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Mark Blair: Good morning, everybody. I'm Mark Blair, the CEO of the Mr Price Group, and thanks for joining us while we take you through our interim results to the 27th of September 2025. I'm going to be talking a little bit about the operating environment. Praneel Nundkumar, the CFO, will take us through the detailed group performance, and then I'm going to share the longer-term thinking with you and also the short-term outlook. So moving into the operating environment. And I think there's already been much said about this. There's been other retailer presentations. So I probably don't have to say too much except to say I think these graphs tell the full picture. Since COVID-19, there's been a prolonged period of negative real wage growth, rising debt service costs and obviously, inflation has been more elevated, but it seems to be improving now. But if you look at that graph on the left-hand side, there you'll see the negative wage growth in 2022 and 2023, started picking up a bit thereafter, but all negatively indexed to the base of 2019. And what happened during that process over that time frame is that there was an access to debt of those consumers who could. And therefore, on the right-hand side, you see the debt service ratio going up as well. It's great to have a little tick down towards the end there going into 2025. And we're hopeful that when we get to the outlook and the shorter-term future discussion that, that starts to trend in the right direction. But I think the picture here that it tells is looking at what's happened to general wages and wage increases over the period, just relative to the cost of living, many of the items that make up the cost of living have increased at a higher rate than people's wages. So there's some negativity in that. I think the good news is that when we start looking out towards the future, some of these things are starting to turn quite nicely. Looking at the consumer spend and behavior. And of course, the 2020, 2021 part of that term is not that relevant. It's a COVID year and it's a bounce back. But you can just see what happened to total household expenditure over the period and 2.6%, 0.2% and 1%, I think, also tells the picture. Certainly, what we've seen as retailers is that retail patterns have been very erratic. So I'm talking about monthly performances, very dependent on what's happened to timing of holidays, et cetera. And certainly, we've seen the impact of around pay days, very strong performance. And as it gets further away from pay days, then performance tends to come off. So very erratic in that front. And of course, what we're living with is a scenario that is spending is one thing. I suppose discretionary spending is another and discretionary retailers have also had to deal with the threat of the online Chinese retailers and online gambling, but just to add a little bit more insight into that. Certainly, the statistics that we've got show that the international online players have been losing market share for a few quarters now, and that was on the back of regulation change. So that's a positive for us. And then I think with online gambling, there's been quite a few reports that I've read. And I guess some of them have got divergent views as well. In the one report that I read, it did refer to that sometimes the statistics aren't that well understood. And it depends what's in the numbers because to some extent, there could have been where online gambling was illegally taking place offshore and has now been localized and included for the first time, that could be a factor. And the other factor is that although one of the figures quoted was total wagered value of ZAR 761 billion, there was a view that, that includes seed capital and winnings reinvested and that, that seed capital is probably around ZAR 115 billion versus the ZAR 761 billion. The net losses at the end of the day, I've seen figures of ZAR 36 billion, ZAR 29 billion coming from online, but it's the incremental change year-on-year that in 2025 is estimated to be about ZAR 15 billion. That's the worrying part is that jump. And of course, at this point, we also don't know how the accessing of two-pot retirement funding aided a short-term diversion into gambling. We'll have to see how that settles down. But I think the point that I also want to make is that as retailers over the years, we've had to face many, many disruptions. And whether you're looking at the 5-year history or in fact, going much earlier than that, the introduction of cell phones was a good example. These are all bumps that we've had to overcome in the past, and we'll certainly make a plan to make sure we manage these ones as best we can. Looking at Mr. Price's sales growth versus the market. Obviously, in this graph, Mr Price Group is in the red bar. And what you see where you're looking at 2024, 2025 and then H1 and H2 in 2025 and H1 in 2026, Mr. Price consistently above the gray bar, which is the rest of the market. So I think just sort of concentrating on the short term for a moment, although, of course, we'd like the 5.5% to be a lot higher, what is absolutely not negotiable for us is the quality of those sales, and we're not after growing market share at all cost. We have to grow profitable market share, and that's what we've done consistently, very, very important for us. Also want to just stress, and we'll talk a little bit later about it as well, is that as we -- in H2 now, we are up against a much stronger base. I've spoken about the two-pot hitting there and accessing that retirement funding really boosted spend last year, kicked in, in October. And just from a monthly trading perspective, we had a really strong run up until February. So the base is very high. And I think that's probably the timing going into 2026 that the two-pot effect should be out of the system, and we can see how we're trading relative to a much cleaner base and therefore, have a much better read on the health of the consumer. But very pleased that for all those reporting periods, comfortably above our peer set with -- and I just want to stress the point again, with profitable market share gains. And I guess at the end of the day, this is the kind of picture that we strive for. And it's not myself as the CEO or Praneel as the CFO, managing this from the top. I'll get into what makes up the Mr Price DNA a little bit later. This is a process that's alive in our business and there's great alignment on it in our business. So shout out to the teams that deliver these, but I must say it's not a fight to get the shape done. So very pleasing that there's been a translation of positive top line growth that we've kicked on in the GP percentage, managed overheads and actually come up with a HEPS growth of 6.5% and then maintained our dividend policy as well. Also cash nicely up at just over -- just around ZAR 3 billion. I did mention the word consistency a bit earlier. That is something that we do strive for as well. And normally on graphs, we like to be red, but in this case, quite happy to be black. And the fact that for the last 4 reporting periods, all our numbers are in the black, I think that's the objective that we set out for. So consistency through merchandise execution, through cost savings, there's a lot of discipline that happens in our business to manage that outcome. So although those figures for us are in the black, of course, we'd like them to be higher in scale. But hopefully, that's the last slide that I'm going to talk to when we're starting to see green shoots out there that could start shaping the trajectory of those black lines here to hopefully what could become a steeper curve. I think we all look forward to that. But I think just relative to what's happening out there, the market is extremely promotional. You've seen what's happening to gross margins across the sector and to come up with another consistent performance relative to that market, I've got to be pretty satisfied about that. I'm now going to hand over to Praneel, and he's going to take you through the detailed earnings. Praneel Nundkumar: Thanks, Mark. Good morning to everyone joining us online on the webcast this morning. I'm pleased to present to you the Mr Price Group results, the interim results for the 26 weeks ending the 27th of September 2025. As you would have gathered from some of the slides that Mark presented just now, the first half was quite a challenge in terms of the operating environment that we had to deliver results in. Consumer confidence remained negative in the first half, and you would have seen that household expenditure growth was subdued. At our last results presentation in June, we did say that in an environment like this, our focus was on ensuring that sales would continue to grow ahead of the market and that, that would come at higher GP margin gains. I'm pleased to report back today that that's exactly how the first half transpired. Taking a look at the income statement. Revenue for the first half grew 5.4% to ZAR 18.5 billion, driven by retail sales up 5.5% ahead of the market's growth of 5.3%. Retail sales was impacted by comp sales growing 2.1%, up from 0.4% last year, and weighted average space growth grew 3.5% due to the addition of 91 new stores in the first half. Gross profit grew 6.3% to ZAR 7.1 billion, creating a nice positive wedge to sales with GP margins growing 30 basis points on last year. Expenses were well controlled, growing 5.6% to ZAR 5.9 billion, and operating profit grew 5.7% to ZAR 2.1 billion. Net finance expenses decreased 4.9%, and that was due to the interest earned on the positive cash balance in the first half, offsetting interest expenses coming in at ZAR 297 million, down on ZAR 313 million last year. This assisted the profit before tax number growing at 7.7% to ZAR 1.8 billion and profit after tax grew 7.3% to ZAR 1.3 billion. Profit attributable to equity holders of the parents were up 6.7% to ZAR 1.3 billion. And as Mark mentioned earlier, HEPS was up 6.5% for the first half. In summary, even through the constrained trading environment and consumer challenges that we spoke about, our management team was satisfied with delivering operating leverage through GP gains and strict cost control. Moving on to the segmental performance. The Apparel segment, which contributed 78.5% of retail sales grew 5.3% in the first half. This outgrew comparative markets whose sales grew only 4.7%. The Mr Price Apparel division maintained market share in the first half and expanded GP margins despite the market being highly promotional, resulting in an operating profit growth for the sector of 12.3%. As you'll note from the pie chart on the left, the Mr Price Apparel business contributes 42.6% to total sales, and it's really pleasing that on a 12-month basis, the division gained over ZAR 200 million in market share. The Studio 88 business also delivered a solid margin-accretive sales performance, and I'm very pleased to report that the Power Fashion business reported its 14th consecutive quarter of market share gains. Comp sales were up 1.7% for the sector. Unit growth was up 2.4% and the sales density just under ZAR 38,000 per square meter for the apparel sector. Moving on to the Homeware sector, which contributes 17.7% to total retail sales. Sales in this sector were up 5.1% with healthy comp growth at 4.3%. It was pleasing that operating profit in the sector also grew 12%, driven by all divisions expanding GP margins and managing costs really well. Unit growth was also up 2.6% and inflation was up 2.4% with sales density just under ZAR 30,000 a square meter. I must make a mention of the Yuppiechef business, who reported double-digit sales growth in the first half and continued to gain market share for 18 consecutive months now. Having a look at the Telecom segment, which now contributes 3.8% to retail sales, up from 3.6% last year, and this came through from retail sales growing 12.4%, consistent double-digit earnings growth from this sector over the last few periods. This also was positively impacted from market share gains of 50 basis points per GfK in the first half. Operating profit grew 16.8% on last year, and comps were slightly down at minus 1.9%, but unit growth was up at 4.3%. The Mr Price Cellular stand-alone stores grew by 12 stores in the first half, taking the total stores to 73 and 481 combo stores across the business. Moving on to space growth now. The group ended the first half on 3,100 stores in the first half, a total of 91 new stores for the period. As you can see, a lot of this growth coming through from the apparel sector, where the Studio 88 chain grew 42 new stores across its 5 trading businesses with Power Fashion growing 11 stores and Mr Price Apparel and Kids growing altogether in 11 stores. The Homeware segment also delivered 8 new stores for the period. And as I mentioned just now, the cellular business grew 12 new stand-alone stores. Weighted average space growth at 3.5%. And really just wanted to show you the table on the left -- I'm sorry, the right at the bottom that over the last 4 years, we've averaged just under 200 new stores per year. And even for F '26, you will see on the red bar graph that we're on track to deliver 200 stores this year, another 109 in the second half. Our management team are also very satisfied with the return metrics on new stores. These continue to exceed the internal thresholds that we've set for new store CapEx. Moving on to the slide that you all have been waiting for, the gross profit analysis. Group GP grew 30 basis points to 40.0% in the first half, up from 39.7% last year. As you can see from the slide, these GP gains were noted across all trading segments despite the highly promotional environment by competitors. The margin gains ensured that we had a smooth transition out of winter into fresh inputs into summer and spring merchandise. The Apparel segment, which grew 30 basis points was driven by the 2 largest divisions, Mr Price Apparel and Studio 88 and further margin recovery in the Homeware sector by 20 basis points ensures that the Homeware sector is on track to deliver their medium-term target of 41% to 43%. And you'll note that we did increase this target in June, so a higher target, but we're comfortable that they are in the range. The Telecoms margin grew 60 basis points, both for cellular and the mobile business, aided a lot by the transition into the private label devices that we've introduced, which aids the margin growth. We're expecting to be within the medium-term target ranges in the second half despite a strong base. A big focus area for me in the first half and for many of our teams, as Mark mentioned, was managing overhead costs in the environment that we spoke about. I'm pleased to report that total expenses grew 5.6% to ZAR 5.6 billion due to stringent and active cost management by our teams, which has now become quite a cornerstone of our value retail model. Our teams are agile at being able to respond when the sales calls are different to expectations. Depreciation and amortization grew 5.5% to ZAR 1.5 billion and employment costs, while growing 11.1% was impacted due to some credits in the base, prior year base effects from LTI schemes that were forfeited due to performance criteria not being met in the previous year. Excluding these credits, employment costs were up 8.6%, which includes the annual increase that we did together with 91 new stores, adding weighted average space growth. Occupancy costs were up 4.2% to ZAR 566 million and other operating costs down 3.1%, impacted by foreign gains -- ForEx gains in the first half compared to ForEx losses last year from our African territories that we trade in. Excluding these ForEx gains and losses, operating expenses were still only up 1.9%, which talks to the effectively managed overhead costs in the business. Moving on to operating margin. Operating margin grew 10 basis points to 11.5% compared to 11.4% last year. And you will note that all trading segments expanded operating margin due to a combination of the GP margin gains that I spoke about earlier and together with efficient cost control. You will note on the slide that the group -- op margin grew at a lower rate than the trading segments, and I must make a comment that you must tie that back to the previous slide where I spoke about the LTI base effects credits in the base, together with the fact that the group growth is impacted by central costs that don't sit within the divisions. Also to note that the H1 margins are seasonally lower than H2, and we continue to track into our medium-term target ranges for op margin as we look forward into the second half. Moving on to the balance sheet now. Also pleased to note that the gross inventory balance grew only 4.5% on last year. We exited winter cleanly, and that really goes out to our management teams and our merchant teams who made sure that we managed stock efficiently and worked very hard in the first half to get this outcome. Together with improved port operations, reducing the unnecessary stock buffers that we had to place into the supply chain in the previous year. Trade and other receivables were up 3.9%, and this really is a factor of credit sales, but also the lower repo rate compared to last year, which we'll talk about a bit more when we get on to the credit slide. And trade and other payables growing 21.7%, just a very big testament to the teams in our sourcing space who really work hard to get our suppliers on to supply chain finance, the program that we've spoken to you about before. It was pleasing to note that in the first half, we've been able to transition a lot of our international suppliers onto the program, which is the non-comp piece to last year. All in all, net working capital resulted in an inflow of ZAR 372 million, assisted the cash and cash equivalents balance growing to ZAR 3 billion, up 38% on last year and a very healthy cash conversion ratio of 81.8% with 0 long-term debt at the end of the first half. Having a look at the cash flow movements now at the beginning of the period, we started with ZAR 4.1 billion in cash. Cash from operations from working capital changes came in at ZAR 3.5 billion. We just spoke about the working capital improvement of ZAR 372 million and net interest received, as I mentioned, on positive balances, ZAR 322 million. From an investing perspective, we spent ZAR 590 million in terms of PPE and intangibles and the large outflows in the financing space relating to dividend payments in the first half of ZAR 1.5 billion. We also spoke to you about the acquisition of the Studio 88 tranche of shares of 9% for ZAR 770 million and then the lease liabilities of just under ZAR 1.6 billion to end the first half on just under ZAR 3 billion in cash. Moving along to CapEx. Capital expenditure in the first half came in at ZAR 574 million, almost 50% up on last year. And for the full year, we're still anticipating to get to ZAR 1.5 billion in terms of CapEx. But as we've noted previously, this comes through due to the investment into the supply chain program, the Gosforth Park DC. That project is on track for delivery within budget by September 2026. This is due to the investment to support future sustainable growth for the business and further mitigating risks through the multisite strategy. You'll also note on the slide that store CapEx came in at 43.6% of the total CapEx spend. This talks to our investment into the store portfolio for new stores, revamps and relocations, expansions also. Moving on to the credit growth performance. Credit sales grew 4.3%, slightly behind the cash sale growth to ZAR 2.1 billion, now contributing 11.8% of total sales. Most of the credit sales that we saw came through from existing account holders. And you will note that we've been talking about the approval rate for the last few cycles, and I'm pleased to report that the approval rate came in at 22.6%, 360 basis points ahead of last year's 19%. This has been quite a big focus for us in the first half and will continue to be in the second half also. We've also just noted the TransUnion Consumer Credit Index, while you see improvements coming through from 2023 into 2025, you see the little dip at the end of the red line now trending downwards, really giving an indication or a data point around consumer credit health in SA. The debtors book grew 5.5% to ZAR 3 billion, and the net bad debt ratio came in at 8.9%, slightly up from the 7.8% in March, but due to the deteriorating consumer environment that we spoke about earlier. The net bad debt book ratio still remains low relative to the sector due to our strict affordability criteria. Impairment provisions at 13% was slightly up on March -- slightly down on March's 13.2%, but we're very satisfied with the coverage ratio on that provision. Thank you very much. I'll now hand you over back to Mark, who will take you through the strategy and the outlook section. Mark Blair: Great. Thanks very much, Praneel. I often get questions and in fact, one of the reasons that we've set out the results presentation in this manner as to what is it about Mr Price that you would think is different? What is our secret sauce? And what are the things that lead to good performance and consistent performance. And I think the short answer is there's no one single thing, but it's a combination of things, and it's suppose the magical way that these things all come together. I'll go through some of the individual slides, but in many respects, I'll let you just read and absorb it. But these are the items that I'll cover. The diverse portfolio of our brands, differentiated fashion value merchandise, and that's where it all starts and it's critical to hold on to that. The trusted brand on the 40 years that we've spoken about, our Red Cap culture, which really is a differentiator, tried and tested processes over the years that we've refined, but we rely on, supply chain agility, a business model that's fit for purpose and also a business that technology has a big part to play. So if I just start off on just looking at the South African business and exactly where the consumer profiles are made up. What you can see there is all the income levels for consumers and that red block sets out exactly where the majority of the population falls in South Africa. I'll let you read those stats on the right-hand side as well, but the first point that I want to make here is that we've got businesses that span this. So we're not all contained in the red block, but we're very well represented there. But of course, we've got some of those divisions that operate within that do access clients outside of that red block. And of course, we've got businesses that solely target or mainly target people outside of that red block on both sides, in fact. The way to show that a little bit better perhaps is then looking at those brands individually. And the 2 that I was saying a little bit earlier is outside of the red blocks would be Power Fashion on the left-hand side, that services the low-income consumer to Yuppiechef on the right-hand side, who on average services a consumer earning well over ZAR 1 million per annum. But if you see those businesses and the spread that they've got across income levels in South Africa and the amount of reach that they've got within those particular brands, I think that's certainly part of our success. And that you all know about the investment matrix that we devised many years ago that was designed to make sure that we are bringing better representation to the income levels that we previously thought we are underexposed to. Being leaders in differentiated fashion value, as I said, was an absolute key and the most important thing to us. It's what gets us our customers, what keeps us our customers and what does set us apart. And the way we always look at it is by plotting it on the fashion value matrix. So it's important to note that Mr. Price doesn't always be the -- try and be the cheapest because cheapest is based on price. We know that there's a lot more things that go into customers' purchasing decisions, and those things start going into the quality of the products, the level of fashionability, et cetera. So if you look at that fashion value quadrant that you can see Mr. Price's position there, that's what we protect at all cost. Yes. And you can see that on the right-hand side, Mr. Price Apparel leads the fashion value matrix ahead of some of the more recent competitors and existing competitors. Having been in business for 40 years now, I think it's important to note that the accolades that you can see here aren't recent. They're not 1-year wonders. Many of these have, in fact, been accolades that we've achieved year after year. Mr. Price Apparel, Mr Price Home and Mr. Price Sport holding the highest brand equity in their respective sectors. Mr. Price Apparel remains the most shopped apparel retailer in South Africa with 3.5 million shoppers. Mr. Price Apparel was voted the coolest clothing store in South Africa again, and Mr. Price Apparel holds a high share of wallet in the market, too. I said that Red Cap culture was something that I really believe is a differentiator. And I suppose that permeates our business. Started off with the founders and the foundations that they led -- that they made. And it's obviously got huge roots inside our business, but extends outside of our business, too. But I think really what it starts off with is a team that is passionate about what they're doing, a team and a young workforce that takes responsibility and ownership for things and a team that's aligned. So when I was saying a little bit earlier that when times are tight, we call code red for overhead management. We don't have to explain it. People know and they get on with it. But it's a team that's aligned in all the big objectives that we're doing and that makes management's team and the broader management team, their jobs a lot easier. There's certainly an extremely strong performance culture and the reward structures that we've got are also aligned to performance. We deal with each other in an environment of mutual respect. And if you ask anyone, are they part of a Red Cap family, the answer would be absolutely we are. So that's all great, and it's the way that we interact with each other internally. As I said, that also then externalizes itself. And one of the things that is really, really important to us is that we speak openly and honestly with the investment community and in fact, all our stakeholders and that we've developed trust just as we've developed trust internally with one another. So that Red Cap culture is something to preserve at all costs as well. We've spoken about our tried and tested processes over the years. This is something that works really well for us. It's what management teams rely on when they're back turned and they know that the rest of the business is focused on what they're doing because there's guidelines in place and performing very well. And that starts with the in-house trend departments. It's how we test merchandise, how we test concepts, how we've introduced tech into the business, talks to the agility of our supply chain and also how we allocate merchandise to stores. So just on that, just to give you a little bit of elaboration, there's an initial allocation of stock to stores. There's a degree of holdback in terms of performance, but the push of stock to stores is depending on what the demand is happening in those locations. So it's not just all a push. And by managing it the way we do, that's a very key way that we manage minimizing our markdowns and stock being in the wrong quantities in the wrong locations. Supply chain, we've spoken a lot over the last couple of years as well. It is a differentiator. We do have great agility without having to own factories. And you'll see by what Praneel just explained with our stock management and our inventory balances, climate like we've got, I think we did a very good job in managing that. And that talks to the -- not just the management teams and the merch teams, but it also talks to the supply base and our supply chain at large. So we've got the flexibility there. We've got, obviously, things that we do to gain access to fabrics. And so far, that supply chain works for us nicely, and that will continue to evolve, but there's a large degree of risk mitigation by relying on any one territory. And obviously, where we do source from depends on proximity to market, the technical attribute of the merchandise and the price of the merchandise as well. I said a little bit earlier that the operating model is one of a value retailer, and the reward systems are aligned to that, that if there's overperformance, then the reward really comes through. That also protects you on the downside when performance isn't there, then there's no performance pay. And when we are talking about the DNA of the business, one thing that is completely understood across our whole business is the saying that every decision every day must support our value routes. That's lived in the business. Highly cash generative, what we do internally with cash. Our investment decisions are always based on an ROI and a business case. And if you get the investment, then you're also responsible for telling us and proving to us that the business case has been achieved. Likewise, very focused on cash generation, and I'll explain some of our achievements on that, not just the recent cash flow, but when you just stand back and see what we've done over the last couple of years and expanded our business and still in the position with cash, I think that's been well thought through and well executed, I think. Praneel was talking about the way that we manage overheads. We've done that year after year. And as I said, there's a lot of discipline and there's a call to action that has proved itself it works. I think the next phase of unlocking efficiencies, however, isn't the more tactical nature of things, which we tended to do. But with all the retail chains and the size of the business and the complexity of the business now, there's a much deeper level of work to unlock efficiency and it's the reengineering, reconsidering the business. So I've just recently launched a program to do exactly that. It's going to be Exco led. There's very senior members of our Exco team that are going to be heading up the project. And the brief is really if the Mr Price Group didn't exist and we are starting it today, how would we be shaping that organization. So it's not something that results are going to be focused on getting into the short term, but it's taking a long-term view of the business. And if we can get efficiency that way with our cost management that we currently do, and an environment that has got this healthier consumer behavior or environment, then I think that's the thing that's going to tick us up going into the future. We've also spoken -- in fact, we spoke at the last results presentation about being a data-driven organization. I won't go into everything here. But then in that middle block, you can see some of the -- how that's translated into actual statistics. Number of information dashboards, we've got AI and ML models deployed into the business, man hours saved through automation. One of the things that we're going to be focusing on is not necessarily implementing a CRM system, but making sure that we've got access to a lot more customer data that will help inform decisions. So that's a project that's currently underway as well. Okay. I want to now go and just talk about -- maybe just start by taking a step back and explaining the strategic planning process over the last 5 years or so. Yes, it's something that I'm -- we're often asked what are we up to, what's shaping our thinking, and I think it's certainly the right time to do that because we've said to the market, well, I guess, for probably the best part of 2 years now, that we're doing research. There's a lot of effort going into it. And as we do that research, I suppose just the way that we landed the acquisitions as well, that there is a body of work to be done. But as we do it, we can't get it distract from running the business. And I think that we've proved that we've achieved that. When I was appointed in 2019 and obviously, early part of 2019, the latter part of 2019, COVID hit South Africa in 2020, and that was a great time for us to sit back and think about where we wanted to take this group. So we did some detailed research there, but it was -- I also had to evaluate the business that I inherited from my predecessor. And obviously, there were certain things that I wanted to change in that. But there are limits to what you can do. So my initial priority was given that COVID was on the go and given that we were doing a lot -- or my plan was to do a lot to strengthen the inherent core structure of the business, and that's where the immediate focus went. So you had all known about the DC that we brought in, the ERP replatforming, et cetera. And overlaying all that was quite a significant change to our management team. So I had to be quite careful in what I introduced into the business, given what I've just explained and had to make sure that even in the case of an ERP, which is very time consuming, I wasn't being too demanding on the business whilst they were coping with all that change. So we had been through a process we had identified many organic concepts. And when I say many, there were numerous. And we ended up implementing Kids and Mr. Price Cellular. Kids was an offer that was preexisting, but how we were actually shaping it in the business changed. So those 2 took priority and now they're a ZAR 4.3 billion business. Simultaneously, whilst we are focused on building our backbone, whilst we are focused on these organic concepts, we actually had been through thorough market research. To cut a long story short, we acquired 3 businesses. And today, those businesses contribute to ZAR 11.7 billion turnover, which is 29%. The operating profit is ZAR 1.2 billion. And there, you can see the store numbers to date with a very healthy future rollout potential as well. So between 2019 and 2025, we invested ZAR 10 billion in CapEx. Our revenue went up from ZAR 22 billion to ZAR 40 billion, dramatically increased the number of stores. Our HEPS went up to ZAR 14.24, and we maintained our dividend payout ratio. I think to reflect on that and the achievement of that in probably one of the most tumultuous trading periods that I've experienced in business, to have acquired 3 businesses contributing that to our turnover. And as Praneel said, we've got about ZAR 3 billion of cash actually tells you the extent to which we've deployed the cash that is available to us and how we've executed over that period. So if you look at the group right now, I think we've got very strong bands. I've spoke a little bit about that, and we've got a great corporate culture. We've got a talented and ambitious team, and we're consistently performing. I said we'd like the numbers to be higher, but it's consistent and it's top quartile and top quartile metrics as well. But we are continually evaluating organic growth opportunities locally and acquisition opportunities. However, the bigger we get, and I think it becomes more and more difficult to identify other businesses that meet our capital allocation criteria. So when we're looking at South Africa, there's no doubt that we can still benefit from scale, and that is online growth, store growth, as I've spoken about. And I'm feeling very comfortable about the growth prospects relating to those 2 things. I've spoken a bit about the focus on the customer as well, the customer obsession and getting more data that will help us inform decisions that will benefit the customer and drive sales is a focus area and supply chain excellence is something that we are very focused on, too. The reengineering program that is about to start to look for efficiency that will -- my guess is it's going to take probably 3 to 6 months to really get to grips of what's in play there and therefore, the execution period thereafter. And something that we've handled, I think, very sensibly is selective integration with these acquisitions. So we haven't forced anything. Of course, some things became -- we were more urgent than others. But a lot of the integration now is really around supply chain and related activities, logistics, et cetera. So one of the things that we're actually going through right now is with one of our -- the chains that we acquired is ran a test on bringing them into our distribution network in a test area that's delivered exceptional results and that will now be rolled out across the rest of that chain. So that's -- it's an excellent example of selective integration. And of course, we're going to continue with the technology evolution and I must stress that whilst we're trying to reengineer and look for cost savings, this is an area that we'll probably seek to redirect money into technology to leapfrog even further. So how am I feeling about SA? I think I'm feeling very comfortable about the performance. I'm feeling very comfortable about our discipline and what we're aligned to run the business. And I think we've got adequate opportunities there to carry on growing the business. And hopefully, the economy will start playing its part and should paint a very good picture, which takes us into Phase 2 of the strategy. So if you just consider that we've got our group investment matrix in place in South Africa, we've got a well-established Exco structure. And I think we've