, AAHKS in Texas, which last year attracted over 5,100 participants. In fact, our U.S. team is actively preparing for the event at this very moment as it kicks off today. Now I'll leave a deep dive into the numbers to Hakan. Hakan, please. Håkan Johansson: Thank you, Torbjorn. And again, sorry for what seems to be a day of technical disruptions and hopefully, now the -- everything stabilizes. So into the financials. Well, net sales improved from SEK 237 million to SEK 294 million, equaling a growth of 24% reported sales growth of 34% in constant exchange rate. Torbjorn has already spoken about the solid performance in especially the U.S. and the major drivers behind the sales growth, but as the weak U.S. dollar somewhat hides a continued strong trajectory in the U.S., I would like to share the U.S. sales performance in U.S. dollar. This slide shows the quarterly sales in the U.S. and U.S. dollar with continued solid performance quarter-to-quarter. The growth in dollar in the quarter of 40% should be viewed in perspective of volatility on BVF sales being 1.7% below same quarter last year, whilst CERAMENT G continued to show solid performance with a growth of 59.2%. The contribution from the U.S. segment improved with SEK 31.9 million and amounted to SEK 111.2 million. The improved contribution relates to increased sales after the effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 123.6 million compared with SEK 102.6 million previous year, of which sales commissions to distributors and fees amounted to SEK 84.2 million compared with SEK 65 million in the same quarter last year. From the lower graph showing net sales as bars and gross margin as the orange marker, it can be noted that the gross margin remained stable and strong around 95%. In Europe and Rest of World, a contribution of SEK 12.5 million was reported to be compared with SEK 15.6 million previous year. Sales and marketing expenses increased with SEK 4.6 million, including SEK 2 million related to the previously communicated commercial investment in the EUROW booster program. From the lower graph and orange marker, the minor drop in gross margin is noted mainly impacted by market mix. The flat selling expenses compared with the same quarter previous year is due to a depreciated U.S. dollar, but also an effect of seasonality. As mentioned previously, the quarter also included SEK 2 million related to the EUROW booster program. R&D remained focused on the execution of strategic initiatives such as the application studies in spine procedures and the market authorization submission for CERAMENT V in the U.S. These initiatives have been progressing well during the quarter and, among others, leading up to the launch of our product, CERAMENT BVF in spine later this year. And administration expenses, excluding the effects from the long-term incentive programs, remain on a stable level. The reported operating result amounted to SEK 65.4 million despite unfavorable currency effects totaling SEK 5.7 million, and I will come back to this in a following slide. The newly introduced tariffs in the United States are not expected to have a material impact on cost in 2025 due to high safety inventories. The full effect of the current 15% tariff equals a 0.8% impact on U.S. gross margins and will come gradually with full effect from 2027. The difference between adjusted and reported operating results are costs regarding the long-term incentive programs amounting to an expense of SEK 13.2 million in the quarter compared with SEK 7.3 million previous year, as you could see from the previous slide. Cash conversion remains solid with a fifth consecutive quarter with strong cash flow and an increase in cash during the period with SEK 69.3 million. Despite unfavorable currency effect with this report with a strong adjusted operating result and a solid cash flow, we continue to confirm a strong operating leverage and the business scalability. During the period, the Swedish krona has continued to strengthen against the U.S. dollar. Other operating income and expenses, therefore, contain foreign exchange gains and losses from the translation of the group's assets and liabilities in foreign currency, amounting to a negative SEK 5.7 million. Simply put, the negative SEK 5.7 million is mainly driven by the operating assets in the U.S. such as inventories and trade receivables. These are originally valued in U.S. dollars and at quarter end translated into a much stronger Swedish currency versus last quarter. The graph on this slide shows with the gray bars how the relationship between the U.S. dollar closing rate and the Swedish krona has varied over time. This is read out on the right Y-axis. The blue dotted line read out to the left axis shows reported adjusted operating results. The adjusted operating result, excluding translation exchange effects is the orange line. To explain this, in Q4 2024, the U.S. dollar to SEK was above SEK 11, which gave a positive effect of