been executing well. The business is in sound shape, as I said, but we've got to recognize that South Africa is a low-performing economy. If you look at the GDP growth, you've seen the reduction over the years to the low point there of GDP growth that was almost flat. The projection out to around 2030 still shows GDP under 2%. The projections I've seen to 2050 see it coming below that number by a bit as well. So -- and of course, with these projections, there's always the chance and it's probably the tendency that projections are never quite achieved. Sometimes they're too bullish, doesn't mean that we're not hopeful that the green shoots that we're seeing will translate. But of course, at these kind of levels, it's hardly a robust and a nongrowing economy the way that we would like it. So you do know about the existence of our Apex strategy team. That's been a dedicated team that's been in place for more than 2 years now. Whilst we are looking and elevating SA businesses, we also elevated our research to look for new areas of growth. And it's really around the long-term execution of a vision. It's not quick growth that we need to stick on. It's all about the long term. We've really unpacked the pros and cons of organic growth versus acquisitive growth, and there is room for both. But of course, there's different things to consider in each. And very importantly, we've been considering local opportunities at the same time as we've considered offshore opportunities. But just to say, just like anything that we've done and anything I've explained up until this point, we're a group that thinks very deeply about things. And certainly, our thinking has been multilayered and includes the use of third parties, advisers, country visits, et cetera, et cetera. So it's -- these layers all help paint the picture. The key outcome is, and this has been, as I said, multiyears work, is that key territories outside of South Africa have been identified. And by identifying those, we also consider all the key risk mitigation considerations. It's fair to say over the years, it's not just the last 2 years, of course, it's way beyond that, that we've had a look at or assessed many, many opportunities. And I'm talking particularly offshore now and the fact that we haven't landed any means that we've been very selective on what we're looking for. So -- and once again, it comes back to the principles that we're setting and do those businesses meet those or not. And I suppose looking at my responsibility as a CEO, I suppose all CEOs have got this responsibility. It's to consider the markets that you operate in. It's to consider growth, consider the risks of achieving that growth and ultimately adding shareholder value over time. So when we're looking at new territories, we are only interested in identifying sustainable regions for long-term growth. The market size, the ease of doing business and the competitive landscape within that region are all critical and will be evaluated. And of course, it has to have a stable macroeconomic and political environment and tailwinds for sustainable growth. And then lastly, it really doesn't help if you've -- if you've ticked some of those things that I've just mentioned, but the currencies all over the place were even weaker than the rand. Credit -- the rand strengthened recently, but obviously, we want territories that don't weaken that position. Looking at actual guiding principles rather than just territory now for individual considerations is the size of the transaction will be appropriately considered. Very importantly, we want to acquire on the merits of the target. The in-country management team is absolutely critical. They're the ones that have got to run the business the way they've been running the business with limited interference from us and our input would be strategic. And therefore, getting the right management team is probably you can't get beyond that into the next block if you can't give that a tick. The asset itself has to have very clear growth prospects, and we don't have any appetite whatsoever for a turnaround. And certainly, what we're looking for is that in terms of the company itself is that we would like that company to be a platform for regional growth. So I'm not saying an online platform or anything like that. I'm saying a management team platform that can do justice to a region instead of perhaps just the country that they're located now. And then, of course, you can -- all those things, I think, are quite obvious why we'd look for them. And then as a final piece, you also want to consider synergies, I suppose, both ways. And then lastly, you'd also want to consider what about our brands in those locations. But we wouldn't plan to lead in with our brands. We want to, as I said, acquire for the merits of the target and let that management team who knows that particular territory very well, assess our brands for suitability into the country. So a lot of thinking, a lot of progress being made on that front. And yes, I think it's been a very thorough process that we've been through over the last couple of years, and we'll continue to focus on. The outlook, which I was referring to quite a few times in the presentation. And look, I think the great thing is that change has to start somewhere. And if you had to look at the outlook that we're seeing now to perhaps a year or 2 ago, I think we're in a completely different position. We've got stable electricity supply. We've got improving port infrastructure. So from the infrastructural point of view, things are a lot better. And then also from where -- what's affecting the economy and the consumer, things are looking a lot better there as well. Rand has improved. We're targeting low inflation of around 3%. Interest rates have been declining, and they are forecast to carry on declining. So I think what I said a little bit earlier is that once we get out of this two-pot base, I think we're going to get a really good read on the health of the consumer. But obviously delighted at this point that things are heading in the right direction. And even GDP growth, even if it's only circa 1%, maybe 1.2% this year, it's also headed in the right direction. So looking good there. It's premature to say that there's been a consumer revival. I think the update from all the retailers is sort of proving that, that's not the case. But I think it could well be the case as we head into the new year, but we just got to get over this lumpy base. And as you know, we performed very well this time last year. In fact, it was only March that was a disappointing month for us. So a strong base up until the end of April -- up until the end of February. And then just in terms of trading post the end of September, retail sales were up 3.1%. We pointed out what the base was. It was 12.3%, which was high. But if you look at the individual months, the RLC for October has just come out. We obviously weren't happy with October performance, but we did gain market share, believe it or not. And the momentum going into November is much better. So we're back into that sort of mid-single digits, slightly above, which I think we'll take relative to the October performance. So quite happy that momentum is improving. Quite happy that as you reach out into the future, the economy and the consumer environment seems to be on the cusp of an improvement. So I think overall, we've got a lot to look forward to. Thank you. Matthew Warriner: Good morning, everybody. Thank you for all of the questions that have come through. There have been a high volume of questions, so we're going to do our best to get through as many as we can in the time that we have remaining. I'm going to start off with some questions around operational performance. As Praneel -- maybe we start with you. With the sales environment softer due to the consumer challenges, do you have the same cost levers to pull in H2? Quite a few questions around H2 OpEx and the impact on the full year. Praneel Nundkumar: Yes. Thanks for that question. I think we have demonstrated that cost control is something that's always top of mind for us. Just in terms of how we're seeing it playing out and maybe how you should be thinking about it is the medium-term target range that we had set. So we had noted in June that, that range was between 27.5% and 28.5% in terms of expenses to RSOI. Our focus is to come in within that range. Obviously, we'll try and manage as much as we can in the second half. And as Mark mentioned, post period trade, also a bit subdued, but gaining some momentum. So we're watching the sales growth quite closely. And as I mentioned, also, our merchants are reacting quickly when they need to, to manage inventory at the same time. So all in all, Matt, I think that the range is where we will most likely want to land up in, and that's what we're aiming for. Mark Blair: I think just something to add there is that the base isn't a surprise to us. We always knew it was there. And therefore, anything that we also have to do on a cost basis, the thinking doesn't just start now. To some extent, we've preempted things. We've identified areas that we need to start pulling back, and that's all been set in motion. Matthew Warriner: How should we think about management preference should demand be soft in the festive season? Are markdowns preferred during the festive season or rather than Jan, Feb to clear stock. A couple of other questions just around the high promotional environment in H1. Is promotion a seasonal thing that could impact H2 as well? Mark Blair: Yes. Look, to some extent, we've got to concentrate on what we're really good at, and that's getting that fashion value equation right. But I must say, when the top line is not there in the market generally, the retail environment does become rather brutal. You've got heavy, heavy promotions. And of course, what that does do is bring higher-priced merchandise more closely still well above ours, but closer to our price. So that's not a great equation. But of course, we also know that competitors can't be living with this elevated stock position all the time. So when you go into December, the worst thing that I think that could happen is that you carry on your problem into the new year. So of course, seeing the trends for this year. We have updated our views on merchandise, on stock flow, on stock commitments. To the extent that, that doesn't play out, then, of course, you're going to be -- I guess, there's the threat of margins going against you. So we -- by track record, that's something that we got against at all costs. We try and manage as well we can. And I think there are very limited scenarios that you would be comfortable carrying stock into the period post December, but then it's got to be that you've actually acquired it with -- and there's no risk to the carry. So it can't be very seasonal, very fashionable stuff that's trending that might be out because you're just going to then have to deal with the problem even more severely in the new year. Matthew Warriner: Thanks, Mark. I think you've covered the one major driver to GP performance in the second half. Praneel, maybe just to cover the second half of that, and I'll read out one specific question, but there have been several on this. If you could give some color on annual GP margin expectations. You mentioned in June several factors that could be supportive of H2 GP. Quite a few questions around the rand and input prices being better a couple of months ago, the impact into second half GP. Praneel Nundkumar: Yes. Thanks, Matt. From a GP perspective, I guess you would understand that there are some supportive factors. So we called out kind of oil prices, cotton prices. We've seen where the rand has been kind of trending recently. The other big one also is shipping rates coming down. So the one piece that's also unclear, and it ties back to the comments Mark was just making now in terms of the second half and the promotional activity, what we have seen and you would have seen in the market is that when there's deep discounting in the market, it impacts and the reaction really then starts sitting in, in terms of where GP lands. So I think that there is some support for GP in the second half. I think what we need to watch quite closely is whether the market is as promotional as it was in the first half. But I think when I take the kind of high-level view, I think the important thing is those medium-term targets. So you'll remember in June, we said that for the group, the medium-term target range is between 40% and 42%, which is the same for the apparel sector and the Homeware sector is slightly higher between 41% and 43%. So we are aiming to land within those ranges more in -- aiming for the middle part of those ranges, but that's kind of what we're expecting or what we know at the moment. Mark Blair: Of course, in an improving currency situation, you do have 2 choices. The first choice is to take margin or the second choice is to pass the pricing through. So without sort of revealing our hand at this point, there's going to be a combination of that, but it's very critical for us to keep an eye on what pricing and what relative value there is in the market so that we do keep our value proposition. Matthew Warriner: And then just lastly, with regards to operating metrics, quite a few questions on central overheads and then a question specifically talking about op margin gains were healthy at a segment level. Can you give us some color on the dilution when looking at it from a group perspective? And yes, several questions just around the central overheads into the second half as well. Praneel Nundkumar: Yes. Thanks, Matt. I think on the slide that when I paused on the op margin slide, I spoke about the fact that there are central costs sitting in the group line, which is not the same from a trading division perspective. And then on the overhead slide, I spoke about the fact that there's base effects of the LTIs that were forfeited in the prior year. So that really was the non-comp base effect. Also, when you look at the performance of the trading segments, you would have seen as I've gone through the segmental slides, you would have seen that the operating profit from the trading segments were quite healthy, which also means that from a group central cost perspective, there is an STI component based on performance that's also non-comp in last year. So those are the 2 key things that are sitting in that group central costs that then impact the group ratio compared to the divisional ratios. But again, the medium-term target range for op margin between 13% and 15% is what we're aiming for as we look forward into the second half. Matthew Warriner: Okay. Just moving on to drivers of sales. The last 4 years has seen some aggressive space growth. Will you continue with this approach going forward? And just some questions as well as to what returns we would expect on space growth going forward? Mark Blair: Yes. as Praneel was saying a little bit earlier, we've set internal thresholds roughly 3x our WACC. And look, I think if we landed at sort of space growth between 3.5% and 4% this year, that is going some, but it's a space that is working for us, as we said earlier. So to the extent that our actual store performances remain, then I'm very comfortable with continuing with store expansion. The question does become, does it become harder to find the quality space with not a lot of new property builds happening, that is always something that we'd look at. I would say we'd probably -- we'll go into the budgeting process for the new year shortly. In fact, it's underway now. But I'd probably say that it would be safe to sort of bet around space growth around 3%, maybe slightly lower. But of course, if we presented with great opportunities and we model them correctly and they're generating -- and on paper they're generating the returns, we mustn't be shy to take the good space. And the other thing is that it's not one chain we're looking for in terms of that space. So it's multiple chains that are performing that all have got the desire for the space. Our job internally is then to say how much capital are we putting into store growth because we also want to spend on revamps. And therefore, that limit that we place, which chain is getting the space. And of course, that then gets down to a couple of other factors, which includes store performance. Matthew Warriner: It seems like Home is turning around with volume growth and profit growth. Would this be a fair assessment? Mark Blair: Yes. I think the trajectory of Home, we've continued to see market share losses. So that is the one negative. But I suppose it was like we're discussing a little bit earlier around margins. We've had GP gains in the Home sector, and that's what it's absolutely all about. So it does show you that without achieving the top line that you want, and I'm not unhappy with the top line, but it could have been higher if we went and chase sales a bit more that we can still generate a good profit. So the home sector, in fact, all 3 businesses, Sheet Street, Yuppiechef and Mr Price Home, I'm very happy with. Matthew Warriner: Praneel, just last one on sales drivers. The credit environment seems to have showed some steady improvements. Is there an opportunity to push the channel more into 2026, considering the lower net bad to book relative to the industry? Praneel Nundkumar: Yes. I think the credit growth is always topical, but as we always say, it's not a big part of our business. We also noted, and you would have seen from the consumer environment and some of the data points around this challenge in the consumer environment, we're obviously trying to manage risk as closely as possible. So we noted in the first half that the approval rate was higher than last year by 360 basis points, so probably mid-22%. We most likely will expect that to continue into the second half. I think if the environment becomes more supportive, and we see the data points in terms of customer affordability and customer behavior from a credit score perspective being in line with that, then yes, that will be an opportunity for us. But again, not an aggressive growth for credit is expected, but we're watching the market and the consumer health and affordability very closely. Mark Blair: Yes. Just to add to that, that consumer health is critical. We've got our own experience going back quite a few years now where we pushed credit into the market in the absence of improving credit health -- on the consumer credit health, and it actually counted against us. And the problem was that by pushing it too early, because you've got a situation where customers rehabilitate themselves, pay down some months, don't others, you've got this lump that moves through your system, and it doesn't just take 6 or 12 months because that's a credit term because of the rehabilitation, you're probably left with a mess in your portfolio for about 18 months. So really premature for us to think about pushing credit at this point. Matthew Warriner: Praneel, just a balance sheet question before we move on to some capital allocation questions. With the improved port operations, are there more working capital benefits that come in relation to inventory days from holding less buffer stock? Praneel Nundkumar: Yes. So we've been looking at this buffer stock quite closely in terms of port operations. We did note that there's been some improvement in the operations. And we did say even in June that we started to relax some of those buffers that we had in. So in terms of managing inventory to year-end, obviously, quite tight. It will continue to be quite tight. So yes, I think that from an inventory perspective, we're not foreseeing any additional buffers required in the second half, and we're quite comfortable with the stock levels as we see them play out. I mean the merchants -- other than just the first half, obviously, the merchants have been very busy as we go into the festive period now to manage the inputs and we're watching the sales also. So if those come off, then we can react quite quickly in terms of where the stock lands, but it's something that's in hand. Mark Blair: I might just add there, too, that we've, for some time now, have been communicating our focus on cash flow and therefore, stock turn is one of those critical parts of that. So when you're in quite a tumultuous situation that there's supply chain issues relating to shipping and containers and vessels and everything that we've been through, it's quite hard for merchants to deliver stock turn improvements when you're building buffers into your processes, absolutely necessary buffers. But as that then reverses, our real objective of improving stock turns should then be executed. Matthew Warriner: Okay. Moving on to some questions on capital allocation. I've been several questions relating to the current cash balance and share price and therefore, appetite for share buybacks. Praneel Nundkumar: Yes. I think we've discussed before that from a share buyback perspective, we obviously have a framework that we look at in terms of a target share price, target P/E ratio in terms of how we look at leading indicators in terms of that opportunity. What we always come back to from a capital allocation perspective, though is what are the returns from the other avenues that we can deploy capital to. So we quite -- as Mark mentioned, in terms of the store returns, we're very satisfied with those store returns in terms of where the portfolio is delivering. So we find that a really good avenue to allocate capital to. And the other piece that from a capital allocation is quite key -- quite a big number. We spoke about the ZAR 770 million for the 9% acquisition of Studio 88. Remember, there's still 15% left. So looking forward, that's another big piece that also drives our capital allocation thinking in terms of how we deploy capital. And the dividend ratio -- dividend policy is a big one. I think our shareholders have come to love the kind of dividend flows that come through the 63% payout ratio. That's also quite a big consideration. And also just to note that this year, we said we were going to invest into the infrastructure of the DC. So you'll see that CapEx coming through this year and also into next year because that DC only goes live in September '26. So more CapEx allocated to that project to support growth in the future. Mark Blair: Yes. I suppose the overall thing is use the cash or return it to shareholders either through share buybacks or through dividends. I think certainly what I was explaining around our strategy and our plans for the future, we've got more than enough plans to warrant keeping our cash flow now and to make sure that we deploy it in the best areas to generate future returns for shareholders. Matthew Warriner: Okay. With regards to the strategy update, do you mean outside or inside of Africa? And would you take the MRP brand to them? Just some other questions relating to which countries offer the best upside with lowest risk. And then several questions relating to multiples, deal size, et cetera. So maybe, Mark, just what you can share now with regards to the question on markets and other information. Mark Blair: Yes. I largely addressed, I think, most of those things in what I already said. I think the -- I'll go back a few years now. And I suppose at one point, there was always this hope of an expansion into Africa. That was the new frontier for a value retailer that seemed like it was an obvious place to go. But it is difficult to do business in some of those territories. And as a result, I said I think there's limited opportunities in SA. There's none that we've identified in the rest of Africa. So that's not really a focus area for us at all. I think it's premature at this point to start speculating on which other markets and territories and stuff like that. I think we've got to finish our work and then communicate at the right time. Matthew Warriner: Great. So thank you very much for everybody for joining today. I think we've covered the main themes. There are obviously many questions in between on other topics. So I do have them and will reply. Otherwise, please do send them directly to me. We can either cover them via e-mail or in catch-ups over the next few weeks. Thanks very much for joining today. Mark Blair: Thank you.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Volex plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. And I'm sure the company will be most grateful for your participation. I'd now like to hand over to Group Chief Executive, Nat Rothschild. Good afternoon. Nathaniel Philip Victor Rothschild: Good afternoon, everyone, and welcome to the Volex half year results presentation. I'm going to provide you with a summary before handing over to Jon, who will give you more detail on the performance in each market. Following this, I'll update you on our strategy before we take questions at the end. Before we turn to the results, I'd like to talk to you about a further step in our strategic journey I'm delighted that Dave Webster has agreed to join as our Non-executive Chair, enhancing an already exceptional Board of Directors. Dave has unique industry experience. In his current role, he's led the transformation of CPM, a global leader in advanced process automation equipment. And prior to that, he was the driving force for growth and transformation as the CEO of Electrical Components International or ECI, a leader in consumer electrical and off-highway harnesses. He brings decades-long customer relationships in our space, particularly in North America, and he will strengthen the Board's sector insight. His experience will be invaluable as we scale our North American operations and deepen our customer partnerships in this important market. This month, incredibly marks 10 years since I joined the Board of Volex and became Executive Chairman in effect, combining the Chairman and CEO roles. I came into a business that was in decline with less than $400 million of revenue and a market cap of about GBP 50 million. And in fact, it dropped down to GBP 30 million at the low and I set about building a new organization, including talent from within Volex who had not been given the leadership they deserved. So with this excellent team to support me, a lot of hard work and endless travel, we've created one of the true standout success stories in U.K. industrials. A significant architect of this success is John Molloy, our global COO. And he will continue in the same role and is every bit is committed to the business as I am, and both of us have very significant personal investments in Volex. Indeed, my move into the Chief Executive position in Volex merely underlines my deep and ongoing commitment to driving further growth and customer engagement. I will continue to lead from the front, delivering our ambitious plans and bringing in new customers. And I'd also like to say that none of this would be possible without Jon Boaden exceptional financial skills and cool head as the business has become increasingly complex. I'm very grateful to Jon who is sitting next to me. I'm very much as well looking forward to working with Dave and the existing Board to pursue growth in our markets. There are very substantial opportunities ahead, and we have big ambitions. This is a sensible time to align more closely with corporate governance best practice given the scale of our organization and the strong performance we are setting out today. Moving on to the results. We've delivered another excellent first half with revenues of $584 million at an operating margin of 9.8%. We've generated further strong organic growth at 13% despite a challenging macroeconomic backdrop. And in particular, we've seen very strong growth in electric vehicles and data centers. And later in the presentation, Jon will take you through exactly what has happened in each sector. The strong performance is proof that our strategy is working. Investment we chose to make in previous years is supporting growth this year and beyond. Our capabilities make us a first choice provider of critical connectivity solutions for global technology businesses. As the world changes, we're changing with it, and we are evolving our footprint to follow the demands of our customers who are reconfiguring their supply chains to deal with tariff challenges. Our move towards centers of excellence where we can deliver a range of the most advanced Volex solutions in a single location has resonated strongly with customers. It also gives us the opportunity to rationalize smaller sites, thereby improving the overall efficiency of the group. We continue to win new projects with our customers, particularly with electric vehicle customers and in the North American off-highway space. Our first half performance positions us strongly relative to our 5-year plan, which, as you may recall, sees us getting to $1.2 billion of revenue by the end of FY '27. Our strong results for the first half or another significant step towards these objectives. Before we break out the individual markets, it's worth talking about how our customer-centric approach delivers deeply embedded customer relationships, giving us confidence in our strategy. As you should all know by now, we work with the biggest technology brands in the world who have earned recognition as leaders in their fields. They trust us to deliver manufacturing solutions that meet or exceed their quality, reliability and functionality requirements. Although our assemblies might be a small part of large and complex systems they play a critical role every time. This is no different whether we are powering a domestic appliance that brings convenience to everyday life or connecting the key components at the heart of life-saving technology. We've built a business that revolves around the customer. We anticipate their needs and rise to their challenges. Our engineers define innovative production solutions and optimize processes for products that are assured to perform in challenging environments. This creates strong customer lock-in and sticky relationships. In many cases, regulatory requirements form a barrier to our substitution in the supply chain. In others, our deep expertise and consistently strong delivery position us as a preferred manufacturing partner. So this customer-led approach, disciplined reinvestment and daily operational excellence form the foundation of a business that compounds value over time. Many of our largest customers have been working with Volex for longer than I have been operationally involved in the business. Over the past decade, revenues have trebled given by expanding share with existing customers, winning new products and customer projects and customers and a targeted acquisition strategy. Operating margins have strengthened from 2% to a consistent 9% to 10% range, maintained successfully for the past 5 full years. And as a result, operating profit has grown from $7 million in FY '16 to $106 million in FY '25. This performance reflects stringent cost control, relentless operational improvement, talent attraction and retention from the top to the bottom of the organization, plus targeted investments in future growth, each aligned with our customers' priorities. And this combination of growth and margin expansion has translated into basic earnings per share rising from $0.015 in FY '16 to over $0.36 in FY '25. Volex continues to steadily build capability, deepen relationships and deliver consistent, sustainable returns creating shareholder value that compounds year after year. I'll now hand over to Jon to take us through the financial performance in the end market. Jonathan Boaden: Thank you, Nat. So first and foremost, I'm incredibly pleased with the results that we've been able to deliver and this is an excellent performance of $584 million of revenue in the first half of the year, which represents organic growth of 13%. Profitability is towards the top end of our margin target at 9.8%, which means we've delivered $57.2 million of adjusted operating profit in the first half of the year. With lower interest costs, that means we've increased basic earnings per share by 30% to $0.197 per share on an adjusted basis. We've maintained a strong track record around return on capital employed despite the investment that we made in our business, which includes putting in additional working capital to support customers. And as a result, we've stayed at 20% return on capital employed. These results are an indication of a business that is in great shape and navigating dynamic market conditions effectively. Over the next few slides, I'm going to take you through what we've seen in each of our end market verticals. We've established a market-leading capability in electric vehicles and are recognized for our proficiency in both designing and producing key components to power the next generation of transports. Our long-standing partnership with leaders in EV technology has positioned us well to support a broad cross section of the EV market. Much of our 13% organic growth has come from expanding our capabilities laterally to meet evolving market demand. This includes delivering complete AC charging solutions through integrated end-to-end manufacturing. Consumer demand for electric vehicles has continued to grow in our key markets in the U.S., Europe and China. EV sales as a percentage of new car sales recently hit 30% in Europe and 58% in China. While changes in government incentives in some markets such as the U.S. may soften short-term consumer demand, long-term prospects across key geographies are strong. Our footprint allows us to be flexible around customer requirements. For example, we are moving a new program to Mexico to support the customers' tariff optimization strategy. And while this will push out the timing of the initial ramp-up, it is exactly the type of dynamic problem solving that strengthens relationships. With enhanced capabilities supporting a wide range of global automotive brands, we have confidence in our ability to grow EV in the medium term. It's worth starting the explanation about consumer electricals with some context about the performance we've seen over the last 18 months. We have what you might call a post destocking rebound in the first half of FY '25 when we hit $132 million of revenue. This normalized to $125 million in the second half of FY '25. For the first half of this year, we delivered $126 million, slightly down versus a year ago and more in line with the H2 performance. This represents an organic decline year-on-year of 6%. Main voltage power cord continue to represent the largest share of what we do. We work with some of the biggest consumer brands in the world where reliability, reputation and customer experience are key priorities. These brands choose Volex because they have confidence in our ability to exceed their quality and safety demands. Vertical integration and scale in this market means that we have relationships with all the major domestic appliance manufacturers. This is giving us significant traction as we continue to push our harnessing capabilities, an area where we see strong opportunities for growth. In fact, harnesses and other complex assemblies now constitutes almost 1/3 of revenues. In the second half of the year, we have a new incremental harness opportunities in Europe. We've seen some secondary impacts from tariffs on European domestic appliance manufacturers. Some of the Chinese competition have reallocated their marketing spend from the U.S. to Europe and are pushing inventory into the European market in response to U.S. tariffs. This is likely to result in some short-term rebalancing with medium-term growth weighted more towards harnessing opportunities. Now moving on to medical. Although medical is the smallest of our sectors, we proudly support health care innovators whose technologies are transforming patient outcomes and improving lives. Our assemblies distribute power and data through sophisticated medical equipment, ensuring reliability, accuracy and patient safety. The first half of the year has seen disruption in demand for complex medical devices, reductions in spending for both medical research and public health care and the impact of tariffs are leading to reduced or delayed orders for some large medical equipment. The effect is different between customers with some customers continuing to increase demand during the period, but others looking to reduce orders and manage inventory levels. We have the flexibility to manage this variability within our operations and support customers as demand pattern shift. It is against this backdrop that we saw our sales in the medical sector declined by around 10% organically during the first half of the year. It is likely that the uncertainties caused by the impact of tariffs and policy changes will continue in the short term and will result in a headwind to medical demand. However, we remain very positive in relation to the medium term. This is partly due to the success in winning new projects with significant medical brands, expanding the range of customers that we work with. In addition, structural growth drivers are very strong in this sector with rising demand due to demographic change and advances in technology, creating new diagnostic and treatment options. And with our significant and in-depth understanding of our customers' requirements, we are well positioned to meet the needs of these health care innovators. We've seen excellent organic growth of 48% in complex industrial technology with data centers a significant part of that, but we've also had growth across the other categories. Outside data centers, which I'll come back to shortly, we're delivering complex assemblies, both wire harnesses and printed circuit board assemblies into highly specialist and demanding applications. Our customers need exceptional quality and complete confidence that the solution will work first time and every time. Meeting their challenging technical and scheduling requirements takes coordination across our operations and engineering experience to support the build process. When we successfully deliver, we unlock additional project opportunities and further repeat business, which contributes to our growth. We are well positioned in the U.S. market with advanced facilities, which are accredited to deliver defense and aerospace products. This includes involvement in major programs that is stepping up to address current defense challenges. Our overall organic growth outside data centers was over 20%, and much of this came from defense projects. In parallel, we're seeing increased demand from core industrial applications such as building environmental systems. Although the end users are different in all cases, customers are relying on us to deliver a complex solution with maximum reliability in a competitive way. Our additional capacity in Mexico is an important part of fulfilling these requirements. In data centers, we're supplying high-performance copper data interconnect, operating at speeds of up to 800 gigabits per second. These cables form the critical physical links between servers, switches and storage systems within data center racks, enabling ultra-low latency, high bandwidth connectivity for AI and cloud applications. Growth in data center investment globally is fueling demand for these products and revenue is up by 80% compared to the comparative period. As with so much of our portfolio, our ability to manufacture in a variety of locations gives us a competitive advantage given in the ever-changing tariff landscape. And finally, turning to off-highway. Here, we've delivered really strong organic growth of 20% in the first half. This included a project for specialist military vehicles in Europe that doesn't repeat in the second half of the year. This was a project that we were able to win because of our ability to move quickly and respond to customer demand. Our success in this market is down to supporting specialist vehicle manufacturers in areas such as construction, agriculture and large passenger vehicles who have demanding requirements across a significant variety of products. Our ability to leverage our advanced manufacturing platforms to deliver efficient and repeatable solutions despite variable lot sizes is a differentiator in this market. We're making excellent progress in the North America, where expanded capacity and our highly skilled engineers and sales colleagues are securing new project wins. This comes at a time when U.S.-based manufacturers are looking for regional production to manage their supply chain objectives. Let me step you through what we've achieved in margins during the period. We are blending together various operating margins across our entities and then adding in investment in capacity growth and capability expansion. These investments include adding incremental manufacturing space or additional salespeople. On a year-on-year basis, we've improved our first half margins to 9.8%, which is towards the top end of our 5-year plan margin range of 9% to 10%. In achieving this, we've identified cost optimization improvements worth 0.7%, which broadly offsets the impact of inflation during the period. The optimization includes further benefits from rolling out automation as well as the productivity actions highlighted as part of the integration of Murat Ticaret. We also achieved savings through site rationalization of 0.5%. We have a mix benefit, which reflects lower consumer power cord sales and higher revenues from our data center customers. There was a small adverse impact from the weakening of the U.S. dollar, which is our main sales currency. Overall, 9.8% is a very strong first half result, particularly given the amount of investment that has gone into our business recently, Nat will come back to the theme of investment shortly. So now moving on to cash flow. As in previous years, there are some factors in the first half that tend to result in lower cash generation in H1 compared to the second half of the year. EBITDA was up to $73.6 million, a 20% increase over the comparative period. Capital expenditure was lower at $21.3 million, which is approximately 3.6% of revenue and well within the 3% to 4% range that we had guided to. Once again, we had an increase in working capital and higher inventory is a big driver in this. About half of the increase in inventory is coming from data centers, where we hold stock in hub locations to support timely fulfillment of demand. The remaining increase in inventory is across our other go-to-market sectors and reflects the impact of increased demand as well as building buffer stock to support relocation activity. Part of this expansion includes an increase in defense projects, where we hold a greater level of raw materials for operational reasons. Interest and tax are similar to the comparative period, which reflects the timing of tax payments and current debt interest costs in our growing business. The repayment of leases shown below free cash flow includes the exercise of an option to secure the freehold of 2 existing sites at a significant discount to market value, providing greater security and control. Our covenant net debt ratio, which is our preferred way of looking at leverage and excludes operating lease commitments, improved from 1.3x to 1.1x, giving us great balance sheet strength and flexibility. Our capital allocation priorities are unchanged from prior years. Our primary focus is on organic investments. In addition, we continue to explore acquisition opportunities in a disciplined way. I'll now hand back to Nat to update on our strategy. Nathaniel Philip Victor Rothschild: Thank you very much, Jon. I wanted to return to the key pillars of our strategy and outline how this contributed to our first half performance. First and foremost, we are in the right markets where we are winning new business, and I'm particularly pleased with the progress we've been making in off-highway in North America. Our team is getting a huge amount of traction with customers who are looking for a high-quality and cost-effective solution. It is an opportune time for Dave Webster to join our organization. And later this month, Dave and I will be on the road meeting with our customers and visiting a brand-new site we are opening this month in Central Mexico. The substantial growth we have delivered in the last 2 years reflects our ongoing investment program. For example, our product development strategy in EV is delivering growth. Our global capacity investments have given us capability in the right locations to support our customers' tariff mitigation strategies. And this is particularly the case in Mexico, where we have an abundant pipeline of opportunities, many of them new just in the last 6 months. We are a critical manufacturing partner for our customers who depend on our engineering capabilities, our attention to detail and our ability to meet challenging specifications. We build deep relationships by exceeding their expectations. Moving complex production from a competitor or between sites is a big decision. In the last 12 months, we relocated multiple programs for our customers without any major surprises and they have confidence in our ability to deliver. Our people are central to our performance. We trust our teams to deliver. We put our skilled managers at the heart of customer relationships. With the demand into our facilities in North America, we've been augmenting our team in the region, and we are seeing the benefits of this. And finally, acquisitions have been a significant element of our growth story, although it's just over 2 years since our last deal. In the first half of the year, we looked at a handful of varied opportunities but nothing met our strict criteria. With a huge amount of organic growth and new customer programs to deliver, we are looking for well-run businesses with strong management teams that can slot into our organization. We are continuing to pursue some interesting opportunities, but we won't compromise on our acquisition criteria. Every deal we do has to be the right deal for Volex. This investment approach is an important part of how we drive consistent growth and how we position ourselves to win incremental programs with new and existing customers. The qualification process we go through for major new programs is understandably stringent given our critical role. We built capacity ahead of demand based on market knowledge, so we can dedicate space to customers during the qualification process. This has been very successful. Take Batam, Indonesia, where we have now almost filled the additional space we opened last year and also Tijuana, Mexico where we are experiencing strong demand for tariff-free manufacturing, having doubled the size of the facility last year. This month, as I mentioned just a moment ago, we are opening a further purpose-built site in Central Mexico, doubling our capacity in this area. However, footprint is only part of the story. We need to have the right capabilities in our facilities to support evolving requirements and to enhance efficiency. An increasing number of our new programs are built to be highly automated from day 1. In addition, we are retrofitting automation technology to existing lines, reducing operating costs and enhancing throughput and yields. Our vertical integration is at the core of our competitiveness and this differentiates from many of our competitors. And we are currently rolling out additional specialist wire products that we extrude ourselves as well as making complex plastic components and connectors in-house. Our investment in product development focuses on both power products to meet evolving demands in the EV space as well as the next generation of data center cables. And we continue our strong focus on cash payback with the majority of capital programs achieving cash payback within 2 years and often much quicker. This market-leading approach to investment, it helps us to secure benefits quickly and gives us confidence to continue investing in our business. So it seems like yesterday, but we are 3.5 years through our 5-year plan. And our first half revenues of $584 million is a significant demonstration that our strategy is working. It's also proof that we are rapidly closing in on our target of achieving $1.2 billion of revenues. We've been comfortably maintaining our operating margins towards the upper end of the 9% to 10% range, and we are achieving this even after significant investment in growth. And this gives us a high degree of confidence that we will achieve the 5-year plan. So now is the time to summarize our performance and take you through the outlook for the second half. These are, once again, excellent results, a real achievement against the backdrop of tariff-related uncertainty and difficult macroeconomic conditions. And our growth is proof that the strategy is working powered by our investments in incremental capacity and capability. And in addition, as we scale up the business, we continue to achieve healthy margins at the top end of our target range as our operating leverage increases. We have confidence to invest and to pursue acquisitions because we have a strong balance sheet and very significant financial flexibility. And looking forward, we are off to a very good start for the second half of the year. We are mindful of the challenges for short-term uncertainty, particularly arising due to tariffs. However, this is a diversified business with deep long-term customer relationships. Those customers have supported our ability to grow despite these tough conditions, and we expect second half revenues to be broadly in line with the first half. In fact, we see the changing global trade environment as an opportunity for Volex. With our geographic capabilities and ability to support customers moving manufacturing between countries, we are well placed to secure further growth. Given our sustained focus on long-term value creation and our tremendous progress against our current 5-year plan, we have started working on a new 5-year plan and this new plan will reflect the strong and scalable business we have created and set out our ambitions for both revenue growth and margin improvement for the next stage in our journey. We will share this plan with investors in due course. And now we would be very happy to take your questions. Operator: [Operator Instructions] Jon, Nat you've had a number of questions from investors today. So thank you, firstly, to everybody for engagement. Jon, if I may just hand back to you, if you can take us through the Q&A and then I'll pick up from you at the end. Jonathan Boaden: Yes, of course. Thank you, Mark. Yes. So I'm going to collate the questions because often we get several questions on the same topic. So what I want to try and do is try and answer as many as possible and go through a broad cross section of the things that are being asked today. So the first question, one of the pre-submitted questions is, will your manufacturing center around Turkey or might you expand in the U.S. partly in order to mitigate the impact of tariffs? Nathaniel Philip Victor Rothschild: Do you want me to answer that one? So look, we've got 5,000 people in Turkey. We have, I think, 8 sites there at the moment. So we're committed to Turkey. We have more than enough expansion space at the moment, should we need it. And we've also just opened a brand-new low-cost site in the center of Turkey, where labor costs are highly competitive. I think in North America, North America has always been a critically -- the critically important market for us. And if you look at what we've done in Mexico where we have doubled the size of our Tijuana site, and as I said, at least one occasion in my presentation, we've opened a new purpose-built site or we're going actually next week to open a new purpose-built site in Central Mexico. So we are covered for the U.S. market through our investments in Mexico. So I think the -- and we have 2 sites -- 2 existing sites, 2 specialist sites in the U.S.A. at the moment. Jonathan Boaden: There's another question here about -- we announced that we were manufacturing partners for AFC Energy. And the question was to understand how significant that partnership is. Nathaniel Philip Victor Rothschild: So I think that you would need to go and extrapolate from the AFC business plan what -- how big the opportunity could be. But we have the capability to take costs out of the AFC, the portable hydrogen generators that AFC makes. And AFC's success will be contingent on dramatically reducing the cost of those generators. And we're working with AFC as we speak. And I think you need to look at their management team to answer that question. Jonathan Boaden: There's a question about when the San Luis Potosi facility will be operational, which is actually operational now. It opened at the beginning of the previous week. And Nat and I, as well as John Molloy and Dave Webster actually going to San Luis Potosi to see the new facility and to cut the ribbon on the site, but also more importantly, as an opportunity to introduce Dave Webster to the operations of Volex and to also take the chance to meet with customers. So that's a really exciting trip for us. So there's a question about Medical organic revenues have declined by 9.9%, driven by reduced global spending on health care and research. What is the plan to turn this around? And that's a question from Anthony. And I'll start and if you like Nat, you can add your thoughts. But really, we're not planning to do anything different in medical. Because actually, the strategy we have is working. We have some excellent deep relationships with customers. We have some excellent facilities and overall, we see very long-term structural growth drivers in the medical market, and we feel that we're well positioned. And it's a great strength in the portfolio effects we have across the 5 markets that if one of those markets is experiencing a short-term dip for various reasons, in this case, it's related to tariffs and changes in legislation, then we can still deliver 13% organic growth across the piece. So we don't feel that we need to do anything significantly different in medical because we're already doing all the right things. Nathaniel Philip Victor Rothschild: Yes. And just to add, if you strip out our largest medical customer, we grew organically year-on-year in Medical by a few points. And the medical business we have requires very little capital investment. So the sites we've got, for example, in Poland, and in Slovakia that are exclusively medical, they kick out big dividends up to the group every year. They have very, very healthy margins. The business is incredibly sticky. And we've managed to grow our -- we've managed to diversify our medical business tremendously over the last 10 years. And I'm very optimistic about the medical business. I think the amount of destocking that's occurred over the last 12 months. I think some of the customers have gone too far, and I think you can have a really kind of rip come back next year. Jonathan Boaden: Good. Thanks, Nat. It's a question from Stuart about the fact we referenced tariff-related uncertainty multiple times. And he'd like us to explain which specific tariff regimes by region products are the most material to Volex's P&L. So in terms of tariffs, it's our strategy with tariffs from the beginning has been to pass the costs on to our customers, and we've done that in 100% of cases that we pass through the cost of tariff to our customers. And in these results, there's only really 2 areas which we referenced in the presentation where we've seen the impact of tariffs. Part of it is in Medical, where some of our particularly euro-centric customers are seeing reduced demand as they sell into the U.S. And the other area that we mentioned in the presentation is in relation to consumer electricals where Chinese competition are flooding the European market with product at the moment, and there will be a rebalancing that will occur over a period of time in terms of demand. And we addressed the Medical piece earlier on why we still feel very confident in Medical. And in terms of the consumer piece, as we've talked about in the presentation, the big opportunity in consumer is around harnesses. Now quite often for domestic appliance manufacturers, we will sell them a power cord for $1, a harness for a washing machine or an other domestic appliance, we might sell that for $6. So you can see quite quickly that if we can grow the share of that harness market, that, that could have an appreciable impact on our revenue over a period of time, and that's very firmly where we have our sight set in that consumer electricals business. So there's a question from Peter about which of our 5 end markets, EV, consumer, medical, complex industrial technology and off-highway, do you expect to grow the fastest and why? And I feel that that's a question that's best saved for when we release our new 5-year plan. We've clearly seen tremendous growth over the life of the current 5-year plan, particularly in EV, in complex industrial technology. And the next 5-year plan that we will set out in due course will give an indication of where we think that future growth can come from. But overall, we feel very positive about the opportunities in end markets. And to that end, is there a particular end market that you feel particularly optimistic about, Nat, in terms of long-term growth opportunities? Nathaniel Philip Victor Rothschild: Well, true to form, I still feel optimistic about all of them. But I would pick out -- I think, look, we said it a lot that you have a situation where labor rates are going up in Mexico, and there is an opportunity to showcase low-cost manufacturing in Southeast Asia. And the -- it's reason of consumer electricals and then it's, for example, the commercial HVAC market, which are really suited for manufacturing in Southeast Asia. And those are areas of business that require less capital investment than some of our other silos. And I think those are very interesting areas. So there's a little piece of -- a growing piece of complex industrial technology, which -- and then there's the consumer electrical side where we are seeing -- we're getting great traction. So I've always said that the consumer electricals side of our business is very, very underappreciated. And where we came from 10 years ago, we had a non-vertically integrated power cord business and we had no consumer electricals harnesses at all. Now we have a business doing around $0.25 billion a year of revenue. And it's a very, very underappreciated part of our portfolio. Jonathan Boaden: Good. Thank you, Nat. So there's a question which is asking for -- from RW asking for some clarification because there's a statement I made, which is along the lines of that there's an increase in working capital driven by investment in inventory. And I mentioned that part of that is because we're operating through a hub model in data center sales. And the question is, can I please explain what that hub model means. Now how that works, how certain customers ask us to support them is by putting inventory into hub locations, particularly in the U.S., and that allows us to manufacture in Asia, and then we ship to the hub locations and then that inventory is available for the customer to pull to meet their requirements. And it works very well for the customer because that inventory sits on the Volex balance sheet which is one of the reasons why you see this adverse movement in working capital. But for operational reasons, from a customer's perspective, they like that confidence that as there are peaks and troughs in demand of their particular use case. So when they're building data centers that they need to move very quickly to populate the data center with infrastructure, which includes all the service switches. And then, of course, the cables that critically connect all of those things together. They want the confidence that they can go to these hub locations in the locality of where the data centers are being built and move very quickly to achieve their build-out requirements. There's a question from [indiscernible] about if we could explain or if I can explain the decline in revenue in Asia. So within the earnings release. We report revenue both in terms of the go-to-market sector, for example, EV or consumer electricals, but we also report a regional split and there is a reduction in Asia and quite a significant increase in North America, and it really just reflects the end markets where we've seen the biggest pull of data center products and the particular customer mix in those markets. So it's just really a function of how we report where particular customer revenue comes from as noted in that release. Question from Melvin. How significant is the volatility of the copper price to the business and what stocking, destocking is taking place in response. So as we've said previously, and remains to be the case for assemblies and products where copper is a significant element of the bill of materials, it is our policy to pass that copper risk through to the customer. So there is a repricing mechanism around copper and when copper goes up, then we're able to charge higher prices, which means our margins remain consistent in the face of copper volatility. And that is a process that has worked very well for us, but it also is something that's very well understood and accepted by the customers. And we haven't seen any significant evidence that customers are either stocking up or destocking in advance of anticipated moves in the copper market. So of course, the copper market moves very regularly and sometimes quite unpredictably. And for some of our customers where they choose not to take that risk, then we back off that risk ourselves by going up to a bank and hedging the copper exposure. There's a question here from Anthony saying that the markets have reacted favorably to these results has been seen by a substantial increase in the share price. Do you think the present share price and market cap is a true reflection of the value of the business? Or do you think the business is still undervalued given the future growth opportunities? Nathaniel Philip Victor Rothschild: So look, I think investors have to decide how to value Volex. I think given our growth rate, our organic growth rate, where we compare against other U.K. industrials, we should trade on a higher multiple. Jonathan Boaden: Good. There's a question from Theo about has Volex ever considered entering the grid electrical cable market given its growth? And if not, why? So I think this is referring to more like the national grids that the supply side of the electricity distribution market. Do you have any thoughts on that, Nat? Nathaniel Philip Victor Rothschild: This is a different business to us. So this is a business that is dominated by companies like Prysmian and Nexans and other large multinational businesses. And this is not what we do. And Also, the business has much lower margin characteristics. Those are sort of single-digit operating margin businesses. So we're looking for niches. We're trying to be maneuverable. We're looking for more -- for kind of less commoditized business. Jonathan Boaden: Yes. Great. There's a question about the percentage of revenue that each of our largest customers make up in the markets that we operate in? Well, in terms of customer concentration that we have a very broad range of customers. And there's nothing that we, from a management perspective, feel particularly concerned about in terms of customer concentration risk. We do have some larger customers, which tend to be very well-known household names that are leaders at the frontier of technology developments and in particular, we see that within complex industrial technologies and within the EV sector. And what's great with working with companies at the forefront of technology is through our manufacturing partnerships and the complex products that we offer to them, we're able to learn a lot about developments in the technology, and that helps us as we engage with other customers who are perhaps a bit behind the -- a bit further from the leading edge. There's a question about whether the boost that gold miners have had this year with rising gold prices has led to an increase in demand for off-highway vehicles to sort of support the gold market. Now I don't think we have seen anything down to that level of granularity. But perhaps a few words on where you see things in the off-highway space and particularly, I suppose, obviously, you have North American opportunity? Nathaniel Philip Victor Rothschild: Well, interestingly, we won a contract with Fortescue to make the wire harnesses that go into the next generation of electric mining trucks and I went down to their headquarters last year and met Dr. Andrew Forrest and had a tour. And that contract has actually unfortunately, gone away because of the decision by Fortescue to move all their production to China and partly because of some of the decisions that this government has taken. And we're trying now to kind of requalify ourselves on the China part of that business. But that's an example of exactly the type of business that we like to do, which is a big off-highway super customized, heavy harness with tons of complexity to it. Overall, the off-highway business has grown 20% in organically through our acquisition of Murat in Turkey in 2022, we've got almost every single one of the major customers and we're now trying, as we said in previous calls, we're trying to then cross-sell those opportunities into other geographic locations. So that includes North America and obviously, Asia as well. Jonathan Boaden: There's a question I'll take from Nick. Given I run one of our support functions, the finance team. And it's about given the growth of AI, what steps are Volex taking to implement AI in our own organization. And it's a good question that there's a tipping point now in terms of how these technologies have developed that it does allow you to run things in a more efficient way. And AI is just one of the avenues that we are looking at and actually using on a regular basis to become more efficient in the back office of Volex. And that's really important because as we grow revenue, if we want to look to enhance our margin position, and we need to do that through further operating leverage, which is all about running as efficiently as possible in the support functions of the organization so that the operating leverage comes through. And as well as AI that we're using cloud technology, we're using lots of applications. We're rolling out a new ERP system, which is going incredibly well and is giving access to a new feature set, and we're using more tools for greater collaboration across the business. So all of these things come together to put us in a position where we're enhancing the efficiency. I think as a final question. We had a question from Chris who says excellent results, well done. I know it's somewhat futuristic, but do you see data centers opening into space? So I didn't know whether you had -- any thoughts on that as we come to close the Q&A session. A rather left field question for the very end. Nathaniel Philip Victor Rothschild: Well, maybe on asteroids as well in space, but it's -- no, the answer is I don't have any great insight into the thinking of Elon Musk. He is the only person who could possibly pull something like that of. Jonathan Boaden: Very good. Thank you. Operator: That's great. Jon, Nat, thank you very much indeed for updating investors. And of course, if there are any further questions, Jon will give those to you post today's call. Thank you once again to you both. Nat, perhaps before I redirect those on the call to give you their feedback, which I know is particularly important to you both, perhaps I could just ask you for just a couple of closing comments. Nathaniel Philip Victor Rothschild: Well, it's 10 years since I've been doing this, and I think it's 5 to 6 for you now, isn't it as well. So we're in the midst of the journey, and we're grateful for the support of all of the retail investors and also the Investor Meet platform, which is very important to us, and we look forward to seeing you in 6 months' time. Operator: That's great. Jon, Nat, thanks once again for updating investors. If I please ask investors not to close this session as we'll now automatically redirect you to provide your feedback. It only take a few moments complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Volex plc, we'd like to thank you for attending today's presentation.
Operator: Good day, and welcome to the last Elastic N.V. Second Quarter Fiscal 2026 Earnings Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Eric Prengel, GVP of Finance. Please go ahead. Eric Prengel: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic N.V.'s second quarter fiscal 2026 financial results. On the call, we have Ashutosh Kulkarni, Chief Executive Officer, and Navam Welihinda, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website. Slides that are supplemental to the call can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements which may include predictions, estimates, and our expectations regarding demand for our products and solutions, and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter fiscal 2026 quiet period begins at the close of business on Friday, January 16, 2026. We will be participating in Barclays Global Technology Conference on December 10 and the Needham Growth Conference on January 14. With that, I'll turn it over to Ashutosh Kulkarni. Ashutosh Kulkarni: Thank you, Eric, and thank you everyone for joining us on today's call. Q2 was an outstanding quarter for Elastic N.V., driven by robust growth across the company with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%. Our team drove strong execution, achieving sales-led subscription revenue growth of 18% with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter end. The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI. The Elastic platform, with its ability to sift through and find relevant insights in terabytes of structured and unstructured data in real-time, is uniquely suited to address the need for context in this age of AI. This ability is driving the acceleration and adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas. We maintained strong momentum in Search and AI while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform. These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued over $1,000,000 in annual commitment value, with five representing over $10,000,000 in total contract value. Of these five deals, two were greater than $20,000,000, a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities. This quarter marked the fifth consecutive quarter of disciplined sales execution, demonstrating our continued commitment to driving enhanced performance and consistency across the field. These increasingly larger commitments are exemplified by an 8-figure new logo deal where Elastic Security was chosen by one of the largest chemical manufacturers in the world. The company initiated a competitive search to replace its fragmented security tools and simplify its IT infrastructure, seeking an XDR platform that could deliver advanced threat protection and a 35% increase in operational efficiency. Elastic prevailed against multiple competitors. We demonstrated superior capabilities by detecting threats overlooked by all other solutions. The customer chose Elastic due to the proven effectiveness of our technology, our open ecosystem, and ability to scale across their global operations. With the customer now progressing towards an AI-driven SOC, we believe our AI features will enable them to realize even more ambitious efficiency targets. Building on our momentum in security, our leadership in next-gen SIEM led to a $26,000,000 commitment with CISA, the U.S. Federal agency responsible for safeguarding critical civilian infrastructure. CISA selected Elastic Security on Elastic Cloud for a unified SIM as a service offering that will help to secure U.S. Federal civilian agencies. This program will standardize security data collection, enabling real-time threat detection and rapid incident response across agencies, while leveraging our standards-based, highly efficient platform to significantly reduce costs associated with data access and retention. We architected our next-gen SIEM solution knowing that security is fundamentally a data problem, one our Search AI platform is uniquely suited to solve. Capabilities like attack discovery, eSQL, and cross-cluster search help analysts investigate incidents and correlate events across environments without manually aggregating data or switching contexts, accelerating detection, response, and forensic analysis. Our ability to overcome complex data challenges by unlocking the value of unstructured data is directly linked to our continuing success in generative AI. In Q2, we saw strong demand for our platform as an increasing number of customers adopted Elastic for developing semantic search and agentic applications. Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural choice for building Gen AI applications. This has led to widespread adoption and successful deal closures across numerous industries, addressing a wide variety of use cases. For example, a global financial institution operating in over 100 countries expanded its use of Elasticsearch in a 7-figure deal. This customer leverages the full Elastic platform in a self-managed environment for hundreds of use cases. Their search capabilities continue to grow as they centralize unstructured data to power insights for customer and employee-facing applications. Previously, they attempted to leverage a hyperscaler's Copilot product, but it did not surface sufficient relevant results. Now they are using Elasticsearch as their context engineering platform paired with an LLM for their internal AI applications. Elastic's ability to ensure accurate context and relevance has improved their results, and they are preparing to move the application into production. Our leadership in context engineering and relevance is translating directly into significant Gen AI customer adoption. In Q2, new customer commitments with Gen AI continue to grow. We signed four Gen AI deals that included new business of greater than $1,000,000 in annual contract value. We now have over 2,450 customers on Elastic Cloud using us for Gen AI use cases, with over 370 of these amongst our cohort of customers spending $100,000 or more with us annually, representing nearly a quarter of our greater than $100,000 ACV customer cohort leveraging Elastic for Gen AI use cases. In another Gen AI win from Q2, a global supply chain software provider expanded its use of Elasticsearch in an 8-figure deal to leverage our AI and vector search features in an embedded fashion in their key products. The customer is now also expanding the use of our platform to support future agentic use cases. We are seeing customers expand their use of Elasticsearch to develop their own agentic workflows, and to further empower enterprises in adopting AI agents, we've recently introduced AgentBuilder. This new product builds on the Elastic Inference service and provides an out-of-the-box conversational experience, allowing users to interact directly with any data in Elasticsearch and extends our technology into a new frontier beyond the vector database. It embodies a truly relevance-centric approach rooted in context engineering, by enabling users to explore their data and assemble the necessary tools for quickly building AI agents with robust workflow capabilities. AgentBuilder dramatically simplifies the entire operational life cycle of agents, including their development, configuration, execution, customization, and observability, all directly within Elasticsearch. This powerful capability strengthens our moat of broader Gen AI differentiation, which is also helping us land deals in observability and security, as customers grow with Elastic because of our AI features. An increase in AI-based security threats fueled the large expansion deal with one of the world's leading investment management companies. They are deploying our AI capabilities to proactively combat evolving attacks. This customer expanded its use of Elastic Security to enhance runtime protection with integrated AI, a critical need for securing applications. Default LLM security controls alone were insufficient. The customer required a security solution capable of evolving with their unique requirements. Elastic's Automation First architecture provided them the ability to rapidly evolve to keep up with ever-changing security challenges. As bad actors grow in sophistication, leveraging Elastic's attack discovery and AI assistant allows their SOC to scale their capabilities and proactively address issues. We are seeing similar success in adoption of our platform capabilities across our observability solution. In one observability win from the quarter, a leading U.S. Municipal technology and innovation agency signed a 7-figure expansion deal for Elastic Observability. The agency is tasked with providing infrastructure as a service to all municipality offices. They launched a new project to unify the city's data in a first-class data environment to modernize operations and decision-making. They chose Elastic Observability as the foundational technology due to our flexibility, open architecture, and ability to deliver cost savings at scale through features like searchable snapshots. The agency is now leveraging our AI assistant, which helps them remediate and triage issues, reducing their reliance on external consultant services. Building on foundational components for working with observability data, we introduced Streams this quarter. Streams is an agentic AI solution that simplifies working with logs to help SRE teams rapidly understand the why behind an issue for faster resolution. Streams can automatically organize logs, find meaning and problems in logs by applying AI and the power of Elasticsearch to this unstructured, messy log data. In Q2, we introduced a steady set of new AI capabilities, including a number of features that improve our performance as a vector database. We introduced a managed inference service natively through Elastic Cloud. Inference at scale is incredibly important for vector search, semantic search, and GenAI workflows, and we provide our customers with an API-based inference service using NVIDIA GPUs with our vector database for low latency, high throughput inference. We also continue to improve our vector database performance with new functionality, including the release of Disk BBQ. Disk BBQ is a new disk-friendly vector similarity search algorithm that delivers more efficient vector search at scale than traditional industry-standard search techniques used in many other vector databases. And finally, we announced our acquisition of GINA AI. GINA AI has developed leading frontier-class multilingual and multimodal embedding and re-ranker models, helping businesses and developers build powerful search applications. As enterprises build AI agents and develop software in new ways, defining context and grounding LLMs remains essential. This is why we have invested for years in developing our own embedding models, re-ranker models, data chunking strategies, and more. GINA AI extends and accelerates this strategy. These advancements in AI and vector search are not isolated. They are integral to our overarching strategy of delivering a powerful and flexible platform. This commitment to innovation extends across our diverse deployment options, ensuring our customers can leverage the full potential of Elastic regardless of their preferred architecture, Elastic Cloud or self-managed. We continue to innovate, making our platform more capable across both cloud and self-managed deployment profiles. As part of this, we made AutoOps available for the first time to our self-managed customers. AutoOps simplifies cluster management through a cloud-powered service that processes telemetry for real-time issue detection and resolution, all while ensuring the underlying customer data remains within the self-managed deployment. It is these organic innovations and strategic acquisitions that give us the confidence to be the leading data retrieval and context engineering platform for the AI era. Just last week, IDC recognized Elastic as a leader in multiple Marketscape reports, including in the Worldwide Observability Platforms report and in the Worldwide General Purpose Knowledge Discovery for Search report. In the general-purpose knowledge discovery report, we had the strongest position of any vendor in the analysis. We are proud of this recognition, which affirms our unique ability to deliver a unified platform that solves the most complex data and AI challenges. In closing, our market opportunity is stronger than ever, driven by robust growth, clear GenAI leadership, and a unique platform built for this moment. Our foundational investments in search uniquely position Elastic to deliver AI to enterprises everywhere. I would like to thank our customers, our partners, and our shareholders for their continued trust and confidence in Elastic, and to our employees, thank you for your tireless spirit of innovation. And now, I'll turn it over to Navam to go through our financial results in more detail. Navam Welihinda: Thank you, Ashutosh Kulkarni. Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during Analyst Day on October 9, and I'm pleased to report that we exceeded both the top line and profitability of that improved guidance. We saw continued broad-based demand and notable strength in commitments across all geos, supported by healthy consumption trends. As Gen AI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter. Our total revenue in the second quarter was $423,000,000, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349,000,000, growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elasticsearch AI platform in addressing critical consolidation and generative AI use cases. Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next twelve months, remains solid. At the end of Q2, CRPO was approximately $971,000,000 and grew 17% as reported and 15% in constant currency over Q2 of the prior year. Our top-line metrics were driven by strong consumption, deal momentum, and traction with greater than 100 ks ACV customers, all three drivers supported by Gen AI tailwind. First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment, driven by solid organic consumption growth from existing customers as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ashutosh Kulkarni referenced, we saw an uptick in consolidation and Gen AI use cases, which led to overall strength in large deals. We closed over 30 commitments greater than $1,000,000 in annual contract value, with five of them representing greater than $10,000,000 in total contract value, and two of those greater than $20,000,000 in total contract value. The strength of this can be seen through RPO, which grew 19% in the quarter as reported and 17% in constant currency. Our deal momentum occurred globally in both enterprise and public sector segments. Despite the U.S. Government shutdown in October, the team closed a notable win with CISA, as Ashutosh Kulkarni noted earlier. In the second quarter, deal momentum continued and supported our expansion of enterprise accounts and high propensity commercial accounts. During the quarter, our greater than 100,000 annual contract value customer count grew approximately 13%, representing approximately 180 net new customers over the past four quarters. Quarter over quarter, we added approximately 50 net new customers, and we continue to see strong expansion from our existing customer base. GenAI is proving to be a powerful catalyst for customer expansion, with 23% of our greater than 100,000 cohort now utilizing Elastic for GenAI use cases, an increase from 17% just one year ago. We see significant headroom for customers to initiate their Gen AI journey and scale into a 100 ks annual contract value cohort. Even with our existing 100 ks plus Gen AI customers, adoption is in its early stages. Now, turning to second quarter margins and profitability, I will discuss all measures on a non-GAAP basis. Our commitment to balancing growth with disciplined spending translated to robust operating leverage and strong bottom-line results. We continue to focus on costs and efficiency in our business. We delivered subscription gross margins of 82%, total gross margins of 78%, and an operating margin of 16.5%. Our disciplined approach to costs, combined with increasing revenue, underpins our strong profitability and free cash flow generation. Regarding cash flow, adjusted free cash flow was approximately $6,000,000 in Q2, representing a margin of 6%. The second quarter is typically a seasonally low free cash flow margin quarter for us, and we manage and view adjusted free cash flow on a full-year basis. For fiscal 2026, we expect to sustain the level of adjusted free cash flow margin that we achieved in fiscal 2025. In October, during our Analyst Day, we announced a $500,000,000 share repurchase program as part of our capital allocation framework. I am pleased to say that we are already underway on our program and began returning capital to shareholders during Q2. During the quarter, we returned approximately $114,000,000 in cash to shareholders. This represents purchases of approximately 1,400,000 shares at an average price per share of $84.45. As I mentioned at our Financial Analyst Day, we expect to use more than 50% of our $500,000,000 authorized amount in fiscal 2026. Now for the outlook for the third quarter and the remainder of fiscal 2026. Starting this quarter, we will begin providing guidance for sales-led subscription revenue. As we detailed during our recent Analyst Day, and in the past two quarters, sales-led subscription revenue is a key metric for measuring our success with larger strategic and enterprise accounts and high propensity commercial accounts. Sales-led subscription revenue is the fundamental driver of our financial framework, and we incentivize our sales team to meet customers where they are, in cloud or in self-managed departments. The momentum we are building in this quarter is evident. Our sales pipeline is very healthy; it has grown throughout the year. Given the strength of our business, we are raising our full fiscal year 2026 revenue guidance. For 2026, we expect total revenue in the range of $437,000,000 to $439,000,000, representing 15% growth at the midpoint or 13% in constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $364,000,000 to $366,000,000, representing 17% growth at the midpoint or 16% in constant currency growth at the midpoint. We expect non-GAAP operating margin to be approximately 17.5%. We expect non-GAAP diluted earnings per share in the range of $0.63 to $0.65, using between 108,000,000 and 109,000,000 diluted weighted average ordinary shares outstanding. For fiscal 2026, we are raising our total revenue, which improves our expected non-GAAP diluted EPS. We expect total revenue in the range of $1,715,000,000 to $1,721,000,000, representing approximately 16% growth at the midpoint or 15% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $1,417,000,000 to $1,423,000,000, representing 18% growth at the midpoint or 17% in constant currency growth at the midpoint. We expect non-GAAP operating margin for the full fiscal 2026 to be approximately 16.25%. We expect non-GAAP diluted earnings per share in the range of $2.40 to $2.46, using between 108,000,000 and 110,000,000 diluted weighted average ordinary shares outstanding. The diluted weighted average shares outstanding reflect only share buybacks completed as of October 31, 2025. In summary, I am pleased with our second quarter results. We remain on track with our execution this fiscal year and on track to achieve the medium-term sales-led subscription revenue target growth rate we laid out during our financial Analyst Day. Elastic stands uniquely positioned as we bring relevance to unstructured data and allow enterprises to transform data into value. Our opportunity continues to grow. With that, I'll open it up for Q&A. Operator: Thank you. We will now begin the question and answer session. The first question comes from Matthew George Hedberg with RBC Capital Markets. Please go ahead. Matthew George Hedberg: Great. Thanks for taking my question, guys. Ashutosh Kulkarni, I want to start with you. I assume you're seeing strong consumption trends from your AI native customer base, but I'm curious if you could talk about the performance of your non-AI native customers. Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base? Ashutosh Kulkarni: Yes, that's a great question. And yes, we are seeing that it's not just the AI native cohort, but we are seeing strong consumption across the board. Even in our traditional businesses, not just in search, but also in observability and security. Part of this is also that we are winning more and more commitments like I talked about in my prepared remarks. This was a remarkable quarter in terms of the number of commitments that we were able to secure, large commitments where customers are consolidating onto our platform for security, for observability. The five deals that we mentioned that were all greater than $10,000,000 in total contract value are all significant. I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue. Just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric, and it came in at 18% this year. So very happy about it. Continuing to drive the momentum, consumption is strong, commitments are strong, we feel really good about the rest of the year. Matthew George Hedberg: That's really good to hear. And then maybe for Navam Welihinda, just a follow-up. All of your reported growth metrics were strong, including both CRPO and RPO, all kind of growing in the mid-teens or better. I'm curious though, billings isn't a key for you guys, but it did lag some of those focus metrics. Wondering if you could talk a little bit about why that was the case? Thanks. Navam Welihinda: Yes. Thanks for the question, Matt. And I agree with you, Q2 to us was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption. Both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year. Also, RPO grew 19%, and that was because of the strength of the multi-year commitments that we laid out. Overall, the commitment side of the business was very, very strong. Now, as it pertains to your specific question on the year-over-year compare, going into the quarter, we expected variability in the second quarter for a few reasons. One of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of a weaker Q1 commitments that we saw. So the billings distribution, the revenue distribution in last year throughout the year was just atypical. You can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the crosscurrents of billings, the ACV growth this year to date is stronger than what it was last year to date. Right? And that's a great sign. Then the second point I want to make was you all know there was a government shutdown that impacted our third month of the quarter, impacted everybody.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 ESCO Technologies Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. On the call today, we have Bryan Sayler, President and CEO, and Christopher L. Tucker, Senior Vice President and CFO. And now I'd like to turn the conference over to our first speaker today, Kate Lowrey, Vice President of Investor Relations. Kate, you now have the floor. Kate Lowrey: Thank you. Statements made during this call, which are not strictly historical, are forward-looking statements within the meaning of the Safe Harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions, and results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including but not limited to, the risk factors referenced in the company's press release issued today. This will be included as an exhibit to the company's Form 8-Ks to be filed. We undertake no duty to update or revise these forward-looking statements, except as may be required by applicable laws or regulations. In addition, during this call, the company may discuss some non-GAAP financial measures in describing the company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the press release issued today and found on the company's website at www.escotechnologies.com under the link Investor Relations. Now I'll turn the call over to Bryan. Bryan Sayler: Thanks, Kate, and thanks, everyone, for joining today's call. We are pleased to meet with you this afternoon to discuss our fourth quarter results. By any measurement, we finished the year strong and closed out another great year at ESCO Technologies Inc. Q4 was the first full quarter to include the maritime business, which had impressive performance leading to a significant impact on our top and bottom line results. In addition to Maritime's contribution, we delivered 8% organic sales growth in the quarter. This top-line sales growth combined with a 100 basis points of adjusted EBIT margin expansion at the bottom line to drive a 30% year-over-year increase in adjusted earnings per share from continuing operations to a record $2.32 per share. 2025 was a truly transformative year for ESCO Technologies Inc. The successful acquisition of Maritime and the divestiture of VACCO were both pivotal steps in the evolution of our portfolio. We now have an expanded presence in the navy market, offering a broader suite of products across both US and UK platforms. With our exit from the space market, our A&D segment now has a sharper focus on serving the aerospace and navy end markets, both of which present durable long-term growth opportunities. Our exceptional financial results this year are a testament to the dedication and expertise of our global team. I want to extend my sincere thanks to everyone at ESCO Technologies Inc. for their hard work and dedication throughout the year. Their commitment enabled us to deliver outstanding operating performance during a period of significant change. Chris will take us through all of the financial details of the quarter. But before we do that, I want to give you a few comments on each of our segments. Let's start with aerospace and defense. We remain positive regarding the long-term outlook for both the aircraft and navy market. We see fundamental drivers across both of these markets and expect increasing production rates to drive growth going forward. We continue to see positive momentum on the navy side as in addition to contribution from Maritime, organic sales were up 53% in the quarter and 24% year-over-year. Our US and UK customer bases are highly focused on increasing build rates for submarines, and we see the benefits from this in our sales and our order rates. We continue to be very pleased with the Maritime acquisition, which has started off 2026 very well, already booking over $200 million in orders in the first month of the new fiscal year. We've been anticipating these orders, and it's been a really nice way to start off the new year. In aerospace, revenue was up over 10% in the quarter and 14% year-over-year. It's been good to see Boeing successfully ramp up production and to get approval to take 737 build rates up to 42 per month. As we all know, the end market demand is there, and their customers really need more planes. We remain positive on the long-term outlook for the aircraft end markets. Switching over to the utility solutions group, which had a solid quarter highlighted by record orders of over $100 million and a 29% adjusted EBIT margin. Sales growth was a little lower this quarter due to policy headwinds in the renewables market, but Doble's revenue was up over 7% over the prior year. As we have discussed previously, there are many factors driving the increase in electricity demand, and utilities need to both maintain and expand the grid. On the Doble side, revenue will vary from quarter to quarter, but the long-term growth drivers remain firmly in place. The renewables market is recalibrating right now, as developers focus on completing current projects as tax credits sunset under the new legislation. This has slowed growth domestically in the near term, but we continue to believe that longer-term renewables are a cost-competitive source of generation, and we think that long-term, utilities will favor a mix of generation sources and that renewables will continue to have a vital role to play as utilities work to meet increasing demand for electric power. Finally, I'll touch on the test business, which had a really nice fourth quarter with 10% revenue growth and a high teens EBIT margin. For the year, it was great to see a rebound in orders, which were up 25% over the prior year. One of the strengths of our test business is the diversity of the end markets that it serves. And with the exception of wireless, we are now back to seeing strong activity across all of our test and measurement and shielding industrial markets. The key takeaway here is that the test business has stabilized, and we feel good about their trajectory as we move into 2026. In summary, we're excited about the future as we continue to see robust growth drivers across our core aerospace, navy, and electric power markets. Supported by record backlog, a strong balance sheet, and entrenched positions in our served markets, we are well-positioned to deliver continued value for our shareholders. With that, I'll turn it over to Chris, who will run you through all of the financial details for the quarter. Christopher L. Tucker: Thanks, Bryan. Everyone can follow along on the chart presentation. We will start on page three, which shows the financial highlights for the quarter. The bar chart on page three illustrates that this was a strong quarter for ESCO Technologies Inc. You'll see as we go through the results a recurring theme of the 30% on a reported basis, and delivered organic growth of 13%. Sales for the quarter were $353 million, which represented 29% growth, and organic growth came in at 8%. So for orders and sales, you can see it was a great quarter. Moving to profitability, adjusted EBIT improved by 100 basis points to 23.9%, and adjusted earnings per share increased by 30% to $2.32. Next, we will go through the segment highlights, starting with Aerospace and Defense on Chart four. Orders were quite good with growth of 60% on a reported basis and organic growth of 12%. In total, we delivered $142 million of orders, which led to ending backlog of just over $800 million, a good indicator of future growth for the business. Sales for A&D in the quarter came in at just over $170 million, or growth of 72% on a reported basis, and organic growth was 13%. Organic growth was driven by growth in the commercial aerospace and navy end markets. Adjusted EBIT dollars grew by nearly 63% in the quarter, margins came in at 28.6%. Margins were down slightly from last year's record level in Q4, as we saw slight dilution from the Maritime acquisition and core margins down 80 basis points compared to last year's fourth quarter. Moving to the next chart, we have the utility solutions group, which once again saw good order activity and delivered 17% growth compared to last year's fourth quarter. The order growth was driven by Doble, which saw strength across the business. Backlogs for the utility group ended at just over $143 million, which represents growth of 20% compared to prior year end. Sales growth was more muted with 2% growth in the quarter. Once again, the growth came from Doble, which was up 7% while NRG was down 20%. Bryan mentioned this in his comments, but we've continued to see the renewables market scuffle a bit throughout 2025. Margins were very good for the utility business in the quarter with adjusted EBIT dollars increasing 12% and adjusted EBIT margins expanding by 270 basis points to 29.1%. This is a great performance as price increases, favorable mix, and good cost containment all contributed to the margin result. Moving to chart six, we have the test business. Order activity here was solid with growth of 6%. This business ended the year with a $187 million backlog, so it's been a nice year of recovery here and great to see the backlog up nearly 20% compared to September. Sales growth was strong in the quarter with a 10% increase to $72 million. Adjusted EBIT margins came in at 17.5%, a reduction compared to last year's record quarter as unfavorable mix and inflation were more than offset by leverage on the sales growth. Next is chart seven, where we show full year results for continuing operations. The data here is impressive with strong double-digit performance on key metrics, demonstrating the strength of our core portfolio and the clear benefits of the Maritime acquisition. You can see the note at the bottom highlighting that we have achieved record performance in 2025 on all key metrics. Orders finished in excess of $1.5 billion, growth of over 56%. Organic order growth was 11% with double-digit organic order growth from the utility and test businesses. Reported sales increased 19% to nearly $1.1 billion, with A&D and Test both delivering double-digit organic sales growth. On the profitability side, adjusted EBIT margin improvement was significant with 20.3%, representing an increase of 180 basis points. All three businesses delivered increased adjusted EBIT margins in 2025. This led to adjusted earnings per share of $6.30, representing growth of 26%. Next is chart eight with our cash flow highlights. Let's go ahead and break out year-end operating cash flow. Delivering just over $200 million from continuing operations, which compares to nearly $122 million in the prior year. Earnings growth and good working capital performance drove the 2025 increase. The teams across ESCO Technologies Inc. have focused sharply on working capital improvement, and we are starting to see nice benefits from that activity in our operating cash flow results. Capital spending increased to just over $36 million in 2025, as we saw modest increases from all three segments. We finished the year with an EBITDA to net debt ratio of 0.56 times as we saw strong cash generation and also proceeds from the VACCO divestiture facilitate a large debt pay down during the fourth quarter. Our last chart is number nine, which contains our fiscal 2026 guidance. We're expecting to show another strong year financially, with reported sales growth in a range of 16% to 20%. This is comprised of 6% to 8% organic growth from our A&D businesses and Maritime revenue in the range of $230 million to $245 million. For the Utility Group, we expect growth of 4% to 6%, which includes Doble growing in a range of 6% to 8%, partially offset by NRG. For Test, we expect top-line growth to be in the range of 3% to 5%. Additionally, we expect nice improvements from adjusted EBIT and adjusted EBITDA margins to drive overall adjusted earnings per share to a range of $7.50 to $7.80, which would represent growth of 24% to 29%. Bryan Sayler: The bar charts at the bottom here show a real nice trend for ESCO Technologies Inc. on sales and adjusted earnings per share growth. The four-year compound annual sales growth through 2025 is 16%, and the adjusted earnings per share CAGR is 27.5%. The company has delivered very well, and we feel strongly that 2026 will continue these great trends. That completes the financial summary. And now I'll turn it back over to Bryan. Bryan Sayler: Thanks, Chris. So as you've heard from our commentary, FY 2025 was a great year. And ESCO Technologies Inc.'s future remains bright. As we continue to see a path for value creation enhancement as we move forward. With that, we are finished with our prepared remarks. And we'll turn it over to Q&A. Operator: Thank you. Then wait for your name to be announced. To withdraw your question, please press star moment again. Our first question comes from the line of Tommy Moll with Stephens. Your line is open. Zach: Good afternoon. This is Zach on for Tommy, and thank you for taking my questions. Bryan Sayler: Hi, Zach. Zach: Could you please give context on how we should think about growth rates and margin trends at the segment level going forward? Christopher L. Tucker: Yeah. So, you know, if you look at the guide we had in there, I mean, we've got the A&D business on a core basis growing in that 6% to 8% range, and then we've got the maritime addition on top of there. Then we've got what do we have for Doble or six to eight. Six to eight for Doble and then three to five for test. We would expect margin improvement, you know, from all three of the segments next year. So, you know, I would say generally, we see 2026 as kind of on trend with how we've communicated, you know, where the business has been kind of running for the last couple of years. And kind of where we are in the cycle. Zach: Awesome. Thank you. And then can you please give an update on the integration of SMNP? Obviously, there was a delay getting the deal closed. But since the close, are you tracking ahead or behind what you had planned? Bryan Sayler: Yeah. I'd say that, you know, in terms of the cultural integration and financial integration, operations, and all that stuff, I think we're on plan. Maybe it's a little bit ahead of plan. I would say things are going very, very well on that front. In terms of financial results, I would say that the maritime business is ahead of what we originally communicated when the deal was announced. You know, we had some I would say we were prudent and, you know, gave the advertised plan a little bit of a haircut and yeah, as we've gotten through the regulatory approval and into the business, what we found is that they're actually performing at or above their originally advertised plan. It's that's been a very welcome result. Since then, we've had some real positive new order activity in the fourth quarter. And then just, you know, here in the early innings of the '26. So, yeah, we would say that everything's going great here and, probably better than, you know, we had expected. Zach: Good to hear. That's all I had, I'll turn it back. Operator: Thank you. Thanks, Zach. Our next question comes from the line of Jonathan E. Tanwanteng with CJS. Your line is open. CJS your line is open. Jonathan E. Tanwanteng: Hi. Good afternoon. Thank you for taking my questions, and really nice quarter and outlook. Really good job there. Wondering if you could expand on the previous comment. Just, you said something about $200 million in ESCO maritime orders. What programs were those associated with? Number one, how are you number two, thinking about growth going forward for that business that you've acquired? Bryan Sayler: Yeah. So the $200 million, it was more than $200 million, but it came in in the first quarter. So, Jonathan, it's in the UK. And so we're operating under a little bit of a different security scheme there, so we're not gonna be able to give precise details on programs and contacts and things like that. But suffice it to say that these were UK submarine-related programs. Jonathan E. Tanwanteng: Okay. Great. Can you disclose what time frame those are supposed to, revenue over? Christopher L. Tucker: Yeah. Those will run out for over two years, Jonathan. So we'll start to book a little bit of revenue in, let's say, second, third quarter, and then we kind of start to ramp it a little bit in the fourth. And then it would run out through '27 and beyond. So it's, you know, those are long-term, you know, programs. Jonathan E. Tanwanteng: Got it. Thank you very much. And then just on the aerospace side, are you expecting any headwinds from just the canceled flights you've been seeing with the shutdowns and the TSA? And exceeded ATCs? Or is that not really significant for you, number one? And number two, as you look into the room, into '26 that six to 8% growth rate, can you just us maybe what the underlying assumptions are? Especially with the build rates at DOEMs going up as much as I think they they're forecasting. Bryan Sayler: Sure. Sure. So on the shutdown, we really didn't see any impact from the shutdown and certainly not in the aircraft, you know, manufacturing or MRO space. So we are, you know, we are thinking that, we are thinking that, that's gonna move forward without any delay. Overall, I think you asked us about the six to 8% at Doble. And what we're seeing there is that we're seeing continued strong spending from the utilities that are really focused on grid infrastructure. It's less about the AI piece and it's way more about the, you know, reliability and maintaining their existing aging assets. And so that spending is really up. You know, we had a record fourth quarter of orders. And, yeah, here in the early part of the first quarter, it looks like that, you know, that trend is continuing. So we feel pretty good about the Doble business. I think the challenge here is the renewable side of the business is definitely seeing a little bit of a challenge as we move forward. Jonathan E. Tanwanteng: Got it. I think I might have misspoke. I was referring to the six to 8%, in For aircraft? For aircraft. Yes. Bryan Sayler: Yeah. So that wasn't what's happening there is we're seeing really good up growth in the build rates for the various platforms that we're on. And I would say from our perspective, you know, in particular, we're seeing growth on 787, we're seeing growth on 737. Yeah. And then we are seeing, you know, broad-based growth, seeing some military, you know, content that's coming through to our benefit. You know, there's more F-15s. You know, some of the newer sixth-generation platforms. All of that stuff is really working to our benefit in the aircraft business. Jonathan E. Tanwanteng: Okay. Great. Thank you. Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, we have a follow-up question from the line of Jonathan E. Tanwanteng with CJS. Your line is open. Jonathan E. Tanwanteng: Hi. I was just wondering if you could expand on the energy business a little bit. Just do you see an inflection point at some point, or might there be further downside as, you know, companies digest what the new policy is being made? Yeah. Wait it out a little bit. Yeah. Bryan Sayler: Well, I think it's, yes. So our assessment is as follows. I don't think it's a big secret that the, you know, the Inflation Reduction Act in 2022 really kind of turbocharged that entire industry. And so we were seeing, you know, 25-30% growth rates, you know, in 2023, 2024, you know, with the new administration coming in, they've kind of certainly got a different perspective. And then with the one big beautiful bill, the tax credits that were driving a lot of that activity are set to expire, I think, mid-next year. What we're seeing from the developers there is really kind of a focus right now on trying to get everything that they currently have under construction qualified for those tax credits. So, you know, the fundamentals of renewable energy, you know, relative to other forms of energy are still pretty positive from a cost and availability perspective. But right now, the focus is really on those existing programs. So what we think is gonna happen is there's gonna be a downstroke for the industry broadly this year. And that beginning, you know, let's say, call it this time next year, I think we would begin to see a little bit of a turn back to what I would call normal growth. So that'd be high single-digit growth. It's really driven by, you know, the fact that, you know, we just need a lot more generation than people are gonna be able to get built out of natural gas given all the constraints of that industry. And the solar in particular, pretty affordable. I think domestically, terrestrial wind is very challenged in the current environment. But internationally, it's still a pretty thriving business. You know? And, Jonathan, remember, we did not have any exposure in our business to any of the offshore wind stuff or any of the rooftop solar. And that, yeah, that's a lot of carnage in those spaces today. So listen. We think our business right now is very well managed. We've been able to maintain margins. And we believe, even though our top line is down a little bit, we think we're taking market share in a down market. And so we're gonna be well-positioned to kind of take advantage of that normalized growth when it returns in '27. Jonathan E. Tanwanteng: Got it. Thank you. And then last one for me. Just any thoughts on capital allocation from here? Looks like you're generating really solid cash flow. It looks like you'll have the debt from Maritime paid off in about a year. You know, what are your priorities at this point? Bryan Sayler: Yeah. We're, yeah. So listen. We've been successful with the acquisition of divestiture and put ourselves right back in a position where we've got a tremendous balance sheet and, you know, a lot of firepower. So we are very active in the M&A space. I don't have anything to announce, but I would say that the M&A market has significantly improved in the last half of the year. There's definitely a lot of very attractive assets that either are coming to market or are rumored to be coming to market here in the early next year. So we're looking at those things carefully. Now I want to be clear that we're gonna continue to be pretty disciplined about this stuff. We really are most interested in businesses that would fit squarely into our aerospace, our navy, or our utility end markets. And the reason for that is because we assess that those markets have, first of all, we understand them, but second of all, you know, we assess that those markets have very durable, long-term secular growth characteristics that provide us a really good opportunity to really grow a business like that added to our portfolio. So that's kind of our focus. We, you know, we've got the balance sheet to go do it, and we're starting to build that pipeline up again. Jonathan E. Tanwanteng: Okay. Great. Thank you again. Operator: Thank you, Jonathan. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Bryan for closing remarks. Bryan Sayler: Well, thanks, everyone. Yeah. Again, a really tremendous year. Transformational. Yeah. One more shout out to all the employees of ESCO Technologies Inc. who really have made this possible. It's been a lot of work. But, you know, our team is good at their jobs. And we've been very, very successful. And will continue to be in the years to come. So thanks a lot. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, ladies and gentlemen. Welcome to the Natural Grocers Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Ms. Jessica Thiessen, Vice President, Treasurer for Natural Grocers. Miss Thiessen, you may begin. Jessica Thiessen: Good afternoon, and thank you for joining us for the Natural Grocers by Vitamin Cottage Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. On the call with me today are Kemper Isely, Co-President, and Richard Helle, Chief Financial Officer. As a reminder, certain information provided during this conference call, including the company's outlook for fiscal 2026, contains forward-looking statements based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks and uncertainties detailed in the company's most recently filed forms 10-Q and 10-Ks. The company undertakes no obligation to update forward-looking statements. Our remarks today include references to adjusted EBITDA, which is a non-GAAP measure. Please see our earnings release for a reconciliation of adjusted EBITDA to net income. Today's earnings release is available on the company's website and a recording of this call will be available on the website at investors.naturalgrocers.com. Now I will turn the call over to Kemper. Thank you, Jessica. Kemper Isely: And good afternoon, everyone. We are pleased with our fourth quarter performance with sales in line with guidance and diluted earnings per share above guidance. On today's call, I will highlight our financial results, including performance drivers, and provide an update on our key operational initiatives. Then Rich will discuss our fourth quarter results in greater detail and review our fiscal year 2026 outlook. Our fourth quarter sales were in line with guidance. Daily average comparable store sales increased 4.2% and on a two-year basis increased 11.3%. The moderation in fourth quarter sales comps compared to the third quarter was driven by several factors. We cycled 7% comps in each of the fourth quarters of the previous two fiscal years. As previously disclosed, UNFI's June 2025 cybersecurity incident constrained UNFI's ability to fulfill orders and distribute products to our stores and had a direct impact on our sales in June and July. Additionally, uncertainty in the economic environment has persisted and we saw consumer behavior shift toward more cautious retail spending in the fourth quarter. Over the past several years, we have focused on operational execution, including refining targeted promotions and store productivity initiatives. That ongoing effort combined with expense leverage from higher sales resulted in an operating margin improvement of 90 basis points for the fourth quarter, driving our fiscal year 2025 diluted earnings per share to a record $2 per share. We are proud that fiscal 2025 represented another year of record sales and earnings. Additionally, fiscal 2025 was our twenty-second consecutive year of positive comparable store sales growth. Consumers continued to be drawn to our differentiated offering of high-quality natural and organic products, reflecting their prioritization of health and wellness, including food and nutrition. We believe that consumers' prioritization of health and wellness will prove to be resilient. While we are seeing some macro pressures affecting the broader retail landscape, we believe that our commitment to always affordable prices provides compelling value for our customers, strengthening our competitive position during periods of economic uncertainty. Next, I will share an update on our key priorities that have fueled recent growth and are expected to drive our long-term success. We continue to enhance the personalization and interactivity of our nPower Rewards program offerings. During the fourth quarter, nPower net sales penetration held strong at 82%. The maturity and high penetration of our nPower Rewards program enables efficient and relevant customer engagement, including communicating our differentiation to new members, personalizing offers to tenured members, or presenting offers to customers who haven't engaged with us recently. Our Natural Grocers branded products continue to experience elevated growth. In the fourth quarter, our house branded products accounted for 8.8% of total sales, up from 8.4% a year ago. During fiscal 2025, we extended our natural brand offerings with the launch of 119 new items, all of which exhibit premium quality at compelling prices. Accelerating new store growth is another core element of our strategy. In fiscal 2025, we opened two new stores, relocated two stores, and remodeled one store. Today, we are reiterating our plan of opening six to eight new stores in fiscal 2026, underscoring the quality of our pipeline and execution capabilities. We are committed to 4% to 5% annual new store unit growth for the foreseeable future. We also remain committed to enhancing value for our stockholders by maintaining a balanced approach to capital allocation. In addition to investing in our business to drive faster unit growth, we are proud to announce that we are increasing the quarterly cash dividend by 25% to $0.15 per common share, reflecting our strong fiscal 2025 operating performance and financial position, as well as confidence in our ability to create long-term stockholder value. In closing, I would like to thank our Good4U crew. Their commitment to operational excellence and exceptional customer service was instrumental in driving our strong results. We are fortunate to have a crew who share an affinity for our founding principles and are dedicated to ensuring that our stores, operations, and supply chain reflect these values. Now I will turn our call over to Rich to discuss our financial results in greater detail and fiscal 2026 guidance. Richard Helle: Thank you, Kemper, and good afternoon. We are pleased with our fourth quarter results. Sales were in line with expectations, and diluted earnings per share exceeded our outlook. Net sales increased 4.2% from the prior year period to $336.1 million. Daily average comparable store sales increased 4.2% and on a two-year basis increased 11.3%. Comps were at the lower end of our guidance range, which we believe primarily reflects the shift in consumer retail spending. Our daily average comparable transaction count increased 2.4%, and our daily average comparable transaction size increased 1.8%, primarily due to annualized product inflation of approximately 2%. Items per basket were relatively flat year over year. In consideration of the broader macro environment, we continue to monitor consumer trends closely. We continued to see the greatest sales growth in our most differentiated offerings, including meat and dairy. These are often considered premium offerings because our product standards include humanely and sustainably sourced meat, pasture-raised and non-confinement dairy, and a minimum standard of free-range eggs. We saw a modest decline in the number of transactions using SNAP EBT in the fourth quarter. SNAP represents approximately 2% of net sales, and the reduction in SNAP transactions was immaterial to our overall sales comp for the quarter. Gross margin decreased 10 basis points to 29.5%, driven by lower product margin. Store expenses as a percentage of net sales decreased 90 basis points, primarily driven by lower long-lived asset impairment charges and expense leverage. These culminated in a net income increase of 31% to $11.8 million and diluted earnings per share of $0.51. Adjusted EBITDA increased 7.7% to $24.4 million. Briefly touching on the full year results, in fiscal 2025, total revenue increased 7.2% to $1.33 billion. Our daily average comparable store sales growth was 7.3%, and 14.3% on a two-year basis. Gross margin improved 50 basis points compared to the prior year, driven by higher product margin primarily attributed to effective promotions and store occupancy cost leverage. Store expenses as a percentage of sales were 50 basis points lower than the prior year, driven by expense leverage and lower long-lived asset impairment charges. For fiscal 2025, diluted earnings per share increased 36.1% to $2 compared to $1.47 in fiscal 2024, and adjusted EBITDA increased 17.5% to $97.9 million. Turning to the balance sheet and cash flow, we ended the fourth quarter in a strong liquidity position, including $17.1 million in cash and cash equivalents, no outstanding borrowings, and $70.1 million available for borrowing on our revolving credit facility. During fiscal 2025, we generated cash from operations of $55.3 million and invested $31 million in net capital expenditures, primarily for new and relocated stores, resulting in free cash flow of $24.3 million. Now I'd like to review the company's outlook, which reflects both the opportunities we see in our differentiated market position and appropriate caution given the current consumer environment. We believe our value proposition will continue to be compelling during periods of economic uncertainty. For fiscal year 2026, we expect to open six to eight new stores, relocate or remodel two to three existing stores, achieve daily average comparable store sales growth between 1.5% and 4%, and achieve diluted earnings per share between $2 and $2.15. We plan to direct $50 million to $55 million towards capital expenditures to support our growth initiatives. In addition, our outlook includes the benefits of our new store growth, targeted marketing focused on our value proposition and differentiation, and initiatives focused on driving higher productivity across our operations. The pace of new store openings will be weighted towards the back half of the fiscal year. Our current expectation is that sales comps will be at the low end of our outlook range in the first half of the year as we cycle relatively strong comps in the prior year, while increasing slightly in the second half of the year as we cycle lower comps. Additionally, the comp range reflects the uncertainty in the consumer environment. Kemper Isely: We expect modest inflation throughout the year in line with current trends. Richard Helle: Our outlook anticipates that year-over-year gross margin will be relatively flat, primarily depending on the level of promotional activity. We expect that year-over-year store expenses as a percentage of net sales will be relatively flat to slightly lower. Lastly, we are investing approximately $0.12 of diluted earnings per share in new store openings, primarily through higher preopening expenses and store expenses. Kemper Isely: We continue to believe that we have significant opportunity to achieve sustainable long-term growth due to our alignment with consumer trends, strong customer engagement through our nPower Rewards program, expansion of the Natural Grocers branded products, existing store productivity initiatives, and investment in new store unit growth. In closing, we had a solid quarter to conclude a record-setting fiscal year. We are confident in our ability to continue to drive profitable long-term growth and enhance value for all stakeholders. Now we'd like to open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Chuck Cerankosky with Northcoast Research. Please go ahead. Chuck Cerankosky: Good afternoon, everyone. Nice quarter. Kemper Isely: Thanks, Chuck. Chuck Cerankosky: Given the increased price sensitivity right now in the consumer environment, and the company's 8.8% own brands penetration, is this a good time to get that number higher and to make customers more aware of the value in the Natural Grocers brands? Kemper Isely: Yeah. I think that would be true. I mean, we definitely are marketing our own brand extensively right now, and we have some really compelling prices on items that we are promoting aggressively, and we do not have to discount those prices because they're already substantially better priced than our competitors. Chuck Cerankosky: Do you have any particular goals for the penetration over the next couple of years, like maybe 10%? Kemper Isely: Our goal is to increase the penetration by one full percentage point per year, so we're at 8.8%. So two years from now, we should be at 10.8% or even 11%. Scott Mushkin: The next question is from Scott Mushkin with R5 Capital. Please go ahead. Scott Mushkin: Hey guys, thanks for taking my questions. So one of the things we hear from investors about is kind of generally the space of natural organic is that it's not the macro. That it's similar to what we saw last decade that's, you know, kind of traditional supermarkets and others in the marketplace kinda caught up given what they saw with how strong your sales and others have been. And are offering a lot of the same products at lower prices. What do you think about that thought process? Kemper Isely: I think that that's been going on since 1978. And we've done a really good job of differentiating from those from the other supermarkets. And having an authentic story and an authentic brand that resonates with consumers. And it's helped us to build our business to over a billion-dollar business. The conventional supermarkets and Costco and Walmart, they only sell the product because it sells. It isn't because of the story of the product. We sell the product because it is what we are. And so, it makes a huge difference to our customers and keeps our customers incredibly loyal. And it also helps us to keep on growing and expanding our customer base. And companies like Whole Foods are kind of losing track of that by becoming, as they said, the Amazon-ination, whatever it was, the Wall Street Journal article was the other day. And then the Forbes article that followed up on it. And so that's making our brand all the stronger. And then you have the wannabes like Sprouts who doesn't really, I mean, they sell stuff because they it sells, but they don't really have the standards that we do or the ethics that we do about the products that we sell. Scott Mushkin: Then, Kemper, what specifically or Richard, what specifically in the business do you see that would kinda make you gravitate towards, hey. It's things are become much more challenging in the economy. And that's the root of you know, some of the more cautious comments. Kemper Isely: Well, the people that are on the periphery of shopping in our stores that aren't our most loyal customers have definitely pulled back and gone I don't I don't know where they're shopping, but they've pulled back. And so that's that's that's made it so that we're just a little more cautious about our growth. But I think that some of our new marketing initiatives will start to gain traction in not this quarter, but next quarter, and we should see an uptick again in our growth. Scott Mushkin: I mean, because of that. Doubt, Scott, that the economy is playing a factor today. I mean, we have massive economic uncertainty. Consumer sentiment is at historic lows. We've seen announcement of significant job layoffs. Had the government shutdown, the loss of government benefits. Richard Helle: Tariffs, you know, and their impact to inflation. I mean, a majority of Americans are expecting that tariffs will result in higher prices. Scott Mushkin: You've had a pretty large. Richard Helle: Well, they are resulting in higher prices. And they are. But there's an expectation of future higher prices from tariffs. All of it is kind of, you know, is creating this uncertainty. There's definitely, as you've heard, you know, across all retail, a pullback by lower and middle-income consumers. Kemper Isely: You know, and a bifurcation in the consumer segment where higher households are continuing to spend. But, you know, as we even heard this morning from Walmart, everybody is looking for value. And so we are going to lean into our differentiation. Richard Helle: Everybody's looking for value, part of our founding principles always affordable prices. And we're gonna continue to lean hard into that. And as Kemper said, you know, we're also very highly differentiated in terms of the quality of our shopping experience. We provide access to nutrition education. Kemper Isely: And we have high product standards that you can trust. So we're gonna continue to lean into those things. Our core customer base is resilient. Our core customer base is growing at a healthy rate. Scott Mushkin: So we have a lot of confidence that, you know, there is a lot of economic concern. That is certainly a driver. Kemper Isely: The natural and organic segment, yes, is pulling back, but so is the entire, I think, segment overall. And we still believe in the health and wellness trends. I mean, you look at GLP-1 penetration rates, they've doubled over the last year. Richard Helle: Significant interest in continuing for many more Americans to try those drugs. We understand that those individuals are looking for more nutritious options post that. And so we you know, it's not linear. Right? I mean, as Kemper said, natural and organic has been going through multiple cycles over the last four, five decades, and we'll continue to do that. But we believe the trends, the long-term trends that they will continue to have, you know, 4% to 6% industry growth. It's just not going to be a straight line. Scott Mushkin: Thanks for that color. And then I actually had just one more, and I apologize because my model's not front of me. So I probably should know this answer off top of my head. But are you guys thinking free cash flow next year will be positive, flat, and what's your thought process around 2026 free cash flow? Richard Helle: Yeah. Free cash flow will be positive next year. Yeah. That's that's our expectation. Yes. We are investing more in CapEx. Right? We are talking about increasing store openings, continuing to do relocations and remodels. We are looking at we're guiding $50 to $55 million in CapEx to support those initiatives. We're excited about the real estate pipeline that we have. Kemper Isely: And about the growth prospects, you know. And we've we've really refined our site selection process and are excited about the communities that we're going in and the positive impact that those communities will have to the overall business. Richard Helle: And then also we're strategically buying some of our buildings. So just to add a little bit more color to the CapEx. Scott Mushkin: Yeah. Alright. Well, guys, I appreciate it. And for the record, I kind of I definitely agree with you guys on the economy. I think it's a little bit tough sliding out there right now. But thanks for thanks for all the color. Kemper Isely: Sure. Thanks, Scott. Operator: Again, if you have a question, please press 1. Operator: Showing no further questions. This concludes our question and answer session. I would like to turn the conference back over to Kemper Isely for any closing remarks. Kemper Isely: Thank you for joining us to discuss our fourth quarter results. We take great pride in our sales and profitability growth in fiscal year 2025 and in recent years. We are committed to maximizing value for our stockholders as we look forward to fiscal year 2026. We expect to build upon our momentum by executing to our founding principles, including highlighting our always affordable pricing strategy and differentiated product offering, emphasizing operational excellence, and delivering on our new store unit growth plans. Thank you. And have a great day. Bye now. Operator: The conference call has now concluded. Thank you for attending the Natural Grocers Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. You may now disconnect.
Operator: Good afternoon, and welcome to the Ross Stores, Inc. third quarter 2025 Earnings Release Conference Call. The call will begin with prepared comments by management followed by a question and answer session. Before we get started, on behalf of Ross Stores, Inc., I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results including sales and earnings forecasts, new store openings, and other matters are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2024 Form 10-Ks and fiscal 2025 Form 10-Qs and 8-Ks on file with the SEC. And now I'd like to turn the call over to Jim Conroy, Chief Executive Officer. Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer, Bill Sheehan, Executive Vice President and Chief Financial Officer, and Connie Kao, Senior Vice President, Investor Relations. Jim Conroy: As noted in today's press release, we are very pleased with our third quarter sales results, which accelerated from the prior quarter. Total sales for the period grew 10% to $5.6 billion with comparable store sales increasing a strong 7%. Our merchants delivered a compelling assortment of brand name values which led to broad-based growth across all major merchandise categories. Those assortments, coupled with our new marketing campaigns, drove excitement, higher customer engagement, and increased store traffic. We had an excellent back-to-school selling season, strong trends that continued through the balance of the quarter. Additionally, the stores and supply chain organizations executed extremely well to support the elevated sales and inventory flow. The strength in top line, coupled with our continued focus on expense control, resulted in an operating margin of 11.6% that was much stronger than expected. Earnings per share for the thirteen weeks ended November 1, 2025, were $1.58 on net income of $512 million. Included in this year's third quarter earnings is an approximate $0.05 per share negative impact from tariff-related costs. These results compared to $1.48 per share on net earnings of $489 million in the prior year period. For the first nine months, earnings per share were $4.61 on net earnings of $1.5 billion compared to $4.53 per share on net income of $1.5 billion for the same period last year. Included in year-to-date 2025 earnings is an approximate $0.16 per share negative impact from tariff-related costs. Sales for the year-to-date period grew to $16.1 billion with comparable store sales up 3% over last year. For the third quarter at Ross Stores, Inc., cosmetics, shoes, and ladies were the strongest merchandise areas. By geography, we saw broad-based strength with the Southeast and the Midwest performing the best. BD's discounts, strong value, and fashion offerings continue to resonate with shoppers, and delivered comp gains relatively similar to Ross Stores, Inc. for the period. At quarter end, total consolidated inventories were up 9% versus last year, and average store inventories were up 15% as we advanced the inventory build for the holiday season into October. Packaway merchandise represented 36% of total inventories, compared to 38% last year. We feel very good about the health and levels of our inventory, and are well positioned to deliver a broad assortment of values this holiday selling season. During the third quarter, we opened 36 new Ross Stores, Inc. and four DD's discount stores. Similar to our summer opening group, we are pleased with the performance of our fall openings, particularly the results in the new markets, including the New York Metro Area. The openings in the third quarter completed our expansion program for 2025. For the year, we added a total of 90 locations, comprised of 80 Ross Stores, Inc. and 10 DD's. We plan to close and/or relocate 10 locations in the fourth quarter and expect to end the year with 1,903 Ross Stores, Inc. and 360 DD's locations. At this point, I would like to provide an update on our branded strategy which has now been fully embedded in our merchandising approach for more than a year. Over this period of time, the merchants have been laser-focused on delivering high-quality, branded bargains at compelling values. They've been able to deliver an assortment that spans good, better, and best brands to ensure that we are providing exceptional values to our diverse customer base. We would attribute a portion of the sequential improvement in the business to the successful implementation of the branded strategy. This strategy has particularly helped the ladies' business, which further accelerated this quarter and comped above the chain average. Additionally, the increased emphasis on brands has further strengthened our vendor partnerships and increased closeout opportunities. These efforts not only drove higher sales, but also helped us partially offset tariff impacts resulting in better-than-expected merchandise margins for the third quarter. While tariff uncertainties persist, we are encouraged by the exceptional product availability in the marketplace. This has enabled us to secure opportunistic buys that position us favorably for the holiday season. As a result, we now expect tariff-related costs in the fourth quarter to be negligible. From a pricing perspective, it is clear the consumer is prioritizing value and our updated assortment is driving stronger customer engagement. While pricing has increased across the retail environment, our commitment to delivering value remains unchanged. We will continue to maintain a strong value proposition relative to traditional retailers, while working to mitigate the impact on our merchandise margin. Bill will now provide further details on our third quarter results and fourth quarter guidance. Bill Sheehan: Thank you, Jim. As previously stated, comparable store sales rose 7% in the quarter. The gain was a result of both higher transaction and a larger average basket size. Operating margin decreased by 35 basis points to 11.6% mainly due to the impact of tariffs. Cost of goods sold increased by 35 basis points in the quarter. Distribution costs were higher by 60 basis points primarily due to the opening of a new distribution center earlier this year and tariff-related processing costs. Merchandise margin deleveraged by 10 basis points while buying expenses were flat compared to the prior year. Partially offsetting the higher costs in the quarter, were lower domestic freight and occupancy costs of 25 and 10 basis points, respectively. SG&A costs were flat year over year despite the headwinds from CEO transition costs. During the quarter, we repurchased 1.7 million shares of common stock for an aggregate cost of $262 million. We remain on track to buy back a total of $1.05 billion in shares this year. Now let's discuss our fourth quarter guidance. We're encouraged by our business momentum as we enter the critical holiday season. As a result, for the thirteen weeks ending January 31, 2026, we are raising our comparable store sales forecast to be up 3% to 4% with earnings per share in the range of $1.77 to $1.85. This updated guidance range reflects approximately $0.03 earnings per share of unfavorable timing of Packaway-related expenses that benefited the third quarter. Based on our year-to-date results, and updated fourth quarter forecast, we are increasing our earnings per share guidance for fiscal 2025 to be in the range of $6.38 to $6.46. As for tariffs, we now forecast the fourth quarter impact to be negligible, leading to a full-year cost of approximately $0.15 per share. These estimates are based on the current level of tariffs. In addition, and as a reminder, 2024 fourth quarter and full-year earnings per share of $1.79 and $6.32 respectively, include the benefit of approximately $0.14 in earnings per share related to the sale of a Packaway facility. Operating statement assumptions that support our fourth quarter guidance include the following. Total sales are projected to increase 6% to 8%. We expect operating margin to be in the range of 11.5% to 11.8% compared to 12.4% last year. Year-over-year change primarily reflects last year's benefit from the sale of a Packaway facility that was worth about 105 basis points. Net interest income is estimated to be about $30 million. Our tax rate is expected to be approximately 24% and weighted average diluted shares outstanding are projected to be about 322 million. Now I'll turn the call back to Jim for closing comments. Jim Conroy: Thank you, Bill. To sum up, we are pleased with our third quarter results and encouraged by our sales momentum. With a strong merchandising plan and a terrific product assortment, we are optimistic about our prospects for the fourth quarter. Additionally, the store and supply chain teams are well-positioned for the holiday season and our marketing campaigns have continued to build excitement. We believe that this multifaceted approach will help us continue our positive momentum and enable us to capture additional market share. Finally, I would like to thank the entire organization for their hard work and solid execution, which enabled us to deliver a strong third quarter performance. Despite the ongoing challenges and uncertainty in the macro environment, we remain focused on our core strategies, and executed well as a cohesive team across the entire company. At this point, we would like to open the call and respond to any questions you might have. Operator: John? Thank you. We will now be conducting a question and answer session. You may press 2 to remove yourself from the queue. We ask that you please limit yourself to one question and one follow-up. Thank you. One moment, please, while we poll for questions. And the first question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question. Thanks, and congrats on a really great print. Jim Conroy: Thank you, Matt. Matthew Boss: So, Jim, could you help break down the inflection in same-store sales? Or the 500 basis points sequential acceleration that you saw? How much would you attribute to company-specific initiatives as we think about marketing or the early stages of store experience? Relative to the macro backdrop? And could you just elaborate on the strong momentum that you cited in November that supported the fourth quarter raise? Jim Conroy: Sure. It was a really nice sequential improvement. And I think in the prepared remarks, we used the word broad-based. So the merchandise categories, every single merchandise category in the third quarter, every single major merchandise category anyway, was positive or nicely positive. We had some businesses in the second quarter that were somewhat under, and they've really caught up. We've seen some really great improvement in most categories across the business. We also had broad-based strength across the country in terms of our geographic regions, including regions that you would otherwise think would be under pressure. So broad-based strength across the business. How much of it is internal versus external, it's hard to say. We acknowledge that there probably has been some tailwinds out there. Some people are calling out that weather may have been a help. Last year we called out that weather was a hindrance to our business a little bit. But in terms of headwinds, there's a whole bunch of other macro uncertainties that have probably left consumers a little bit uneasy in their shopping. So I give a lot of credit to the team. The product team leads the charge. The assortments look fantastic. They've navigated through tariffs very strategically, have maneuvered AURs. The marketing team has done a very nice job. Stores team has stepped up, really, the whole company. So I'm sure there might be something in the macro backdrop that's a tailwind to us, but I also give some credit to the team for just executing extremely well. Operator: And the next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Corey Tarlowe: Great. Thanks, and good afternoon, and congrats on the strong results. Jim, I just wanted to hone in on this element of change. And you've come into the business and we were comping flat to start the year. And we've really substantially accelerated. And I wanted to get a flavor for what in your view are the major drivers of this improvement in the momentum? And then what do you think is perhaps the stickiest of all of these changes that is going to propel the business on a multiyear trajectory for continued growth and improvement in outperformance? Jim Conroy: Sure. Happy to have a shot at that. First, I'd start with I absolutely inherited a strong company that was being managed extremely well. So, you know, the company has been growing for years before I showed up. The first quarter was a bit of an anomaly. Right? We had a lot of macro headwinds that pushed the business to a flat after a challenging January and a very challenging February, which we called out last year. In terms of some of the things that have changed, it's not very different than my remarks on some of the first couple of investor calls. The merchandising team is extremely strong, and some of the best merchants in the world work for Ross Stores, Inc. And that strength continues to propel the business forward. If I added anything to the business, it's to sort of raise or amplify the voices of the marketing group and the stores team. So we can drive more traffic from a marketing standpoint. And when they get to the stores, they can enjoy a slightly better, or hopefully much better in-store shopping environment. And the overarching strategy is quite simple, which is just to get merchandising, marketing, and stores, perhaps add supply chain to that mix, operating in unison. So we're all kind of pushing the business forward for more growth. Corey Tarlowe: Understood. And then just as a follow-up, the new marketing campaigns have clearly resonated. What is it in your view that you think has materially helped to accelerate the amplification of all of these improvements that you've made in the business, particularly from a branded perspective that's really working from a marketing standpoint? And that's helping amplify the message even more and resonate with consumers. Jim Conroy: Sure. Sure. And coming in as an outsider, there's some disadvantages. I wasn't an off-price person, and I'm not a true merchant. But perhaps if there was one advantage, it was a set of fresh eyes. So from a marketing standpoint, we absolutely want to remain rooted in great branded values. But the challenge that I gave to the marketing team and the new agency was how do we create cut-through with a refreshed marketing message. So we've really contemporized how we go to market in terms of a creative standpoint. We've tweaked the merchandise mix a bit. Notably, we have an increased marketing expense, at least as a percentage of sales. But I think sort of this refreshed view of how you can look at the store and reach out to customers in a slightly different way and perhaps reach out to younger customers in a more aggressive way. It seems to be taking root. We are encouraged by it. We're excited by it. We've seen some hard metrics improve, and we've seen some qualitative factors improve nicely. And I certainly don't want to dampen anybody's enthusiasm because it's fantastic to see. But let's just remember that it's only been a few months now. Right? We've got a very busy holiday season to get through. And then, you know, we'll see what becomes sticky in your mind. Coming back to that part of your question, I think probably the stickiest thing ultimately will be the power of the Ross Stores, Inc. brand and just what that means for customers and the promise that it delivers to shoppers. And it's had a great legacy up to this point. And if I had any impact on it, it's, you know, how can we modernize it slightly so we continue to resonate with all customers, particularly younger customers. Corey Tarlowe: It's great color. Thank you so much, and best of luck. Jim Conroy: Thank you. Operator: And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Mark Altschwager: You're expecting tariff costs now to be negligible in Q4, which is great to hear. I was hoping you could update us on the mitigation efforts, you know, what's working, what's giving you the comfort with your ability to fully offset. And, you know, with that, hoping you could