SEK 20 million in the quarter. And therefore, the blue dotted line is above the orange line. In Q1 2025, the U.S. dollar to SEK rate was SEK 10.02, creating a negative impact of SEK 30 million. In Q2, the U.S. dropped down to SEK 9.49, creating a negative impact of SEK 11 million and in Q3, continuing down to SEK 9.41 with a negative impact of SEK 5.7 million, meaning that the blue dotted line dropped below the orange line for these 3 quarters. The orange line eliminates the translation exchange effects and gives a more comparable view of the underlying trend in operating profit. In the table below the graph, you can see the FX adjusted operating margin of close to 29% in the period compared with 23% in the same quarter last year. And with this, I hand back to you, Torbjorn. Torbjorn Skold: Thank you, Hakan. And if we take the last slide, so to summarize Q3 2025 for BONESUPPORT, sales grew 34% in constant currency, reflecting steady and consistent progress. Adjusted operating margin reached 27%. Cash flow remains robust, underscoring the health of the business and its scalability. With the publication of the CeraHip study, strong endorsement from leading surgeons at Charite and detailed procedural guidance for using CERAMENT in revision arthroplasty, we're unlocking a new avenue for market expansion. This marks a significant step forward in our ongoing mission to transform the standard of care. We maintain our guidance on sales growth above 40% in constant exchange rates for full year 2025. And to conclude, my first period at BONESUPPORT has been as rewarding as it has been intense. I'm convinced that the most exciting part of our journey still lies ahead. And as I said, to provide a clearer view of what that journey will look like, we will host a Capital Markets Day in the spring of 2026. Lastly, again, apologies for the technical issues that we've had during the call, but now we're happy to open the line for any questions that you might have. Thank you. Operator: [Operator Instructions] The next question comes from Erik Cassel from Danske Bank. Erik Cassel: Yes. So India has probably cut out 70% of what you said. So you have to excuse us if we repeat some stuff. But first, I just want to confirm the sales level for CERAMENT G in the U.S. Was that USD 19.9 million in, 59% organic growth? Or is it a completely different figure? Håkan Johansson: Again, as commented, CERAMENT G reported a 59% growth. Erik Cassel: Okay. Good. First, I then want to ask, what are you seeing for trauma now during the initial 3 weeks of NTAP for CERAMENT G in the U.S. Håkan Johansson: Again, as communicated previously, what we see is a slightly different market dynamics than what we experienced launching into when there is a bone infection. So when there is a bone infection, the surgeon was looking for treatment options and CERAMENT G fitted very well. With trauma surgeons, it's a bit of a timing issue. We meet the trauma surgeon and the trauma surgeon haven't had a patient coming back with a bone infection during the latest weeks or months, et cetera. It's a harder call to convince the surgeon to try a new product. However, if the surgeon had had a bone infection lately, it's an easier call to convince the surgeon to start trying. So what we see confirms what's been previously communicated. It's a big market potential in trauma, but market penetration to start with will be somewhat slower than when there is a bone infection. Erik Cassel: Okay. But just specifically on the NTAP, you haven't seen that in and of itself accelerate uptake anything? Håkan Johansson: Again, the NTAP, Erik, is valid from 1st of October. So it's too early to see whether this has any impact in the penetration of the trauma segment. Erik Cassel: Okay. And then U.K. down 5.5% year-over-year. Germany, you said was worse. Is it possible to give any sort of more specific numbers on how bad Germany is doing and sort of how much that represents of the European sales? Håkan Johansson: Again, we have always been precautious to disclose exact numbers on geographic level. But again, if there are structural challenges... Operator: Speakers have been disconnected again, but if you have to stay on the line, I hope they will. Erik Cassel: The speakers was not disconnected. We heard them. Håkan Johansson: So do you hear us now, Erik? Erik Cassel: Yes, I hear you loud and clear. Håkan Johansson: Thank you. So again, some of the challenges [Technical Difficulty] Erik Cassel: Okay. Now I don't hear the speakers. Operator: Yes, a second, we're trying to fix the connection problems. Håkan Johansson: So dear moderator, where are we now in terms of technology? Because it feels like things are going silent. Operator: Yes. Now you came back. So maybe, Erik, can you repeat your last question, so we can go back from there. Erik Cassel: Yes, sure. It was on Germany. U.K. down 5.5%. You said Germany was worse. And I asked for if we could add any more color on Germany. How much is it