just speak specifically to the AUR trend you're seeing and also how we should interpret that Q4 guide as we think about the wraparound effects of tariffs for early 2026? Michael Hartshorn: Hi, Mark. It's Michael Hartshorn. Similar to what happened in the second quarter, as you saw in our commentary, the tariff-related costs came in lower than we expected. And our merchant teams have done a tremendous job balancing cost concessions with modest market-driven price increases where we can maintain our value gap against other retailers. In addition, they were able to take advantage, given the closeout availability, take advantage of closeouts in the marketplace, and chase above-plan sales. As we expected, as we imagined the year when we had lead time from the initial tariff announcements and had open to buy to fill. Our merchant teams have been able to mitigate the impact of tariffs as we progress through the year. In addition, with some tariff stability, we've been able to normalize ticketing activities in our distribution centers. For going forward, it's too early to speak to 2026, but barring any meaningful changes in the tariff policy, we would expect pricing stability which would eliminate the need for our merchants to make pricing decisions against a moving target. Mark Altschwager: Thank you. And then a quick follow-up on the comp acceleration. I believe you said consistency or you said strength across regions, but I'm wondering if there's any call out by demographic or income cohort. Michael Hartshorn: Sure. And just to follow-up on your AUR. So the comp components for the quarter, traffic, UPT, and AUR all increased in transactions where the biggest of those. In terms of demographic performance, we called out in previous quarters our Hispanic stores during the quarter. At both Ross Stores, Inc. and DD's, stores that have what I'd say is high trade area Hispanic population saw an improvement that was similar to the chain from quarter to quarter and ended up posting solid comps despite trailing the chain slightly. Other call outs, did mention in the call Southeast and Midwest were above our top performing market. In terms of bigger markets, California, Florida, and Texas were all relatively in line with the chain. Mark Altschwager: Thank you. Sure. Operator: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Chuck Grom: Hey. Thanks. Good afternoon. Thanks. On the marketing change, can we double click on that a little bit and do you think you're driving new or lapsed customers think you're increasing engagement with existing customers? Where do you still see opportunity on that front? Jim Conroy: It's hard to tease out the components of the traffic. Do believe we're gaining some new customers. And reengaging with last customers. If you go through the analytics provided by Meta Platform and you go through TikTok, you we I think it's safe to say we have improved our engagement. In terms of where we are in terms of our evolution from a marketing and branding standpoint, it very, very early. Right? We we we hired an agency in the beginning of the year. Their first output was in the July time frame. We just released a couple of new spots for holiday that then translate across all the digital platforms as well. So very early innings. And Deepa and the marketing team have done an unbelievable job. But there's there's just even more in front of us, I think, for us to continue to learn and and react to that and, you know, continue to deliver some great messaging. Chuck Grom: That's great. And and just as a follow-up, you you noted that as a percentage of sales, you didn't increase, the spend. But it's well known that that you spend far less in dollars and as a percentage of sales relative to your largest peer. When you look ahead, do you think you need to grow that, or do you think you would continue to just reinvest and redeploy those dollars? Jim Conroy: It's a good question. Right now, we're gonna maintain our percent of sales where it is. You know, we have a financial and operating model that I wanna kinda work within. Clearly if we can spur on more business and and drive more customers and drive more sales, even at the same rate, we'll get them our marketing dollars. So it's it's too early to say we're we'll invest anymore in it and right now, the the the amount we're spending seems to be paying dividends. So stay tuned for that. But right there's there's no immediate plans for an increased spend there. Chuck Grom: Got it. Thank you. Thank you. Operator: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Lorraine Hutchinson: Jim, you called out the branded strategy as a key driver of the comp acceleration. Can you talk about how this benefit has built over time and how much more opportunity you see going forward? Jim Conroy: Sure. Absolutely. And if you wanna go through the timeline, in the fourth quarter, last year, we had a decent quarter. We called out it it the the branded strategy touches everything, but it's probably most impactful to ladies. So if we just look at the ladies business and how it's sequentially changed over the last few quarters. Last year fourth quarter was pretty strong, but ladies was a drag on the comp. Then in Q1 and in Q2, the ladies business was slightly better, but still flattish. In Q2, it started to show some improvement. And a slight drag on the comp in Q1. With kind of in line with the company, maybe slightly comp enhancing. And in this most recent quarter, the entire business got better, substantially better. And the ladies business was actually comp enhancing. So if we posted a plus seven, you can intuit that the ladies business better than a plus seven. Lorraine Hutchinson: And how much more opportunity do you see in the How much more opportunity going forward do you see in the this lady's business from the branded strategy? Jim Conroy: I a fair amount, I think. I mean, we we as you know, we've been investing in that over four or five quarters. It had a drag on our merchandise margin that we thought would be an investment in the business. And that investment seems to be paying off now. I think, you know, what with one very solid quarter under our belt, I'd like to think that, you know, for the next three quarters until we at least anniversary that, we'll we'll see some outsized growth. And then, of course, the you know, that that team has has really started to build excitement. Some great leadership there. And I think after even after we anniversary this quarter, I think they'll they'll find some opportunities for for more comp improvement. There's not a lack of ideas innovation in that part of the business. Lorraine Hutchinson: Thank you. Operator: And the next question comes from the line of Paul Lejuez with Citibank. Please proceed with your question. Paul Lejuez: Hey, thanks. Jim, sorry if I missed a bit. Did you say anything about the monthly cadence? Curious if you could share anything on that front. Home versus apparel, and specifically, not just performance, home versus apparel, but AURs. In each of those categories? And then is there any quantification of how your customer base has changed? Like, within that ladies business, you know, can you can you isolate that you are getting a customer of a certain age that you did not previously have. Is there any quantification to that? Michael Hartshorn: I'll just start on a couple of those, Paul. During the quarter, we had a very strong back to school and held the trend, throughout the quarter. So throughout the the trends were fairly consistent, and that was true for both Ross Stores, Inc. and, DD's. On the AUR, I said in a previous commentary that was driven by traffic increases in traffic UPT and AUR with with the traffic or transactions for us. The biggest of those traffic and the basket were very similar. In terms of overall category performance, we mentioned children's and men's were relatively in line with the chain. Cosmetics, shoes, and ladies were best performers. Home was slightly below the chain average. If you you also ask about shifts in in business. You know, the things we measure against, usually you see bigger trends over time. We certainly talked about demographics and Hispanic customer. In terms of household income, the not only was the the sales very broad based across geographies and merchandise categories, they're also very broad based, across trade area income levels. And we did not see any significant shifts there. Paul Lejuez: Thank you. Good luck. Thank you. Operator: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question. Alexandra Straton: Congrats on a great quarter. Just on maybe for you, Jim, on the upgrading the store experience. I think you highlighted that as an opportunity when you first started. Did any changes there play a role in the comp acceleration? Maybe how do you gauge effectiveness of those strategies? And what are your priorities on that front as you think about 4Q and into next year? Michael Hartshorn: I can take that. We're addressing the store experience on a couple different factors. First, we have begun refreshing, we expect to refresh all stores in the chain. Which we believe will provide a more modern look and feel the customer. This includes new parameter signing, wayfinding signage along with addressing cosmetic type repairs. We're halfway through the chain there, and though it's very, very early, the customer feedback has been good. The other focus areas within the store is you can imagine improving line lengths and throughput through the front end of the store and also improving our recovery throughout the day. And we're finding places to get efficiencies within the store and then reinvest it in those focus areas. In terms of immediate impact in quarter, I think it's very, very early days and if anything, we'd expect to build momentum over time. Alexandra Straton: Great. Thank you. Good luck. Sure. Thank you. Operator: And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Brooke Roach: Good afternoon, and thank you for taking our question. Jim, I wanted to get your thoughts on Ross Stores, Inc.'s approach to value gaps into holiday and 2026 as market prices move up. How much of the AUR growth in the third quarter was driven by price actions versus mix? And are there any categories where you've taken action on pricing where you're starting to see any signs of consumer elasticity? Jim Conroy: Sure. Happy to take it. In terms of the first part of your question, our strategy is, I think, a pretty typical off-price strategy of keeping an umbrella under traditional retailers in terms of pricing. We tend to be very intensely focused on the values that we provide which is one of the reasons why we were a little bit slower to make any changes to AUR because we really wanted to underscore what the customer that we were going to be delivering values including during a tariff environment. And holding true to that, and we've called out tariff impacts over the last couple of quarters, although they're going away for the fourth quarter, but holding true to that sort of promise perhaps has helped us pull in some new customers or bring back lapsed customers. So we're excited about that. I think Michael talked about in terms of transactions, AUR and UPT transactions was still the biggest driver of the comp. As we look at the fourth quarter, we've been pretty much bought up for the fourth quarter for a while. So wouldn't expect any significant changes in our strategy from a pricing standpoint for fourth quarter. I think it was encouraging that we were able to have a modest increase in our AUR. And not see degradation in units per transaction. That was up a little bit. And also continue to see transactions. But hopefully, that answers the question. I mean, it's been a very difficult thing to navigate for the last several months looking at the changing in tariffs and the changes in the retail environment and trying to find exactly the right set of prices for every single category. Have we made mistakes within that? Probably. And, you know, it's what ultimately falls out of that is a business that may start turning slightly slower, so you may mark it down in you move through it. But on balance, we haven't had any significant footfalls that have created massively increased markdowns or slow down in our terms. Brooke Roach: Thanks so much. Best of luck going forward. Thanks, Operator: And the next question comes from the line of Michael Binetti with Evercore. Please proceed with your question. Michael Binetti: Hey, guys. Thanks for taking our questions here. Congrats on a nice quarter. I guess as you look at marketing and some of the store refresh in the state of the fleet today, as you look at some of the initial successes and the top line impact here, how do you think about what to invest in and accelerate those things that are working to keep the top line going versus how you think about flowing through some of the earnings on these initiatives to investors next year? I think just at the highest level, maybe some thinking on the trade-offs between pushing sales harder. Now you've got some things that are very obviously working and then flow through versus investment next year. And then separately, you know, spoken a little bit about a strong pipeline of DD stores in the past. How are the Ross Stores, Inc. Banner stores in the Northeast area doing? And do you see an opportunity to accelerate store growth both chains at Ross Stores, Inc. in addition to DD's? Jim Conroy: Sure. Maybe I'll take the first one and Mike will take the second piece of that in terms of store growth. On the investors' flow through, yeah, I'm not even here a year, and I was very cautious when I first got here to quote, unquote, listen, learn, and lead. Right? I really wanted to learn a new business. I'm not bigger business, and the off-price sector, etcetera. for change as did the team, And while I had some hypotheses we I really wanted to be respectful of the financial model and the operating model that has been successful for the company for so long. So while we've made some changes over the last couple of quarters and perhaps we're seeing fruits of that, of those changes now. You know, I'd like to let some more time go before we come out and say, we're gonna over-invest betting on the come for future results. So anything we've done so far has been again, within the expense structure, the financial model of the company has, And we haven't spent anything from in an outsized way from a marketing perspective. Or really even from a store's perspective outside the sort of capital plan that was here when I when I got here. Three months from now, six months from now, if we continue to see positive ROI, to your point, we may then get more aggressive and say, look, you know, if we can break the model slightly from a financial standpoint, will we deliver higher comps and additional earnings perhaps. But right now, I'm I think we're all kinda committed to the operating model that's worked for the company for decades. Michael Hartshorn: Michael, on real estate, first on this year's store openings. As we said in the commentary, opened eighty Ross Stores, Inc. and DD's. As an entire group, the new stores have outperformed our plan and we're very excited, although it's very early. With the success in both Northeast and the New York stores, and also in our Puerto Rico stores that opened over the summer. So as I said, what we've seen thus far, we're really optimistic about the Northeast. Expansion. We feel good about the real estate lands. We have a very healthy pipeline. We've said before that we're going to reaccelerate the DD's growth in terms of the combined groups, we'll have more to say when we get to the end of the year in our 2026 guidance. Michael Binetti: Alright, guys. Congrats again. Best of luck to the holiday. Thank you. Jim Conroy: Thank you very much. Operator: And the next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Ike Boruchow: Hey, everyone. Jim, I was figured I would ask about self-checkout. I think it's something you've talked about in the past as a driver. Where how many stores is that rolled out to? How meaningful can that be, you know, or maybe over the next twelve months? And just kinda how are you thinking about ROI on that investment? Michael Hartshorn: Sure, Ike. It's in 80 stores today. And it's taken us a while to get to this point. We tried a couple different models, and it's taken us a while to get the shrink aspect of self-checkout correct. We now have a prototype that's worked well for us over the last year and we're not only seeing lower shrink, but we're seeing higher high customer adoption. We're seeing sales impacts in the stores that we put it in, and we'll be rolling it out to further stores next year. How big it will be depends on kind of the next phase of rollout, but where it works best for us is in our high volume stores. So we'll continue to roll it out. We'll have more to say on how many of those stores in the in the 2026 preview. Ike Boruchow: Thank you. Operator: And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Adrienne Yih: Great. Thank you. Good afternoon. Congrats on a great acceleration into holiday. First question on DD's. Did you see any I mean, was it patterned very similarly to the Ross Stores, Inc. Dress for Less stores? Or did you see any pressure, particularly in the early part of November, with the delay of the SNAP benefits? So has that rebounded? And then secondly, you mentioned that the results fully offset all of the tariff, the gross tariff amount. So should we assume that, that obviously is the case for the fourth quarter? But that kind of the biggest impact because of your turns being so fast that the biggest impact would have been felt in 2025, and we enter '26 in a pretty normal way state. In terms of tariffs, or there's probably a little bit of overhang in Q1? Thank you. Michael Hartshorn: Adrienne, on the DD's, DD's was very similar to Ross Stores, Inc. The business was very consistent across the quarter, so there's nothing that I would call out there. In terms of tariffs, We did say there continued to be an impact in Q3. But it will be neutral in Q4 as we've been able to chase the business with closeouts. We've been able to work with vendors and cost concessions. And I would expect it to be somewhat neutral. It is neutral in Q4 and expect it to be neutral as we move into '26. Adrienne Yih: Okay. And then my quick follow-up is just going to be there are very few companies that are the third quarter with overall sales growing faster than inventory. On an average basis or even at the end of the quarter. Obviously, you've built some inventory up. The availability is fantastic. Is this just sort of do you feel well, I'm gonna ask you questions I know the answer to. I mean, clearly, you can chase that inventory. But, I guess, as you think about kind of, like, heading into spring, what are you seeing in terms of kind of being a little bit more maybe disciplined or judicious about taking some of that pack away? Any changes to strategy as we head into spring when we think that broader retail will raise prices across the board. Michael Hartshorn: On the ending in the as we said in the commentary, we did end up 15% on the last day of the quarter. Actually, during the quarter, inventory was in line with sales. Which similar to prior year's holiday shopping and promotions. Are well underway ahead of Thanksgiving holiday and in anticipation of shifts, we set the sales floor for the holiday as we at the October, which is earlier than last year, and also advanced some of the inventory into the store. Adrienne Yih: Okay. Perfect. Thanks. Best of luck. Great quarter. Michael Hartshorn: Thank you. Operator: And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Dana Telsey: Hi. Good afternoon, everyone, and congratulations on the terrific results. As you take a look at your customer, thanks. As you take a look at your customer, particularly an assessment of the lower-income customers, Are you seeing anything? Are you seeing a trade down to the core Ross Stores, Inc.? What are you seeing in DD's? And is there any difference in performance of the lower-income stores and lower-income areas versus others? And then just lastly, with the expansion into the New York area or the Northeast, If you think about your store expansion plans for next year, will a greater portion of those stores be in the Northeast? And how do you see opening cost? And is there is the opportunity greater sales from those stores in more dense areas leveraging the cost given it may be a higher cost structure? Thank you. Michael Hartshorn: Dana, on the trade down customer, it's really hard to peel apart in the data. We do measure the trade area demographics around the stores. And the seven comp was very broad-based across all income levels. So we didn't see any distinction between the lower higher income customers. In terms of entry into the Northeast, today about 70% of our store openings are in what I call existing markets and 30% in newer markets, would now include the Northeast and Puerto Rico, over the last couple years. It's included the Upper Midwest, I'd expect that pace to continue, and we'll gradually continue to add in New York over time into Puerto Rico. And continue to expand those markets. We don't think our return on opening a new store will decline as we enter the Northeast. As you say, the it's more dense population should drive a higher sales to support the additional investment and higher cost in some of the store base there. Dana Telsey: Got it. And then just one more thing, Jim. In terms of what you're seeing with the store refreshes, the great enhancements that you're making in brand in general, other categories besides women's where you're seeing this opportunity for? And when you think about the store refreshes, anything that is particularly notable that you see at the opportunity for next year? Thank you. Jim Conroy: Well, we certainly have some ideas about next year and, you we don't wanna sort of necessarily divulge those just yet. In terms of categories that have improved, we've seen sequential improvement across a number of different businesses. Perhaps the one to call out is the home business was a drag in Q2 and was nicely positive in Q3. And we feel, you know, well-positioned in that piece of the business as we go into the fourth quarter when it spikes as a percent of sales. So I think that may be another category that we can talk about some of the wins that that merchandise team has pulled together. And yes, I'm glad to hear the enthusiasm on store refreshes and the stores I think, are looking a bit better. I would come to come back to some of my earlier comments that it's still very early innings in some of these changes. So maybe that's just is good news in terms of the best is yet to come. Dana Telsey: Thank you. Thank you. Operator: And the next question comes from the line of John Kernan with TD Cowen. Please proceed with your question. John Kernan: Congrats on the great quarter, guys. Jon. Thanks, So just wanted to circle back to gross margin. The merch margin was down slightly. You're now lapping a lot of the initiatives in the branded segment. I'm just curious what you think the opportunities for merch margin are going forward. You are comfortably above the levels you were at pre-COVID as a benchmark. I'm just curious what you see as long-term drivers. And I just have a quick follow-up on distribution costs. Michael Hartshorn: I mean, you said, merch margin although it declined, it was a little better than we expected. As had less ticketing and some stronger shrink results helped there. Moving forward, you know, it's an area of continued focus. And certainly, we would like it to get better, but I think currently, we'd expect it to be relatively stable over time. I think there is Okay, got. We talked about we're a year and a half into the brand strategy. I think there's gonna continue to be opportunity to gain some leverage as we move through time as we built the branded relationships with the vendors. Gives us opportunity for closeouts. So I think there's still some opportunity there within gross margin, you know, the transportation cost will be a year-to-year, kinda market-based discussion. But I think there's ongoing improvement capture in merchandise margins. John Kernan: Yeah. Obviously, the new DCs gonna give you a lot of capacity. Just curious on, you know, distribution and deleverage. Is that something that continues into next year? Looks like it picked up in Q2 this year and I'm assuming it continues a little bit in the fourth quarter. Michael Hartshorn: Yeah. In Q3, that deleverage, like, talked about a bit before, the full impact of the opening of a new distribution center and also some tariff-related processing costs. As we move forward, we'd expect that that pressure from the new DC continued, but that pre-ticketing pressure we've seen before related to tariffs should improve a bit. So we'd expect just a slight headwind in Q4. As we grow capacity, we look beyond this year, we'll be able to continue to lever that new capacity until we open our next due distribution center, which is two to three years away. John Kernan: That's great. Thanks, guys. Operator: And the next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question. Aneesha Sherman: Wanna follow-up on the brand strategy. As you've discussed it in the past, you've talked about not changing the good, better, best mix. But rather increasing the availability of branded goods versus, you know, unbranded and labeled. As you're now attracting new customers and growing AUR in basket size, are you rethinking that and potentially considering adding more higher-end brands to expand the mix on the higher side? And then a follow-up on home. Jim, you talked about home getting better this quarter, though it was still weaker than the chain for two quarters in a row. Have you pulled back on the assortment at all in response to that weakness? And are there any implications there in terms of holiday and gifting and home decor assortment going into the holiday period? Thank you. Jim Conroy: Of course. On the home piece, absolutely not. You know, we feel that the home business is really building momentum, and the team there has just created tremendous sequential improvement. As we get into the fourth quarter, the categories change a bit. Right? Toys increase quite a bit, food increases, etcetera. So, you know, those businesses kind of have nothing to do with the incoming trend line. And we feel extremely well-positioned from a gifting standpoint and from a toy standpoint. In terms of branded versus unbranded, a couple of points I would I guess I would say is over the last several years, right, the reason the brand strategy was put in place and certainly predated me was there was a notion that the company had migrated away a little bit too much from known brands chasing higher margin or higher markup kind of tertiary players. And we needed to rate that shift. That doesn't always mean higher-end brands, though. Right? There are some really great brands at all price points within the store, And we have a very diverse customer base in every definition of that term. So we wanna have the best-branded values for a good, better, or best pricing tier. Is there some opportunity to stretch higher? Perhaps. The merchants are always out there looking for the next new brand. It's always a small celebration within the buying office when we've opened a new brand and we've gotten access to new closeouts, etcetera. Over time, perhaps that will be that will include, you know, reaching up a little bit. But I would say it's across the board. Aneesha Sherman: That's helpful. Thank you. Of course. Operator: And the next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question. Marni Shapiro: Hey, guys. Congratulations on a great quarter, and congratulations on the New York store. I hear it is the place to be. I'm just curious on the marketing. You did what I'm hearing. It's what people say. So I'm so curious on the marketing side as you kinda dive a little bit more into marketing. Two things. Will you, at some point consider a loyalty program, and how would what would that look like if you thought about it? And are you doing even some of the more basic stuff like email or phone number captures that you can more directly talk to your consumers. Jim Conroy: So I'm not sure about the loyalty program. On the email and text, but we do have a pretty decent email database in existence today. You know, a few million active email addresses. And while we don't constantly update that number to the street, we saw a really nice increase in active emails over the last quarter. So that was great. We don't have an active text program at the moment. But who knows? The first order of business from a marketing standpoint was to experiment with some slightly different messaging, and maybe a slightly more contemporary aesthetic. And, over time, you might try some of these other ideas. Yes. The Brooklyn store has been just a great addition to the portfolio. Glad it's the place to be seen. We've seen a lot of interesting people come in recently. And we're constantly kind of spying on it with our CCTV. So we kinda know everybody that goes in and out. But yeah. So it's four of the yeah. Yeah. No. Everybody competitors, everybody. That story has been a really nice arrow in the quiver and who knows what it bodes for future stores there. I mean, that particular location is pretty unique, very high traffic. There are other stores that we've seen open up in that area, in the New York Metro Area that have had very strong openings, perhaps, you know, that that would probably be the outlier one. The one in Brooklyn that you're talking about. Marni Shapiro: Yep. Alright. Great. Thanks, guys. Best of luck for the holiday. Have a nice Thanksgiving holiday. Jim Conroy: Likewise. Thank you. Thanks, Marni. Bye. Operator: We have time for one last question coming from the line of Jay Sole with UBS. Please proceed with your question. Jay Sole: Great. Jim, my question is about the guidance because you're guiding to 3% to 4% comp. And I look back, you know, ex the post-COVID period, every company hasn't guided above a two to three in at least ten years. I'm just wondering what this signals. I mean, are you taking a different approach to guiding now being CEO? Or is it just that the quarter-to-date trends you're seeing are so good that you just felt like two to three just wasn't even relevant and you had to guide to three to four? Because sometimes the thought is that the guide is as much as internal signals and external signals sort of a signal to sort of plan conservatively and then just be prepared to chase, keep a lot of open liquidity. If opportunities materialize in the quarter. So just kind of wondering how you're thinking about guiding and why you decided to go to 3% to 4% instead of just sticking to the same old two to three. Michael Hartshorn: Yeah. It's Michael Hartshorn. It's probably less tricky than you think. It is our internal plan. So, you know, currently coming off a seven comp, that's how the underlying business is planned. And we always try to align the internal latest forecast with the plan. So there was there's no change in methodology. It is really how we're planning the business for the fourth quarter based on the momentum in Q3. Jay Sole: Got it. Alright. Thank you so much. You're welcome. Of course. Operator: There are no further questions at this time, and I would like to turn the floor back over to Jim Conroy for closing remarks. Jim Conroy: Very good. Well, thank you everybody for your interest in Ross Stores, Inc. We wish you all a very happy holiday season. Take care. Operator: Thank you. That does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Good evening, welcome to Webull Corporation Class A Ordinary Shares' Third Quarter 2025 Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Carlos Questell, Webull Corporation Class A Ordinary Shares' Head of Investor Relations. Please go ahead. Carlos Questell: Good morning, good afternoon, and good evening everyone. Welcome to Webull Corporation Class A Ordinary Shares' third quarter 2025 conference call. Earlier today, we issued a press release detailing our third quarter financial results. A copy of the release can be found on our IR website at webullcorp.com under the Investor Relations tab. Please note that this call is being recorded and will be available for replay via our IR website. During the call, we will be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to the cautionary statement and risk factors contained in our filings with the Securities and Exchange Commission and press release, both of which can be accessed via our website. The presentation will include a discussion on adjusted operating expenses, adjusted operating profit, and adjusted net income, all non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to their most directly comparative GAAP measures are included in the press release that we issued today. It's important to note that although we believe that these non-GAAP measures provide useful information about our operating results, they should not be considered in isolation or construed as an alternative to their directly comparative GAAP measures. Furthermore, other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. With me today is our Group President and U.S. CEO, Anthony Michael Denier, and our Group CFO, H. C. Wang. We will begin with prepared remarks and then take questions at the end. With that, I would like to turn it over to Anthony. Anthony Michael Denier: Thank you, Carlos, and hello, everyone. Thanks for joining us today. Webull Corporation Class A Ordinary Shares' third quarter results demonstrate continued momentum and growth in what remains a highly favorable market environment for our business. Our Q3 results reflect this environment, but also our global team's continued ability to achieve our goals, drove strong results across almost every metric. Strong corporate earnings, interest rate reductions, and rallies in technology and AI stocks have driven robust market conditions with the S&P maintaining near record levels throughout the quarter. This backdrop, combined with our ongoing technological innovation, product expansion, and increased access across geographies, continues to create significant opportunities for our customers worldwide. Webull Corporation Class A Ordinary Shares is exceptionally well positioned to continue to capitalize on the global consumer shift towards mobile-first trading. We are executing well against this favorable backdrop. This quarter marks significant milestones in product diversification and geographic expansion as we continue to see high growth across our platform. On the heels of our public listing, we successfully reintroduced crypto back to the Webull app and expanded our offerings in the space to include crypto futures trading. We also introduced sports prediction markets through our partnership with Kalshi and are on track to achieve a major international milestone as Webull Canada will soon become the first non-U.S. brokerage in our group to reach $1 billion in assets under management. Just last week, we launched Vega, the latest evolution of our AI-powered decision-making partner, which will enhance the investor experience by providing personalized insights and analysis to inform trading decisions for our users. These offerings are already leading to meaningful ROI. We are seeing strong adoption among both new and existing customers as the platform successfully reengages dormant accounts through compelling new products. During the quarter, we brought crypto trading back to the Webull platform and brought Webull Pay back into our group, which added $1.2 billion in 140,000 funded accounts. Now over 50% of new funded accounts are trading crypto. We will continue to meet investors where they are and increase our share of wallet by introducing them to our expanded products and solutions over time. Our differentiated offerings, including direct deposit enablement and the launch of corporate bonds, continue to set Webull Corporation Class A Ordinary Shares apart from competitors. With each new product, we continue to strive to be the one-stop platform for traders looking to get the most personalized and agile investment opportunities on the market. I am proud of the Webull Corporation Class A Ordinary Shares team for the innovation and execution they have shown in reaching these milestones. We have reached another important milestone in our journey as a public company with the expiration of all shareholder lockup restrictions on October 8, which significantly increased our public float, further enhancing our market liquidity. With that, let me now walk you through the key highlights from the quarter in more detail. Here on Slide two, I'll walk you through our third quarter highlights. We delivered another strong quarter for Webull Corporation Class A Ordinary Shares shareholders. With the year-over-year revenue growth significantly outpacing increasing operating expenses, driving solid margin expansion for another quarter. We recorded top-line revenue of $156.9 million, representing 55% growth year over year driven by four key factors. First, customer assets reached an all-time high of $21.2 billion, inclusive of the $1.2 billion in assets from the acquisition of Webull Pay, marking the third consecutive quarter of AUM growth. Second, equity trading volume surged for the third straight quarter, up 71% year over year. Third, our on-time delivery of new product