down? And how big is Germany in terms of Europe sales? Håkan Johansson: Well, Germany is our second biggest market. So of course, when we have a setting in a market like Germany, it impacts on the totals. Erik Cassel: Okay. And then just lastly, do you have any visibility on U.K. and Germany coming back? You're saying that you're seeing a gradual, say, recovery in the U.K., but when can you be back to sort of normal levels or normal growth rates in those markets, do you think? Håkan Johansson: Again, what is impacting in the U.K. is that U.K. is a market where a substantial health care backlog is impacting hospital priorities. Already before the pandemic, there was patients -- 5.5 million patients in queue that has increased to 8 million patients. And the political priorities has started to recruit or reduce that queue, but still from a very high level. So again, we will be fighting against hospital priorities from time to time. But in the environment, we start to see that patients that have been waiting for surgeries where CERAMENT G is a good fit are gradually coming back. But as Torbjorn said in the call, it will probably be a slow process for the market to return into a normal and steady situation. Operator: The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: I have 2. So I guess it's not your main product in the U.S., but I just wanted to dig into the BVF product in the U.S. a bit. We've seen a negative trend in the U.S. for that product here for a couple of quarters. I just wanted to understand a bit more what is driving that and how to extrapolate that negative growth we see at the moment into the coming quarters and into 2026. And then I have another question. Håkan Johansson: Again, I think that it's 2. Again, as you said, we've seen that the BVF has been soft in the latest quarters, but also then showing volatility with a few quarters where we have good BVF sales. And we see that when we look at sales and hospital levels that there is an underlying volatility in the volumes. What we also see, and this is important for the longer term is that with the extending customer base and with surgeons recruited thanks to CERAMENT V, we also see these surgeons starting to use BVF in such cases where there is a controlled infection risk, et cetera. So we remain with a belief that all the time, BVF will stabilize and BVF will, like we've seen in Europe, deliver a small organic growth, but the main driver will be our antibiotic eluting products. Viktor Sundberg: Okay. And just looking into 2026, if we see substantial cuts to Medicaid as part of the One Big Beautiful Bill Act, even if you're not particularly relying on Medicaid directly, I guess, hospitals could see an increase in uncompensated care and maybe strained overall budgets due to this. What's your thinking around how hospitals will look at CERAMENT G as it carries a bigger upfront costs? Our feedback just by speaking to some orthopedic surgeons is that price is the main barrier for wider adoption of CERAMENT G in the U.S. And I'm just thinking that if major cuts to Medicaid will materialize in 2026, hospitals might focus even more on price next year. But I just wanted to understand how you plan to mitigate some of those budget headwinds, I guess, for next year. Torbjorn Skold: Yes. No, I'll start and then Hakan can fill in. So I think the plan to mitigate that is just to follow the BONESUPPORT strategy where we focus on evidence. And I think it was very interesting to listen in on what was discussed and presented at European Bone and Joint Infection Society. And it's very clear from those presentations and the discussions that are ongoing, and it's similar also at OTA that happened last week, which is a big trauma meeting in the U.S. is that it's very clear that there is a paradigm shift in the market in orthopedics going from long systemic antibiotic regimes in orthopedic surgeries to move to shorter, if any, systemic antibiotic regimes and combining that with local antibiotics with, for example, CERAMENT. So that paradigm shift is happening. There is clear evidence already now on the market. The topic is clearly highlighted. And more evidence will come in the future, partly by BONESUPPORT and CERAMENT and partly because the market moves in this direction. So I think it's nothing new really. It's something that has been happening. It will continue and our plan to address this is just to focus on the strategy, continue to build really, really strong clinical and health economic evidence and make sure that, that evidence is right and center, not just in front of orthopedic surgeons, but also the other decision-makers that play a role in those conversations. Anything to add, Hakan? Håkan Johansson: No, I think you covered it quite well. And again, the pricing is something we meet as part of the dynamics that we have referred to. And we have hospitals that are becoming frequent users and hospital administration noticing that this drives a certain level of costs. But so far in those discussions, when we come with strong clinical evidence and health economic evidence, this is discussions that we're able to handle through. So we're confident in the evidence around the technology and the difference to standard of care it represents. Operator: The next question comes from Mattias Vadsten from SEB. Mattias Vadsten: I have 3 questions. I think I'll take them one by one. First, I think quite confident wording around Q4, if I read it correctly. You also reiterate guidance of at least 40% sales growth. This require a quite strong finish to the year, I guess, very close to 40% organic sales growth at least and an acceleration quarter-over-quarter. So just what brings this confidence? And yes, if you have any further color on sort of how the start of Q4 have looked for you? That's the first question. Torbjorn Skold: Sure. I'll start with that more from a, let's say, tactical operational side and then Hakan can hopefully back it up in the numbers. So as we reviewed both the U.S. business and as we've reviewed the EUROW business in detail and the outlook for the quarter, the fundamentals look very strong from my view in terms of the number of accounts that we have, the penetration in the accounts whether we are increasing penetration or losing penetration. So I feel very confident in the numbers on an account level and regional level that we've gone through. I think also very high level, and Hakan will speak to this also, if you look at the comparables Q3 versus Q4, that also gives me more comfort in the numbers. So yes, I feel pretty confident in hitting that guidance that we've provided with 40% sales growth above prior year on a full year basis in constant currencies. Hakan? Håkan Johansson: Again, I think you covered this quite well, Torbjorn. And again, to bear in mind that if we look at the U.S. dollar -- sales in U.S. dollars, for instance, in the U.S. Q3 to Q4 last year, Q4 was a bit soft after a strong Q3 and then followed by a strong Q1, et cetera. And with the momentum that we have and again, we believe that Q3 somehow gives us a lot of confirmation in that underlying momentum, we are confident that we [Technical Difficulty] Mattias Vadsten: I can't hear Torbjorn or Hakan anymore. Operator: Yes, just a second. We're trying to fix the issue here. I hope they will be back at us soon. Håkan Johansson: Moderator, do you hear us now over a mobile line instead of over the Internet? Operator: Yes, now I can hear you. Mattias Vadsten: I can hear you, Hakan. I heard the full answer from Torbjorn and I heard, I don't know, the first sentences from you, Hakan. Håkan Johansson: Okay. So what I said is that when we look at, for instance, the U.S. in U.S. dollars, last year, Q3 was strong and Q4 was a bit soft. And with the underlying momentum we see in the U.S., we see good opportunities to be well in line with the target we have set for the full year. Mattias Vadsten: Okay. That's perfectly clear. Then I have 2 more. So the next one is the revision arthroplasty segment. I mean, as you said, quite supportive data to say the least. Sort of what are the sales volumes of CERAMENT in this segment today? And could you talk about what you think is required to sort of achieve a meaningful uptake in this segment? Torbjorn Skold: Sure. So I think it's fair to say that currently, this is a segment that where CERAMENT, we've had -- it's been on label. It's been on label in the U.S., and it's been on label in Europe. But at the same time, without clinical evidence, very few orthopedic surgeons will pick it up. That's just how orthopedics works. Now over the last couple of years, the team has worked with Charite, which is, I would argue, top 3, top 5 hospitals in the world when it comes to revision arthroplasty. They've done a study and to be frank, the results could not have been better. So that's the first important step. But to answer your question, our sales in this segment, I would argue it is very, very limited. There is some, but very limited. And I think the potential, if we look at the number of procedures that are done in revision arthroplasty in general and specifically in periprosthetic joint infection, which is going to be our primary focus area. Those are pretty considerable volume numbers that we have at hand. And what is required is, of course, that we have a sales force that is in front of the customers that are in the ORs talking about this and that we promote the evidence and the application techniques that we already have today. But also, let's be frank, we will continue to invest in education. We will continue to invest in further evidence in this space. And this is work that we've kicked off, and that's something that I foresee will continue for several years ahead because this is such an interesting and important segment for us strategically for many years. Mattias Vadsten: Very clear. Then I have a final one. I think it will be quite quick. If you take