offerings, including crypto futures and prediction markets, enhanced stickiness and new user growth. Fourth, we continue to broaden access to our leading platform across new and varied geographies. We recorded adjusted operating expenses for the quarter of $120 million, representing a year-over-year increase of just 13%. Our increase in expenses was mainly driven by increased brokerage and transaction expenses, reflecting higher trading volume as well as higher general and administrative expenses driven by increased compensation and bonus accruals reflecting headcount growth and stronger than expected performance. The increase in G&A expenses was partially offset by a lower marketing spend. Lastly, we delivered a fourth straight quarter of operating profitability with a strong 28.7% increase in adjusted operating margin on a year-over-year basis to 23.4%, representing adjusted operating profit of $36.7 million for the third quarter. We continue to focus on execution and margin expansion, reflecting our commitment to delivering sustainable growth and value for our shareholders. Turning now to Slide three and our 2025 roadmap. We continue to enhance our existing product offering while executing against the ambitious roadmap we outlined in Q2 to support our growing customer base and expand market share through new offerings and geographies. We are particularly excited about the launch of Vega. Vega is an AI tool that combines news, earnings, and technical data to deliver a focused, intuitive experience that helps both new and seasoned investors navigate modern trading and make smarter decisions. Other key features of Vega include statistical insights, options trading that showcase investment opportunities, and voice commands for placing trades as we continue to enable accessibility on our platform. As we continue to broaden our offerings to solidify our position as a one-stop investment platform for retail and sophisticated investors, Vega will play a crucial role in enabling further consolidation as investors gain powerful insights across their portfolio of equities, bonds, crypto, and more. Webull Premium, our subscription-based service for active traders and long-term investors, has now reached 90,000 subscribers, a 20% increase from just last quarter and is tracking well ahead of our internal target of 100,000 subscribers by year-end. Our premium offerings have been further bolstered by the introduction of corporate bonds during Q3. Corporate bonds provide customers with low-risk investment opportunities and steady yields while also facilitating asset transfers from traditional brokerages, positioning Webull Corporation Class A Ordinary Shares as the one-stop platform for sophisticated investors. I am excited to discuss the launch of prediction markets. Through our partnership with Kalshi, we have introduced sports prediction markets covering NFL, NBA, NASCAR, F1, and college football events. This offering provides an engaging and accessible trading experience that lowers barriers to entry. Results have been exceptional. More than 30 million prediction contracts were placed in October, nearly twice as many as were placed in September, over half of which were sports contracts. As I stated previously, the return of crypto to our platform has delivered instant results and has become a significant driver of funded account growth. While we currently offer crypto trading to our customers in the U.S., Brazil, and Australia, we will continue expanding crypto offerings across geographies and are actively exploring digital asset licenses in numerous other markets. Finally, our expansion of products available internationally continues to progress. During the quarter, we launched our Webull platform in the EU, beginning in The Netherlands, and anticipate launching in additional European markets over the coming months. We also entered into a strategic partnership with Merits Financial Group to offer U.S. market access to Merits customers in South Korea. In addition, Level three options trading is now live in Singapore and Hong Kong and is set to launch in Japan imminently. We are excited to continue to scale and reach even more global customers as our product offerings continue to grow. We have now over 700,000 funded accounts outside the U.S., and we continue to prioritize delivering U.S. products to international markets and building diversified revenue streams globally. On Slide four, I'll discuss our growth in both users and funded accounts. During the third quarter, we added roughly 1 million registered users, bringing the platform to a total of 25.9 million registered users, a more than 3 million increase from the third quarter of last year, representing a 17% increase. Importantly, that 1 million increase also represents a large sequential increase, showcasing that our product and geographic expansion is driving robust user growth. Webull Corporation Class A Ordinary Shares was originally launched as a global market data platform before evolving to become the leading digital investment platform we are today. As a result, we have a significant number of registered users in geographies where our trading platform is not yet available. We are committed to offering access to best-in-class market data and information to everyone, whether or not they currently have a brokerage account with us. On the right side of the slide, you can see funded account metrics. Funded accounts, defined as accounts where customers have made an initial deposit that has remained above zero for forty-five consecutive calendar days as of the record date, showed healthy growth. We added approximately 200,000 new funded accounts this quarter, inclusive of accounts onboarded through our acquisition of Webull Pay, bringing the total number of funded accounts to 4.93 million, a 9% year-over-year increase. As we continue to innovate and enhance our offering, I am also happy to report that our quarterly retention rate remained high and grew slightly on a sequential basis to 97.7%. Turning to Slide five, as I previously mentioned, Webull Corporation Class A Ordinary Shares customer assets reached an all-time high of $21.2 billion, inclusive of $1.2 billion in assets from the acquisition of Webull Pay, representing an 84% increase on a year-over-year basis and a $5.3 billion sequential increase. The growth in customer assets reflects strong momentum driven by favorable market dynamics and robust deposit activity. Our customers deposited over $2.1 billion during the quarter, a 31% increase year over year, bringing our cumulative net deposits over the last twelve months to $5.9 billion. On Slide six, I'll provide an overview of trading volumes for the quarter. While we are always looking to expand and enhance our product offerings, growth in our core products also continues to accelerate. Our equity volume increased by 71% on a year-over-year basis and 26.7% sequentially, totaling $24 billion. Our options contract volume was 147 million in the third quarter. The associated revenue continues to outpace contract volume growth after implementing a new pricing model in the second half of last year. We are pleased to see the continued results of that initiative with a steady increase in the monetization of our options business. We are now midway through Q4 and are on pace for further growth. October was our best month ever in terms of customer deposits, trading volumes, and revenues. Our new products are driving increases in market share and the consolidation of users' portfolios onto the Webull app. With that, I'll pass the call over to H. C. Wang for a closer look at our financial results for the quarter. H. C. Wang: Thank you, Anthony, and thanks to everyone for joining us today. Slide seven shows that in the third quarter, Webull Corporation Class A Ordinary Shares generated revenue of $156.9 million, up 55% year over year. Adjusted operating expenses for the quarter came in at $120.2 million, an increase of 13% from a year ago. We continue to take a disciplined approach to balancing execution costs and operating efficiency as we continue to scale the business. We are pleased with our continued margin expansion and profitability. On the following slides, I will walk through the components of revenues and expenses in more detail. Now turning to Slide eight, on our profitability performance. As Anthony mentioned earlier, Webull Corporation Class A Ordinary Shares has now recorded its fourth consecutive quarter of operating profitability. In Q3, adjusted operating profit reached $36.7 million, our most profitable quarter ever, representing a 28.7% improvement in adjusted operating profit margin year over year. Adjusted net income for the quarter was $32.9 million, up RMB38.6 million year over year. Adjusted net profit margin improved 26.5% year over year, reaching 20.9% of revenue. Turning to Slide nine. Our trading-related revenues continue to accelerate, supported by higher trading volumes across all asset classes and improved monetization, particularly in options. Momentum from the second quarter carried through to Q3, with daily average revenue trade increasing 56% year over year, driving a 64% rise in trading-related revenues. On a per trade basis, revenue increased to $1.53. Turning to Slide 10, our interest-related income. This category includes interest earned on client and corporate cash as well as revenues from margin financing and stock lending activities. In the third quarter, interest-related income grew 32% year over year to RMB43.4 million, driven by higher interest-earning balances across all categories: corporate cash, client cash, margin lending, and fully paid stock lending, reflecting the continued growth of our client assets. Finally, let's turn to Slide 11 for a closer look at operating expenses. As a high-growth business with meaningful operating leverage, we expect operating expenses to increase as we scale, but at a much slower pace compared to revenue growth. In the third quarter, operating expenses grew 13% year over year, primarily due to higher brokerage and transaction costs associated with rapid growth in trading volumes and product expansion. General and administrative expenses also increased, reflecting headcount growth and higher bonus accruals tied to stronger than expected performance. These increases were partially offset by lower marketing spend as we continue to optimize our marketing and branding strategy. We remain committed to maintaining expense discipline while continuing to invest strategically in innovation, customer acquisition, and wallet share expansion to capture sustainable long-term growth opportunities. Now thank you everyone. With that, I will turn the call back to Anthony before we open the line for questions. Anthony Michael Denier: Thanks, H. C. This was a record quarter for Webull Corporation Class A Ordinary Shares on many metrics, including revenue and funded account growth, marking an exciting new chapter for our platform as we successfully unveiled innovative product offerings, including crypto futures, sports prediction markets, and our AI-powered decision partner Vega. We remain energized as we continue to deliver our product roadmap for U.S. and global investors. I want to recognize the global Webull Corporation Class A Ordinary Shares team for their continued dedication as we continue to grow our platform following our public listing in early 2025. We look forward to engaging with you at several upcoming industry and investor conferences. On that note, we welcome any questions you may have either here on the call or one-on-one. Operator: Thank you. We will now begin the question and answer session. Your first question today will come from Kareem Saif with Bank of America Securities. Please go ahead. Kareem Saif: Everyone. Can you hear me okay? Anthony Michael Denier: Loud and clear. Kareem Saif: Perfect. Okay. Well, congrats on a great quarter. My first question is on prediction markets. It was very nice to see you guys added sports contracts to the offering. So Anthony, was wondering if you maybe like help size the revenue opportunity for Webull Corporation Class A Ordinary Shares from the prediction markets offering as well as like maybe share some of the any of the economics that you have with Kalshi? Anthony Michael Denier: Sure. Happy to, Kareem. So yes. So many people do not know this, but we have been partnering with Kalshi since the very beginning of the year. We just recently got into the sports prediction markets, at the beginning of the NFL season. Late August, I believe, for Thursday night football. And the prediction market pre-sports has seen some really nice growth as we did, like, SPY hourlies, NBX hourlies, some major Fed events. But the sports numbers have been completely blowing us away, right? And we have all seen the headlines how much growth we have seen from Kalshi and Polymarket on a notional value. We are seeing that lockstep. And the value of offering these sports predictive contracts are multifold the way I look at it. Right? We announced 30 million contracts in October. You know, we are already now halfway into Q4 on the November 20. And that number is completely gone. We are blowing that number away already in November. Right? And I would not be surprised if we see a month-on-month growth at over 100% on a pretty consistent level. Now the opportunity from a monetary standpoint is different with every partner that Kalshi has. So we do charge a $0.01 commission to our clients that are trading per contract. And we also get an exchange rebate from Kalshi. And the blended rate comes in anywhere between 1.25 to 1.5¢ per contract. On the revenue side. That being said, I do not think it is merely a revenue catalyst for our business. These sports prediction markets are reengaging dormant accounts right? And it is also addressing a completely new TAM of customer. And so you know, if we have customers that have come on the platform in 2021 during GameStop, the world opened up. They got quiet, right? Life got in the way, and they were not actively trading. Now they are back because of these sports prediction markets in a big way. And it is a great way to reengage customers that have gone dormant. It is a great way to address a whole new addressable market of clients. So very exciting time for our industry. And I do think prediction markets are going to be something that is going to continue to push us not only on new to customer acquisition, but product expansion. Kareem Saif: Got it. That was very helpful. Thank you very much. And then for my follow-up, so obviously, it was very nice to see, I believe you called it in your prepared remarks, net deposits in October were very strong. The best I believe, the best months for Webull Corporation Class A Ordinary Shares. But when I look at net deposits in 3Q, very strong also at $2.1 billion which I believe like when I look at it as a percentage of your AUA or AUC, it is like almost 53% annualized. So I was wondering if you could maybe like help unpack that a little bit for us, where are you seeing that strength coming from? If you could maybe unpack it by geography, that would be very helpful. Anthony Michael Denier: Absolutely. So one of the great advantages we have versus a lot of our peers is the fact that we are truly a global platform. We have 14 broker-dealers that are currently operating around the world. The U.S. is the largest and the oldest but we just opened up in The Netherlands in September. Went live in 2025 and we continue to look to expand. That expansion and us taking significant market share not only in The U.S. but outside The U.S. is one of the great drivers for that AUM growth, right. So we took in $2.1 billion of net deposits in Q3 alone. That is not including the acquisition of Webull Pay and the money we received as part of the AUM in that acquisition. And I would put it on two different catalysts for that impressive net new money coming in. One is the evolution of our marketing style. So we have been evolving our marketing over time and we have seen a lot of success and great ROI on our incentive transfer programs. So offering like sticky money to rollover 401(k)s into Webull Corporation Class A Ordinary Shares, where we are offering matching deposits, extremely successful in bringing new AUM into the platform and then back to the geographic expansion. We are seeing huge growth in markets like Canada that we did not announce about to cross $1 billion in AUM alone in that market. That is only call it, twenty months old at this point. We have other locations that we are seeing huge amounts of growth like Australia, of all places, Thailand, is growing in the it's doubling on a quarter-over-quarter basis in terms of what we are seeing in transaction. And that is a recurring theme that we are seeing outside of The U.S. As The U.S. As we start expanding on U.S. Products outside to the non-U.S. Entities, we are seeing the customer demand for increase for U.S. Products really push new customer acquisition and new AUM coming into the platform. Kareem Saif: Got it. That was very helpful. Thank you so much for taking my questions. I'll hop back in the queue. Operator: The next question will come from Steven Chubak with Wolfe Research. Please go ahead. Steven Chubak: Hi, good afternoon and thanks for taking my questions. Wanted to hey. I hope you guys are well. So I wanted to ask, a two a multiparter just on expenses and margins. So we really good expense discipline in the quarter. Total revenues were up 55%, adjusted expense up 13%. So impressive incremental margin just north of 75%. I wanted to understand the sustainability of those incremental margins, just given myriad opportunities to lean in on the investment side? And then for the second part, given the comments you just made, Anthony, around the marketing strategy, why not choose to lean in a little bit more in terms of marketing spend just given the strong momentum in 3Q in October? I recognize the high ROI is that was the one bucket that actually saw declines year on year. I wanted to better understand how you're thinking about the opportunity to lean in there as well. Anthony Michael Denier: Sure. Happy pick that up. So when we look at, when we look at our customers being able to transfer assets in, we are constantly in improving on the product and the rails for them to do so easily. And when we think of margin expansion, we are very cognizant that we are in an extreme growth phase of our business. So right where we are now in the mid kind of 20s, of margin, think is extremely healthy for a growth company. And we are going to continue to deliver on that. I can hand it over to H. C. for a little more detail on the actual margin and the expenses side. H. C. Wang: Sure. Thanks, Anthony, and thank you for the question. Yes. So for us, as you can see that we have consistently maintained our adjusted operating margin around 20% for the last four quarters. And so we are constantly optimizing and adjusting how we are approaching expenses, for example, marketing. I think you asked about why not overinvest in marketing when the market is good. I think in a certain sense, we are very opportunistic. We actually do a lot of work and review on a market-by-market basis to see where we get the highest ROIs in terms of our marketing dollars. But we also want to be smart about investing in forms of the forms of different promotions that we take. And so we have over time shifted more from giving away free stocks to customers to more of these like asset matching promotions. And as a result of that, we are seeing significant increases in net deposits in AUM growth. Another result of that is there is a greater amortization of marketing expenses. So it's not just given away immediately when the customer fund their accounts. The customer would have to deposit AUM and maintain their AUM for a number of months before they accrue and earn the whole marketing spend. So actually that helps us in managing expenses to make the marketing expense more predictable quarter over quarter. Which I think is a good thing in terms of managing the P and L. And also for the for the G and A expense, I think a lot of it is just proportionate to our headcount growth and to our continued investment in in R and D as we continue to enter into new geographies and expand products. So we'll continue to remain disciplined and and manage our expenses to make sure that we continue on the right path of margin expansion. And continue to capitalize on this market environment and and continue to drive growth. Steven Chubak: That's great color. And for my follow-up, I did want to ask, given the relaunch of crypto in The U.S, how your crypto strategy might evolve now that you're getting that second at that and specifically wanted to better understand where the crypto pricing is today? Do you see an to potentially be more aggressive in terms of take rates to attract more users? And how you see that pricing evolving over time as competition intensifies in the space? Anthony Michael Denier: Yeah. No. I appreciate that question. Extremely excited about the relaunch of crypto, and and appreciate you mentioning it's kind of our second at bat. We obviously we had crypto when we launched crypto back in 2019, through the process of trying to get our company listed. Previous administration, we spun it out to Webull Pay. We brought We brought that crypto back to the brokerage platform, the main brokerage platform. Back in August, kind of like a light speed project, if you will. And so I look at it exactly like that. This is our second opportunity to really knock it out of the park. What does that mean for us? Right? So we are still in the early innings of crypto. At least the crypto for our at least crypto offering on our platform I think we lean into the sophisticated fact of our active trading user base. And so right now we have approximately 100 basis points. Coinbase retail is about 150 basis points. I know some of our competitors use a variable model based on the actual token itself for pricing. And we are going to aggressively lean in to squeezing those take rates to attract active crypto traders. Now timeline, on that business is probably going to be early in '26 I have to be careful on guidance. But when I think about it, we have an amazing opportunity to relaunch our crypto product with a whole new vigor that attracts the customers that call Webull Corporation Class A Ordinary Shares home. Sophisticated, experienced and active retail traders. We are to cater our crypto trading products specifically to them as we roll out especially new products in the crypto world. I do not want to give up too much on this call. We'll be announcing a lot of major new additions to our crypto offering. To get us on the same level playing field as all of our competitors. Once we are on that playing field, we're going to aggressively take those active traders from our comps. Steven Chubak: That's great color. Thanks so much for taking my questions. Operator: The next question will come from Michael John Grondahl with Northland Securities. Please go ahead. Michael John Grondahl: Hey, thanks guys. Anthony, can you talk a little bit about the Merits announcement and kind of the opportunity you have there globally? And is Merits the first? Do you have other customers internationally you're helping like that? Anthony Michael Denier: So Merits is the first publicly announced but not the first. And when we say Merits, we're talking about institutional customer bases or B2B business. Which is a completely new line of business for us. We have been 100% focused on retail since we launched in 2018. Now we're spending a significant amount of internal resources and a significant amount of focus on targeting B2B partnerships in geographies where we don't currently operate a broker-dealer. We're even talking to B and D partnerships to institutional type partners in places where we actually do have retail. A retail platform. Having said that, none of this revenue is yet even factored in to our current models and our current growth. And so the future, so Merits is an example of getting access to South Korean retail without having to have a South Korean retail brokerage license. We're going to continue to focus on opportunities like that. And in my opinion, the institutional side of our business, which is just beginning, Merits is the first announcement on a very long list of clients that are in the pipeline. That's going to be a huge boom. Not only for our market share, but for our top and bottom lines. Michael John Grondahl: And when would you expect Merits to go live? Has it started? What is that timeline look like to ramp up? Anthony Michael Denier: So typically institutional onboarding takes much longer than retail onboarding. Right? We can we can open up a retail account in minutes and our retail customers can typically trade within five minutes of downloading the app. It's very different for institutional. There is a lot more checks. There is a lot more approvals, sometimes even up at the board level. That being said, we are currently live with Merits. We are currently trading on behalf of their clients' orders. And as we continue to grow the relationships that the amount of flow that we receive from Merits will continue to grow over time. Michael John Grondahl: Got it. And then just lastly related to that, where will that revenue show up? Is that other revenues or in the equity and options line? Anthony Michael Denier: So, this is actually one of the fun parts. So the revenues actually show up in our transaction volumes. So even if we see a slowdown in U.S. Retail, trading volumes. Our trading volumes will continue to tick up because we're onboarding a lot of these B2B relationships. So it's going to be baked into the transaction revenue mixed in the equities and hopefully in the next several months options. Currently, we're trading equities only with Merits. Michael John Grondahl: Got it. Hey, thank you and good luck. Operator: Next question will come from Christopher Charles Brendler with Rosenblatt. Please go ahead. Christopher Charles Brendler: Hey, thanks. Good evening and congratulations on the strong results here. I'd like to ask about the funded accounts, which ticked up. I know even if you back out the crypto, you did see a nice tick up there. I know there's been a little bit of a refocus of your marketing strategy towards assets over accounts, but given the gap between registered and funding, I'd love to see that close a little bit. So how are you thinking about funded account growth as you head into 2026? Thanks. Anthony Michael Denier: Sure. Hey, Chris. Well, funded account growth in my opinion, we're going to see so so we're going to start seeing a lot more attribution coming from outside of The U.S. Like we mentioned on the call earlier, we have more than 700,000 funded accounts now that are outside The U.S. And we've seen the momentum in onboarding of funded accounts outside of The U.S. Basically for the last six months, it was about 55%, 50 Right? 55% of new funded accounts coming from The U.S, broker. About 45% coming from outside. That number is now completely equalizing. And we're at about fifty-fifty. And in fact, wouldn't be surprised if we start seeing new funded account growth outpace new fund outside of The U.S, outpace funded account growth in The U.S. I believe that's going to be the continued driver as the 13 broker-dealers that we operate outside The U.S. Start to really mature. If you remember, the first brokerage outside of The U.S. We opened was Hong Kong in 2021. The second one wasn't until 2022, which is Singapore. We just opened our latest one in The Netherlands in September '25. So these are all relatively young businesses that are in hyperscale mode. And so we're gonna see a lot of low cost, low customer acquisition costs, new funded accounts really being driven from outside The U.S. And in The U.S, we're going to continue to focus on quality of our customers. Christopher Charles Brendler: That's super helpful color. Thanks so much for that. I wanted to add a quick follow-up on numbers. Does crypto or prediction markets have any impact on third quarter metrics like DARTs or trading revenues? And will those kind of transactions show up in those metrics in the fourth quarter? H. C. Wang: Yes, sure. So we actually closed the Webull Pay transaction at the very end of the third quarter. So what the third quarter metrics include is the AUM and funded accounts that we that were consolidated. As part of the transaction. What's not included is the revenues, the transaction volumes and the DARTs because those those take place over the course of the quarter. But the transaction did not close until the very end. But they will start to be included and presented as part of the consolidated group results starting in Q4. Christopher Charles Brendler: Okay, great. That's helpful. And then I just have one more quick one. Which is on Vega, It seems like this is a a product that would help attract folks here platform and potentially stay there longer? Any insights on the initial impact of Vega? And on the expense side, is it an there's an ongoing expense from running this AI that you're outsourcing or is it all developed in house there won't be much additional expense? Anthony Michael Denier: Yes. So the Vega AI launch is not only not only a huge thing for Webull Corporation Class A Ordinary Shares. This is the future of investing. Right? There is so much news flow, so much information at all investors' fingertips. Often it's like drinking out of a fire hose. Now we have created in house, to answer that question, in house we've created our Vega AI trading assistant, not only analyzes your portfolio, but can advise you on high levels of risk and give you insights into implied volatility in some of your options positions. Right? This is a game changer for the industry. And so because we developed it all in house, there is no increased cost and the user engagement has been phenomenal. We're seeing tens of millions of engagements of Vega. Whether it's for actionable trading through the Vega AI trade assistant, or just analysis of earnings or consolidation of news. And every day, we're seeing more and more engagements we're seeing regular engagements. Meaning, we're seeing users come back to Vega regularly. And I believe that this is now the beginning of a whole new way that retail engages their own portfolio and accesses market information market opportunity. Christopher Charles Brendler: Well, that's great. I obviously need to try it out. Thanks so much. Operator: The next question will come from Brian Vieten with Seiberg. Please go ahead. Brian Vieten: Great. Thanks guys. Anthony, so nice pickup in funded accounts this quarter. I think you said 50% of new accounts. Are trading crypto. Does that include the Webull Pay folks? And then looking ahead, could you speak to the opportunity in converting existing Webull funded accounts? I'm just curious on that as I know your customer demographic is younger and digitally native. Thanks. Anthony Michael Denier: Yes, exactly right. So the average Webull Corporation Class A Ordinary Shares customer is in their young 30s. So very, very crypto native. And you know, it it it really pains me back in September 2023 when we had to strip out our crypto offering from our brokerage platform. Our customers were not happy with it. So bringing it back was imperative. Now that we have it back, and we have the opportunity not only to knock it out of the park with, you know, a better offering of crypto, especially for our customer type. We've been seeing great engagement for crypto native customers either coming back to Webull Corporation Class A Ordinary Shares or discovering Webull Corporation Class A Ordinary Shares for the first time. So like you mentioned, 50% of new funded accounts 50% of them the first trade they made was with cryptocurrency on the Webull Corporation Class A Ordinary Shares platform. Those are not customers coming over from Webull Pay. Those are new customers to Webull Corporation Class A Ordinary Shares in and of itself simply because we now offer crypto. So we're going to continue to lean in to that type of customer. And like I mentioned before, make sure we give the tightest spreads and the best trading experience for the customer that calls us home, and that's the active sophisticated type. Brian Vieten: Very good. Thank you. And then just one more if I may. Just on the future listings, think at one point the plan was to get to 100 by year end, not sure if maybe there's some it's a little contingent on some of the regulatory dynamics, which you alluded to, but just the complexion of those future listings. Are you envisioning more so listing established crypto protocols or kind of newer tokenized assets where you might be more differentiated? Just any commentary on the listing strategy would be great. Thank you. Anthony Michael Denier: Yes. So I mean, one of the fundamentals that we've always held here whether it's crypto it's equities, it's options, again, prediction markets. We want to give our customers the availability to trade as much as we possibly can offer. If that means so you mentioned 100 as a number, I do not want to go on record and say we're going to have 100 different, different tokens available to trade by year end. But that certainly is our goal. Having said that, when we look at know, when we look at the opportunity for crypto, it's more than just offering new product types it's offering a better experience to do so. So yes, the short answer is yes. We plan to have as many as many different opportunities and as many different offerings on the platform as we possibly can bring. And we plan to to really lean into making sure our customers feel that this is the best place, Webull Corporation Class A Ordinary Shares is the best place to trade. Brian Vieten: Thanks, Anthony. Congrats on a great quarter. Operator: Next question will come from Edward Lee Engel with Compass Point. Please go ahead. Edward Lee Engel: Hi, everyone. Thanks for taking my question. Appreciate some of the color you gave about funded accounts outside The U.S. Just kind of wanted to get a better sense on maybe some of the localized features that you're offering in some of these markets in kind of where the roadmap is, whether it's tax wrappers or savings accounts, or local banking connectivity? Thanks. Anthony Michael Denier: Sure. So it really depends on the region. We've always had a single mentality here. We have one global vision but we make sure that we execute locally. What does that mean? It's simply every Webull Corporation Class A Ordinary Shares broker-dealer that we have, 14 around the world, has a local team. It's it's not, you know, it's it's not an American that's sitting in London. You know, we have we have a Brit sitting in London, running the office there. There's a reason for that. Not only did they have a better feel for what that customer needs, they also have a better opportunity for local marketing. How to differentiate. That being said, a lot of those businesses are still relatively young and we're constantly adding new products, things like tax wrappers, for example. IRAs in The U.S. Or ESAs, ISAs, in The UK, I'm thinking UK maybe too much, but as soon as we have the regulatory approval to add those products, we always do. And for the most part, there are two or three exceptions, but for the most part, every Webull Corporation Class A Ordinary Shares entity will trade the local security in that country as well as give customers the ability to trade U.S. Products. The one example I can think of is Indonesia. There is no license yet in Indonesia for our customers, sorry, Indonesian customers to trade U.S. Securities. However, hopefully that'll change by year end. That all being said, we see the majority of transactions happening our non-U.S. Entities the transactions are happening in U.S. Products. And that goes back to things I've been talking about for the last year and change. The exportation of The U.S. Retail trading experience is one of the largest growth factors that I believe we're going to see in the next year, year and a half. Right, especially when it comes to retail out of The U.S. We have seen the adoption of not only obviously ETF trading outside The U.S, but options trading specifically, for example, you know, customer sitting in New York City has a position in NVIDIA yesterday. Coming out with earnings at the close. And we have a customer sitting in Japan Also, with a position in NVIDIA. They're looking at the same news flows. They're listening to the same podcast. They're listening to they're they're watching the same Reddit feeds, they're reading the same comments on the Webull Corporation Class A Ordinary Shares community. Yet, a lot of times, they're not able to trade the same products. We're changing that. Now our customers in in Japan can trade calendar spreads, can put on a Condor. Right? That doesn't exist for the most part outside of The U.S. And we are working very hard to make sure that we export that U.S. Retail investor experience to everywhere outside The U.S. Which is one of the main reasons why we're seeing such amazing growth in our non-U.S. Brokerages. Edward Lee Engel: Great. Appreciate that color. And then, I mean, I guess, to date, we have seen a bit of volatility in U.S. IVD market. Curious if you're able to provide any color on, I guess, how your users are kind of holding up through some of that? Thanks. Anthony Michael Denier: Sure. I think uniquely Webull Corporation Class A Ordinary Shares we are extremely well positioned