away the effects of incentive program and sales commission costs, the OpEx look a bit low, I would say. I know quite substantial FX effects year-on-year, but I think down SEK 5 million versus Q2. So question is, is this just usual seasonality? Or is it anything you would mention here, Hakan? Håkan Johansson: It's primarily that relates to normal seasonality in outside the U.S., people tend to have vacation and during vacation period, there's a lower level of activities, et cetera. So just normal seasonality. Operator: The next question comes from Kristofer Liljeberg from Carnegie. Kristofer Liljeberg-Svensson: Three questions. First, just a follow-up on the previous one on implant revision. Is this something you think will start to generate revenues for you already in 2026? Or will that be later? Torbjorn Skold: On revision arthroplasty? Kristofer Liljeberg-Svensson: Yes. Torbjorn Skold: Yes. I mean it will generate revenue in Q4 this year. And it will, for sure, generate revenue in 2026. If it doesn't, then we do something fundamentally wrong. Kristofer Liljeberg-Svensson: Okay. So -- but do you think you could see a faster uptake in this indication than for open fracture trauma, for example? Torbjorn Skold: So really good question. And I don't have any solid data points on that because of my somewhat limited history in BONESUPPORT. But if you think about the segments and how surgeons generally work and how they take decisions and you compare revision arthroplasty, which is an elective procedure and trauma and especially open trauma, which is acute trauma. So it's not an elective procedure. It's always easier to sell into a segment where you have elective procedures. So only looking at those sort of characteristics, you could argue that, well, it should be easier and faster to enter revision arthroplasty than it is trauma. So I think there's something in that, that you're absolutely right on, but I have a hard time quantifying it, to be perfectly honest. Kristofer Liljeberg-Svensson: Okay. And then I don't know whether we missed that due to the technical problems, but did you say anything about expected launch timing for CERAMENT V in the U.S. Torbjorn Skold: So CERAMENT V in the U.S., we follow the plans. So we deliver on the plans and the plans that were previously communicated was that we submit additional data to the FDA in November, that is according to plan. And then we feel comfortable that we have the right data in place and expect a positive outcome of that review with the FDA. Exactly when FDA will come with an answer, it's hard for us to predict. But typically, historically, what we've seen is that there's a 90-day period following the submission of the supplemental data until an FDA decision is taken. So that's typically the guidance that we give on the CERAMENT G for the U.S. Kristofer Liljeberg-Svensson: Great. And then finally, just on R&D costs, should we expect that to be more stable now quarter-over-quarter or year-over-year before you start the CERAMENT G spine study? Håkan Johansson: Yes. I think that's a fair comment. And again, you've seen quite a solid stable level over the last year, et cetera. And it's a fair estimate to assume that, that level continues. High activity level remains, but there is no true acceleration until we would start a clinical study preparing for getting CERAMENT G approvals. Operator: The next question comes from Sten Gustafsson from ABG Sundal Collier. Sten Gustafsson: I think most of it has been covered already, even though there were some technical issues here. So I just want to confirm that I heard it correctly. Did you say that you had CERAMENT G sales in the U.S. of -- was it $19.9 million in the quarter? Håkan Johansson: We did not confirm the dollar amount, but we say that we confirm that the growth in constant exchange rate was 59%. Sten Gustafsson: Okay. That's good. And then the number of procedures in the U.S. related to this hip joint infection category. Did I hear it right, 70,000 or... Torbjorn Skold: So what we say is that the number of primary hip and knee arthroplasty as per previously communicated data from BONESUPPORT is estimated to 1.5 million. So that's the number of primary arthroplasty. Revision arthroplasty is a smaller number, of course. But the initial focus that we have on revision arthroplasty is the subsegment that is called periprosthetic joint infection. The previous numbers from BONESUPPORT that has been communicated related to the size of that segment is 70,000 for U.S. only. So those were the numbers that we refer to. So we're not communicating any new numbers on this call compared to what's been communicated earlier. Sten Gustafsson: And that was 17, 1-7? Torbjorn Skold: No, 70. And the 70,000, just for absolute clarity, those are revision arthroplasties with bone infection where a bone graft is needed. Sten Gustafsson: Okay. Excellent. And then on NTAP finally, and I heard it, I think correctly that you expect the trauma NTAP will be more challenging than when you got it initially on osteomyelitis, which makes perfect sense. But do you think that the net impact here short term with the sort of -- will be then a negative driver? Or do you expect the underlying osteomyelitis procedures to carry on even though you don't have the NTAP on those particular procedures? Håkan Johansson: Well, sorry, I think that to clarify, I think we were talking about what the market dynamics and the differences between there is a bone infection and in trauma. When we talk the value of the NTAP specifically, I think that it showed to not have so much impact when penetrating the market when there is a bone infection, et cetera. But when we are talking trauma, open trauma and the surgeon has the patient in front of him, there's always a consideration between risks and costs. And here, the NTAP is taking away the cost aspect. So potentially, the NTAP for open trauma has a bigger value. But again, it remains to be seen over time. So it's been valid from 1st of October, so that after Q3, and we don't have the data to back that up. But we honestly believe that it has the potential of having a bigger impact than for bone infection. Operator: The next question comes from Maria Vara from Stifel. Maria Vara Fernandez: Just a couple of them. I think we, of course, see extremities as the near-term opportunity, what's going to be driving growth for the company for many years. But of course, I think we haven't dedicated much time to the opportunity in spine during the Q&A session. So I just wanted to maybe get some thoughts on how this recruitment of sales reps is going? And any kind of guidance on contribution we could see from the first quarter launch as well as from 2026? Torbjorn Skold: Yes. No, good question. And I think to put spine in perspective, spine is clearly a very interesting area for BONESUPPORT for the long term, but we also want to be realistic in the short term, we will likely see much bigger uptake from revision arthroplasty than we will see in spine. But spine is an important strategically and large opportunity for us. The approach that we take is that we first launched spine with CERAMENT BVF to build the market. So we are going to have a relatively focused launch. So we're not going to go fully and nationwide to all the accounts everywhere at the same time. We want to take a focused approach with certain distributors that we already work with, some new distributors that are specialized in spine. And we want to make sure that we build the right clinical evidence and the right and validated surgical techniques over time. And then, of course, the big strategic play for us is to go into spine with CERAMENT G. But that, of course, requires a market approval. But we see a couple of good scenarios ahead of us. So the question is not if, it's about how and when. And that's why we engage with a discussion with FDA in the near term to make sure that we feel comfortable on the right way to market and that we are also able to execute on that. Maria Vara Fernandez: Okay. That's helpful. And then if we think about the profile of the sales commissions in the U.S. we see a little bit of an increase with respect to the U.S. revenue for Q3, if I'm not wrong, 35% with respect to the U.S. sales. How should we think about this percentage changing over time, especially as of the U.S. launch in spine? I mean, there's not much of an investment there, but still with something. So if you can guide whether we could think about the same range with respect to revenue or any major changes here will be appreciated. Håkan Johansson: Well, thank you, Maria. And again, in the short to midterm, you can expect the increase in Q3 is mainly related to short-term volatility, the commission level remains stable. There is no change in commission levels. There are a few performance-related aspects in the commission structure, and that's why it can be some volatility between quarters. But in general, it should keep itself the commissions plus other fees that is involved around -- I mean, between 34% and 35% over time. And we don't see the inroads into spine with BVF changing that structure. Operator: The next question comes from Oscar Bergman from Redeye. Oscar Bergman: Torbjorn and Hakan, I know you've answered a lot of questions, but I only have a few more to you guys. So first off, on your current base of U.S. CERAMENT G users, is there any noteworthy crossover to spine surgery among these? Håkan Johansson: Very limited type of sales. Of course, when we have hospital accounts where ultimately you have both surgeons on the extremity side and on the spine side. Torbjorn Skold: Yes, but it's very... Håkan Johansson: Yes. And again, coming back to as we communicated, our strategy of launching into spine will be very focused. We have a list of hospitals and list or surgeons that we are addressing so that we reach the right surgeons to build additional clinical data and validation, et cetera, before we go wider. So with that, we also work very focused with what distributors and what sales reps we're contracting. Oscar Bergman: Okay. And just wondering if you can elaborate a bit more on the situation on eventual pushback on price, both for customers in the bone infection segment and in trauma. Has this been sort of a driver of customers either not signing up or perhaps even signing off during this quarter? Håkan Johansson: Well, Oscar, price is always a discussion. We're living in a commercial environment and so on. And -- but so far, it has had no impact in terms of listing and continued growth of listed hospitals. We meet that also, as I mentioned in the call, as part of go stop go, we have hospitals where we have surgeons becoming frequent and high users and not seldom, there is a reaction from hospital administration where we have them to involve with our med and health economic specialists to help explaining the data that is backing up the price level and the savings that is enabled by the clinical and health economic benefits by using CERAMENT G. So of course, that's part of daily life. But so far, we don't see a general pushback on price. Oscar Bergman: Okay. So those efforts in training and education on the health economic benefits, they are holding back customers from perhaps signing off them essentially? Håkan Johansson: As for now, and again, that's also the reason why we're confident with the approach that we're using, and that's why we also will continue to invest in additional med and health economic resources. Oscar Bergman: All right. And what do you say in terms of user rate at the existing customers? Are they at desirable levels in bone infection? Or is there still plenty of room to grow in the existing number of CERAMENT G surgeons? Torbjorn Skold: From my perspective, what I see is that there's plenty of room to grow in current markets, in current products, in current clinical indications. Now I might be wrong on that, but all the data that I've seen so far after a couple of weeks indicate that we're just scratching the surface on these 3 main segments that we prioritize short term, which is foot and ankle, trauma and revision arthroplasty. And then, of course, longer term, we're entering spine. So I think there's plenty of room to grow going forward. Oscar Bergman: All right. Just 2 more quick questions. I suspect you're in a hurry. The geographic reach in the U.S., are you at a good capacity already in the different key regions? Or are there any initiatives that you will accelerate on? Torbjorn Skold: I mean the U.S., as you well know, that's our most important market, both from a growth and profitability point of view. So it has priority #1. I think we have good coverage, but that doesn't mean that we will not continue to invest. We're investing in Q3. We will continue to invest because if we're not investing, we're not taking advantage of the potential that we have. So I don't think it's a coverage issue. It's about making sure we invest to address the potential we have in terms of increasing the penetration. Oscar Bergman: Okay. So there's no specific region in the U.S. where you feel like, okay, we should really focus on this specific region. Torbjorn Skold: I mean, when we look at the map, of course, we have certain regions where we think our penetration/market share is lower, but that's not something that we disclose on this call. But on a high level, we will continue to invest to make sure that we increase the penetration in the U.S. and certain regions have higher priority than others. Oscar Bergman: Okay. This is my final question. You are quickly accumulating a lot of cash over SEK 220 million since Q3 last year. Will you perhaps present some sort of plan on how you aim to deploy this growing amount of cash in your CMD in the spring? Håkan Johansson: Oscar, I think that, as Torbjorn mentioned during the call, and sorry for all the technical breakout is that, that's an area where we own the market, some clearer communication and the Capital Markets Day in spring time is a good opportunity to do that. In the shorter term, again, this gives us the comfort of continue to investing in the business. We believe in the business. We think we do the right things. We see strong confirmations also in the Q3 report on the work that we're doing and the cash just helps us to continue investing in this. Torbjorn Skold: And gives us the freedom to operate in a way to take advantage of all of the opportunities that we see in the 3 priority segments plus spine as well as on more longer-term strategic initiatives and scenarios that we, of course, also work on. But more on that in the Capital Markets Day this spring. So unfortunately, now we have to close this call. We're coming to an end. Again, thank you all for attending. And also from our side, we apologize for the technical issues that you guys have experienced, and we thank you for your patience with us. Thank you.