for a rising VIX. Our customers, I mean, we've been offering the ability to short sell since the first day that we launched the platform in 2018. Right? Our customers, again, I keep saying this word sophisticated. I keep saying this word experienced. When there's volatility, our customers are trading more. And so just the past couple of weeks, we've seen explosive volume due to volatility. And I think Webull Corporation Class A Ordinary Shares is probably uniquely positioned to weather volatile markets a lot better than our peers. That of course being said, long-term volatility is never amazing for a cyclical business. But I believe as a platform, we are accelerating into this volatility in the short term. Edward Lee Engel: Great. Thanks for that. And then, yeah, congrats on another recent progress. Anthony Michael Denier: Thanks. Operator: We'll conclude our question and answer session as well as conference call. Thank you all for attending today's presentation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Leo: Please standby, your meeting is about to begin. Afternoon. My name is Leo. I will be your conference operator. At this time, I would like to welcome everyone to Intuit Inc.'s First Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. With that, I'll now turn the call over to Kimberly Anderson Watkins, Intuit Inc.'s Vice President of Investor Relations. Ms. Watkins? Kimberly Anderson Watkins: Thanks, Leo. Good afternoon and welcome to Intuit Inc.'s first quarter fiscal 2026 conference call. I'm here with Intuit Inc.'s CEO, Sasan K. Goodarzi, and our CFO, Sandeep Singh Aujla. Before we start, I'd like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit Inc.'s results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-Ks for fiscal 2025, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit Inc.'s website at intuit.com. We assume no obligation to update any forward-looking statement. Some of the numbers in these remarks are presented on a non-GAAP basis. We've reconciled the comparable GAAP and non-GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplemental financial will be available on our website after this call ends. With that, I'll turn the call over to Sasan. Sasan K. Goodarzi: Thanks, Kim, and thanks to all of you for joining us today. We delivered an outstanding quarter with Q1 revenue growth of 18%, reflecting the momentum we have across the company. Our AI-driven expert platform strategy is fueling strong growth by helping businesses manage from lead to cash, consumers from credit building to wealth building, all in one place. We're becoming the system of intelligence, leveraging data, data services, AI, and human intelligence, which we will refer to as HI, that everyone depends on to power their prosperity and fuel growth. We're doubling down on the three big bets we shared at Investor Day, which represent our largest future growth opportunities. First, delivering done-for-you experiences with AI and HI, where customers never lift a finger but are always in control. Second, we're excited by putting money at the center of everything we do. Last month at Intuit Connect, our flagship event that reaches the leading accounting firms and mid-market businesses, we brought to life the power of our AI-driven expert platform strategy. We showcased our all-in-one business platform where a team of AI agents and AI-enabled human experts automate tasks, workflows, business functions, and provide a single pane of glass for customers' KPIs and dashboards all in one place. We also shared the strong early impact of our AI agents delivering just after four months in the market. We marked the one-year anniversary of Intuit Enterprise Suite, our AI-native ERP platform that is disrupting the mid-market. We are proud of the massive advancements we've made, including serving industry-specific needs and building more sophisticated go-to-market motions, including partnering with accounting firms to add new customers to our platform. We introduced Intuit Intelligence, a revolutionary system of intelligence where customers can ask anything. For example, customers can ask questions like, "How can I accelerate revenue in the next six months?" "How can I improve margins?" "Can you show me how to lower my cost of goods sold?" and "Can you add the performance of my top sales reps to my dashboard?" Using customers' data and any external data they wish to upload, Intuit Intelligent Actionable Answers will execute on a customer's behalf or hand off to a human expert. We have thousands of customers in beta and plan to be GA soon. Finally, we unveiled Intuit Accountant Suite, an AI-native offering that will transform accounting firms' efficiency and effectiveness in managing their clients, firm, and workforce, all to fuel their success. The suite provides client management and collaboration, multi-service delivery, business planning, and team management all in one place. Soon, we'll be launching more advanced capacity planning, productivity, and collaboration capabilities. Over time, firms can integrate to other functions. This is a game-changer and significantly deepens our partnership with accountants, fueling faster mid-market penetration. And for accountants, it drives tech stack consolidation and efficiency for their firm and encourages them to migrate clients to QBO Advanced and Intuit Enterprise Suite. Attendees walked away from Intuit Connect blown away by the amount of innovation in the last year and a clear message that we are well-positioned to fuel their growth. We're continuing to see momentum with our virtual team of AI agents, with 2.8 million customers leveraging these agents to do the work for them. Our accounting agent is saving customers up to twelve hours a month, and our payments agent helps customers get paid on average five days faster. We recently launched a payroll agent that automates tasks that typically take mid-market businesses two to three hours to complete each month, such as collecting hours directly from employees, spotting anomalies, generating insights, and sending customers a ready-to-approve draft of their payroll via text. We also launched a sales tax agent, which automatically helps businesses stay compliant. The combination of AI and HI is resonating. QuickBooks Live customer growth of 61% in Q1. Zooming out, it's clear we are delivering done-for-you experiences with AI and HI that will eventually do everything for our customers, powering their growth, saving them time and money, and consolidating their tech stack. We're making strong progress across our all-in-one platform, which includes accelerating money benefits by putting more money at the center of everything we do. We saw total online payment volume for our payments and bill pay customers grow 29%, reflecting continued momentum in helping our customers get paid faster and better manage their cash flow. Turning to the mid-market, we continue to make strong progress serving larger and more complex customers, with approximately 40% growth for online ecosystem revenue for QBO Advanced and Intuit Enterprise Suite in Q1. Mid-market customers are over-digitized, with their data trapped in a number of applications that take too much time and money to manage. Our offerings help businesses achieve their growth goals by automating complex tasks, workflows, and functions, and delivering insights and recommendations all in one place. Our AI-native ERP platform is disrupting the legacy way of managing their business, and the ROI is clear. With a Forrester study estimating that customers can see nearly 300% return on investment over three years when using Intuit Enterprise Suite. This value proposition is resonating. For example, a large customer with over 200 entities that we signed in Q4 quickly realized the value of our platform and expanded their contract to include an additional 46 entities in Q1. In aggregate, the total number of IES contracts at the end of the quarter was nearly 50% higher than it was at the end of Q4. We're also seeing early momentum with our accountant partnership strategy to bring new customers to Intuit Enterprise Suite. As a result of our partnership with Aphrio, a top 25 business advisory and accounting firm, we've already signed several new customers in multiple verticals. Earlier this month, we also signed accountant partnerships with Cherry Becker, a top 25 advisory tax assurance firm with clients across 14 industries, Raymond, a top 40 professional advisory firm that provides accounting assurance and other business services to clients across 11 industries, and Cogan and Taylor, a top 100 advisory tax accounting assurance and technology firm with clients across seven industries. We have many other opportunities of similar scale in the pipeline. Turning to our consumer platform, our AI-driven expert platform is delivering done-for-you experiences for consumers from credit building to wealth building to make smarter financial decisions year-round with confidence. We're seeing strong momentum in the areas that matter most, with 51% in Q1 reflecting continued strength as we concluded the 2024 tax season. Credit Karma had a strong quarter. In fiscal year 2025, we saw several point increases in share of member originations for personal loans and credit cards. We believe share gains continued in Q1 as members and partners find value in our platform. These strong results and the introduction of significant innovation with Done For You experiences, AI-powered local expertise, and faster access to money show the power of one consumer platform. Our done-for-you innovations include Credit Spark, everyday payments to build your credit score, as well as several agentic AI assistants. For example, our debt assistant will craft and deliver personalized debt pay-down plans. Our refund assistant will give a personalized recommendation when the customer receives their tax refund to pay down debt, build an emergency fund, build credit, or invest for the future. And with our tax assistant, consumers who answer easy quick questions in Credit Karma year-round can have up to 80% of their taxes ready to go at tax time. We're also expanding our AI-powered local presence, making local expertise more accessible than ever with a larger service footprint. As customers are five times more likely to book up with a pro within 50 miles, this local presence will also help us further scale business acts, which grew 3x last year. With our virtual or in-person filing and consultation option, we're offering the best experience, price, and speed to money. This is data, AI, and HI powering prosperity for consumers and businesses. One of our superpowers is experimenting and learning from our customers and then scaling what works. The results from more than 300 tests we ran in Q1 bolster our confidence in our strategy to win. We're excited about the growth potential for our all-in-one consumer platform with an untapped opportunity to penetrate a $142 billion consumer TAM. We have significant momentum across the company and are obsessively focused on execution with high velocity and fueling the success of our customers. Intuit Inc.'s brightest days are ahead of us. Let me now hand it over to Sandeep. Sandeep Singh Aujla: Thanks, Sasan. We delivered a strong 2026 across the company. Our first quarter results include revenue of $3.9 billion, up 18%, GAAP operating income of $534 million versus $271 million last year, non-GAAP operating income of $1.3 billion versus $953 million last year, GAAP diluted earnings per share of $1.59 versus $0.70 a year ago, and non-GAAP diluted earnings per share of $3.34 versus $2.50 last year, reflecting our overall disciplined approach to managing the business, including continued AI efficiencies. Turning to the business segments, starting with the Global Business Solutions Group, we continue to make progress serving businesses with our all-in-one platform and delivering done-for-you experiences with expertise. Global Business Solutions Group revenue grew 18% during the quarter, or 20% excluding Mailchimp, while Online Ecosystem revenue grew 21% in Q1, or 25% excluding Mailchimp. This includes approximately 40% growth for Online Ecosystem revenue for QBO Advanced and Intuit Enterprise Suite that serve the mid-market. All-in Ecosystem revenue for small businesses and the rest of the base grew a strong 18%. We saw robust growth in both online accounting and online services in Q1. QuickBooks Online Accounting revenue grew 25% from higher effective prices, customer growth, and mix shift. Online services revenue grew 17% in Q1, or 26% excluding Mailchimp. This growth was driven by money, which includes payments, capital, and bill pay, as well as payroll. Within money, revenue growth in the quarter reflects payments revenue growth, which was driven by customer growth, an increase in total payment volume per customer, and higher effective pricing, as well as 29% in Q1, reflecting our continued momentum in payments and adoption of our bill pay offering. All-in payment volume growth excluding bill pay was 18%, relatively consistent with the range you've seen over the last several quarters. Within payroll, revenue growth in the quarter reflects mix shift, customer growth, and higher effective prices. Within Mailchimp, revenue was down slightly versus a year ago, in line with our expectations for the quarter. We continue to target double-digit growth for Mailchimp exiting fiscal 2026. We are seeing strong results from a mid-market sales team within Mailchimp with several recent larger customer wins, as well as increasing retention rates in the mid-market segment. We are continuing to invest more in go-to-market for these higher-value customers and beginning to increase broader go-to-market spend to drive acquisition of smaller customers. Turning to desktop, Desktop ecosystem revenue grew 6% in Q1, and QuickBooks Desktop Enterprise revenue grew in the low double digits in Q1. We expect desktop ecosystem revenue to grow low single digits in fiscal 2026. Turning to our consumer platforms, we are pleased with our strong momentum. Q1 revenue grew 21%, driven by 27% TurboTax revenue growth, 6% Protex revenue growth, and 15% Credit Karma revenue growth. Within 13 points of growth, credit cards accounted for 10 points, and auto insurance for three points. Looking ahead, the results from more than 300 go-to-market and product experience tests run during Q1 bolster our confidence in our strategy to win this upcoming tax season. We are excited about the opportunity ahead for our all-in-one consumer platform powered by AI, human intelligence, and data to empower customers to take year-round control of their finances, from credit building to wealth building, while driving monetization for Intuit Inc. Shifting to our balance sheet and capital allocation, our financial principles guide our decisions that remain our long-term commitment and are unchanged. We finished the quarter with $3.7 billion in cash and investments and $6.1 billion in debt on our balance sheet. We repurchased $851 million of stock during the first quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter. The board approved a quarterly dividend of $1.20 per share payable on January 16, 2026. This represents a 15% increase versus last year. Moving on to guidance, we are reaffirming our fiscal 2026 guidance. This includes total company revenue of $20.997 billion to $21.186 billion, growth of 12% to 13%. Our guidance includes Global Business Solutions Group revenue growth of 14% to 15%, up 15.5% to 16.5% revenue growth excluding Mailchimp. Our guidance also includes overall Consumer Group revenue growth of 8% to 9%, including TurboTax growth of 8%, Credit Karma growth of 10% to 13%, and Protex growth of 2% to 3%. GAAP diluted earnings per share of $15.49 to $15.69, growth of 13% to 15%, and non-GAAP diluted earnings per share of $22.98 to $23.18, growth of 14% to 15%. We expect a GAAP tax rate of approximately 23% in fiscal 2026. Our guidance for 2026 includes total company revenue growth of 14% to 15%, GAAP earnings per share of $1.76 to $1.81, and non-GAAP earnings per share of $3.63 to $3.68. You can find our full fiscal 2026 and Q2 guidance details in our press release and on our fact sheet. Before I turn it over to Sasan, I want to share that Kimberly Anderson Watkins has made the decision to leave Intuit Inc. to pursue a new opportunity outside the company. This will be her last earnings call. I want to take a moment to thank her for her tremendous contributions and partnership over the years. She's built a strong, highly respected Investor Relations team and has strengthened our relationship with the investment community in meaningful ways. Jeff Koehler, who has been a key part of the team, will step in as acting Head of IR. We're deeply grateful for all that Kim has done and wish her the very best in the next chapter. With that, I'll turn it back over to Sasan. Sasan K. Goodarzi: Great. Thank you, Sandeep. We are well on our way to becoming the system of intelligence enabling financial success for consumers, businesses, and accountants. Given our early bets on AI, our low penetration of our large $300 billion TAM, the significant investments we've made in the last decade, and our momentum, we are well-positioned to power the prosperity of our customers and win in the era of AI. Let's now open it up to your questions. Operator: Thank you. From Kirk Materne of Evercore ISI. Please go ahead. Kirk Materne: Yes. Thanks very much for taking the question, guys, and congrats on a nice start to the year. And Kim, congrats on your next venture. Sasan, the question for you, a lot of questions from clients this week on the OpenAI arrangement and deal you announced. Can you just give us a little bit more color on if there's any sort of revenue share as part of this deal? I think there's also some questions about sort of how data obviously, you guys have always been very protective of customer data. How does that stay within Intuit Inc. as people are now using Intuit Inc. solutions within OpenAI? Can you just give us maybe a little bit more color on those aspects of the new partnership? Thanks. Sasan K. Goodarzi: Yes. Thank you for your question. First of all, I'll start by saying it's an absolutely game-changing partnership and everything starts with people and the relationships to make any long-term partnership work, and the relationship with OpenAI is really magnificent. With that said, the way to think about this before I get to the specifics of your question is this is a huge opportunity for us to accelerate new customer growth. You have 800 million weekly active users that are engaging within the platform, and we have an opportunity to power their prosperity. Now to answer your question, I'll just break it very quickly into three buckets: experience, data and models, and economics. On the experience front, what happens today is when customers are asking questions about getting access to financial products like cards, loans, building their credit score, or how to grow their business, they get good yet generic answers, but that will change tomorrow. The way it's going to change is that our Intuit Inc. apps will be deeply integrated within ChatGPT, which means tomorrow you get the power of all of the Intuit Inc. platform and apps within ChatGPT. The experience, which I can get into a lot more detail if you all wish, will be game-changing because we'll know who you are, we will be able to leverage the power of our data and all of our models to be able to deliver experiences that are very personalized to you, just like the experiences you get when you're within an Intuit Inc. app today. So the experience will be absolutely game-changing for consumers and businesses and truly power their actions and insights within ChatGPT. The second on data and models, nothing changes from what we do today. Customers will be engaging within the Intuit Inc. app, they'll be within the Intuit Inc. four walls. We will continue to train our Intuit Inc. large language models with the customer's data, our data privacy, security, and privacy principles are unchanged. And that's very important because one of the game-changing elements that OpenAI is excited about is the fact that customers will be able to get accurate, secure answers that are personalized all within ChatGPT. So that's on the data and model. Nothing is unchanged from the way we operate today. On the economics, it is as the economics are today. There's no revenue share. And so the economics that we enjoy today when directly working with customers, we will enjoy tomorrow. And I'll just end with, you know, we're really excited about the partnership, by having access and working side by side with the OpenAI team, having access to their frontier models because, as you know, Intuit Inc.'s large language models are what gets trained by the customer's data, does not leave our four walls. But it also has the agency and authority to deliver the experiences and use other models, and we're excited about the acceleration of the use of some of their models that the RLMs will put in place. So I think those would be the headlines, Kirk, that I would share. Kirk Materne: That's great. Thanks very much. Congrats on the quarter. Sasan K. Goodarzi: Very welcome. Operator: We'll move next to Sitikantha Panigrahi of Mizuho. Please go ahead. Your line is open. Sitikantha Panigrahi: Thank you. Congrats again and a great start to this year. I wanted to dig into the mid-market so Sasan, which is one of your drivers for the aspirational goal to accelerate growth. First on IES side, it's been a year and you had 250 sales set, how is the productivity has been going on? And any plan to add more headcounts to this mid-market and also the partnership you announced, when should we start seeing that translate to revenue? Sasan K. Goodarzi: Yes. Thanks for the question, Siti. I'll break it down into three things: awareness, our platform innovation, and accountants. First and foremost, we're just starting to press on the gas with awareness. In terms of showing up at conferences, we were just at the faith conference in New York. We were everywhere to raise awareness because as much success as we've had, very few people still know about Intuit Enterprise Suite and what a disruptive, AI-driven, and AI-native ERP platform that it is. So we're doing a lot around awareness. One element is conferences and webinars, to really get the word out there. The second is the platform innovation is just accelerating, and it's having a dramatic impact with customers now across many verticals starting to refer us to customers like them, whether it's wealth management, dentists, or construction. The impact from our innovation and now beginning to customize and launch vertical-specific KPIs and dashboards is incredibly important and incredibly powerful. And more than ever, we win on experience, price, and total cost of ownership. The third is around accountants. We're just getting that flywheel going. In fact, we redirected a number of our internal sales folks above and beyond the 250 that you referred to, which I'll get to in a moment, that really are providing coverage across our large accounting firms. What you should look at is these are really best to come. We expect acceleration from these large partnerships that we've announced and many that are in the works to contribute to the back half of the year and into next year. Actually, not counting on that, but it's an important point to put out there, which is this is where the network effect comes in because we had the largest firms at Intuit Connect and I personally have been meeting with these large firms and they're blown away by our innovation and how they can use our platform to be able to drive accelerated growth and our productivity is significantly improving when we look at the last several quarters and we would expect to start adding more headcount in coming quarters. So those would be the way I would break down the answer to your question. We're really excited and bullish about what's possible. Operator: We'll move next to Brad Alan Zelnick of Deutsche Bank. Please go ahead. Your line is open. Brad Alan Zelnick: Great. Thanks so much and my congrats and Kim congrats on a fantastic run. It's been great and look forward to your next chapter. Maybe for you, can you talk us through any of the learnings that came out of this extension season on tax and those might apply to the season ahead? And maybe for Sandeep, saw the announcements around the TurboTax office footprint expanding which seems to clearly reflect leaning in on local search. How are you thinking about the investments necessary to sustain 15% to 20% assisted growth this year? And maybe how do they compare to last year? Thanks so much. Sasan K. Goodarzi: I'll get us started and then I'll let Sandeep take over on your question. First of all, Brad, I've been with the company twenty plus years. I've never been more bullish than the season we're about to step into. And the reason is all of the innovation across the platform. We ran, as we talked about earlier, 300 significant experiments from platform innovation to go-to-market tests inclusive of a lot of what we're doing to show up locally, which is the question you asked a moment ago for Sandeep. And just across what's possible for consumer tax and business tax, we are incredibly bullish and the bullishness comes from really three fronts. One, a lot of the work that we've done around data and AI that makes it far simpler and easier for folks to get their taxes done and get early access to their money to the innovation end-to-end to deliver a great experience at a great price for those that use the prior year assisted method from how we're leveraging data and AI concierge to greet customers to get them immediately connected to a live expert where most of the work is done already. By the time they get to the expert to doing a lot of the work for the expert where the expert really becomes a concierge that you would walk up to in a Four Seasons. That's really about the service that they provide, how they make you feel, while we ultimately deliver excellent service. The power of going from 400 locations that we showed up to 600 and then the 20 stores that we talked about with one flagship store that's going to be in New York is about showing up locally. It's also about shaping the market around the fact that we truly have AI plus HI. And once the one opens up in New York, I'd encourage you all to go into it because I think you'll want to sit there and have some coffee. It's tech-forward. It's friendly. It's warm. By the way, money in your pockets quickly, so I'll end with where I started before Sandeep takes over, which is I have not been this bullish going into a tax season, given the amazing work of the team. Sandeep Singh Aujla: Hey Brad, it's Sandeep. On local, key to winning in the as we have shared that our we see that customers convert five times better there's a local expert within a 50-mile radius of their location. And we are planning 600 expert locations, so that's up from 400 last year and as Sasan mentioned a unique flagship store in New York City. This is all part of our strategy of ensuring that we are showing up in key high-density areas and covering a majority of the tax filing population in the United States. And this showing up local, we know really extends the trust people have in the brand, it drives adoption. And our tests also show that 39% of full-service customers preferred zero-touch approach to engagement. So it's really more of a driving that trust. In terms of our investments, our approach to showing up local is truly asset-light and is scalable without long-term commitments. The rent OpEx cost here are relatively small. They're all included in part in our guidance that we gave earlier today. Brad Alan Zelnick: Thank you, both. Sasan K. Goodarzi: Very welcome. Operator: We'll move next to Keith Weiss of Morgan Stanley. Please go ahead. Your line is open. Keith Weiss: Excellent. Thank you guys for taking the Congratulations on a really strong start to the fiscal year. And I'll also add my congratulations to Kimberly Anderson Watkins. Truly has been a great partner to the financial community at Intuit Inc. So congratulations and best of luck on the new endeavors. You guys had a really solid quarter. We saw it in the Global Business Solutions. There's a lot of concern out there about the health of the overall U.S. consumer. And I know you guys get a lot of signals. So can you help us walk through if any of your signals turned or if this was more so Intuit Inc. just doing very well in what could be a shaky environment? Help us get a little bit of confidence about the durability of these types of results throughout the year. Sasan K. Goodarzi: Yes, Keith, thank you for that question. I'll actually tag team this with Sandeep. I would say two things. One, what we see in our data across 100 million consumers and 10 million plus businesses that we serve is stability. To provide more specifics, you know, profits and cash flows are stable and up. One of the things Sandeep and I and the team looked a lot at is payroll hours worked, and payroll hours worked are actually up. And as you can imagine, we're not concentrated in any particular industry. So we see a lot of industries. So if you double click, you see things like IT services, construction, manufacturing that are actually up quite nicely compared to the year prior, then you see places like real estate and lending that are down, compared to the prior year. Significantly, but down. And so it's industry-specific. But when you look at the aggregate of what we serve, they're quite successful. From what we see in the data. I think the second thing that I'll just end with is a lot of it is also our platform. And really what the platform is doing to fuel the success of businesses of all types. If you remember one of the things that we shared at Investor Day was that businesses that are on our platform are nearly 20 points more successful in terms of how they thrive their profits versus those that are not on our platform. So our platform is having a real impact on the livelihood of businesses. Sandeep Singh Aujla: Keith, let me build a little bit on Sasan's point. One thing, as you know, of course, we keep a keen eye on the macro environment, but what also gives us confidence in addition to the stability that we're seeing in the broader environment is the resilience of the Intuit Inc. business. Our offerings are not just nice to have, they are a must-have. In the forty years that we've been around, we've historically seen that when the economy is tougher, our products become more critical. And just also add on and highlight the stats from within our platform, is you saw that our charge volume was up 29% with bill pay up 18% excluding bill pay. On our Credit Karma side, we continue to see strong engagement with our partners. So both the macro data within the platform and also just how the business performed, it continues to give us confidence in the stability and the opportunity that lays ahead. Keith Weiss: Thanks so much, guys. Sasan K. Goodarzi: You're welcome. Operator: We'll move next to Mark Murphy of JPMorgan. Line is open. Please go ahead. Mark Murphy: Thank you so much. Congrats on the great results and also to Kim in your future endeavors. Sasan, the Credit Karma market share gains of several points in loan originations and credit card issuance are pretty staggering. Because the size of those markets is just utterly vast. Could you speak to whether you see ongoing runway to continue that type of motion where you're chipping away a couple of few points of share every year, maybe by leveraging the TurboTax customer base and that data, maybe by leveraging QuickBooks and the cash flow data has to be of interest to lenders? And at the end of the day, do you think you can create a more holistic financial health score than the traditional providers have? Sasan K. Goodarzi: Yes. Mark, thank you for your question. Actually love the nature of your question. I would lead with the following. I think now you're seeing the TurboTax Credit Karma platform coming together at work. And, you know, the thing that I would just also add to everything that you just shared around the market share increases is that Credit Karma contributed to an entire point of growth in TurboTax last season, and that's just over time only going to get larger. And it's because of what we are doing, customer back, to help them with problems like getting access to financial products that are right for them. Helping them with how to manage their debt and with our debt assistant actually helping them what they pay down first, second, and third. What they should do with their refund, and just being in their life on an ongoing basis. That's how you take market share. So that's the first point I would make. The second point, which is a more specific point, is this is data, AI, and all of our credit models at work. As you all know, one element of our AI capabilities is Lightbox, where financial institutions have put their credit models, their proprietary credit models as part of Lightbox. And we are able to leverage their credit models to be able to deliver personalized experiences. That's a game changer. And now we have more and more financial institutions that are now putting their credit models as part of Lightbox, don't do that with anybody else. They trusted Intuit Inc. It helps drive growth for them. And it delivers personalized experiences for us. And so I'll end with sort of the essence of the question that you asked. We're just getting started. We have runway and we're just getting started from what's possible to do at the platform. And even access to money and how we can monetize money offerings is yet to come. So we're excited about what's possible. Mark Murphy: Thank you. Sasan K. Goodarzi: You're very welcome. Operator: We'll move next to Daniel Jester of BMO Capital Markets. Your line is open. Daniel Jester: Great. Thank you for taking my question and also pass along my congrats to Kim. Best of luck. On Mailchimp, appreciate the additional color on the progress that has been made there specifically in the middle market. As we think about the reacceleration to double digits by year-end, is that something that could be accomplished solely through middle market improvement, or does this have to broaden out and also include some of the smaller customers coming back to the fold as well? Thank you. Sandeep Singh Aujla: Hey, Daniel. Mailchimp, we've taken a number of strategic steps that I feel really confident about. As you mentioned, we have scaled the mid-market sales team to build upon the momentum we have in that segment. We've improved the product experience and the onboarding flow across all customer segments. And now we're scaling up the go-to-market efforts, and those efforts, in addition to adding to the mid-market sales team, are dialing up the marketing on the platform, which we had dialed down while we were working on the product fix. In terms of getting to double digits, it takes a mix of both customers across the smaller customers as well as the mid-market customers. We have good momentum, and it's really going to be around early calendar year and springtime that we'll have a solid read on the Mailchimp progress. Daniel Jester: Okay. Thank you very much. Sandeep Singh Aujla: Absolutely. You're welcome. Operator: We'll move next to Aleksandr J. Zukin of Wolfe Research. Line is open. Please go ahead. Aleksandr J. Zukin: Hey, Thanks for taking the questions and I apologize for the background noise. I guess maybe can you speak to some of the margin leverage and efficiencies that you're seeing from deploying some increasing AI leverage and just any other efficiencies that you're seeing that are durable given continued outperformance on margins to that we're seeing now for I think, like the third or fourth straight quarter. Anything you can add there would be super helpful. Sandeep Singh Aujla: Hey, Alex. We continue to feel really confident about the ability as an organization to continue to scale margin that comes not just from efficiency, but we run the business leaning on economies of scale, being disciplined about when and how and where we are allocating capital to maximize ROI on it. And of course, complementing our workforce with AI technology to truly unleash their productivity. Areas that we continue to see strong improvement are across our technology organization, using AI to improve the productivity of the sales force, our time to market with how we are rolling out code. Across our customer success organization. As you know, a lot of that work is rules-based, super applicable for the AI to help complement those areas. And then across our entire organization, whether it's in finance, it's in legal, HR, you name it, using AI to unleash the productivity of our employee base. What you should continue to hold us accountable to is the discipline that we have demonstrated over the past multiple years, the same discipline continues. And it's not just about the AI efficiencies, but it's all about the learning, the culture of seeing what works and where we lean in marketing. Did marketing last year. There's many tests that work and we scaled them. There are other things that didn't work and we shut them off. That's a discipline you should all continue to hold us accountable to. Aleksandr J. Zukin: Excellent. I just want to give a big shout out to Kim. It's been a true pleasure working with you and can't wait to see where your next adventure takes you. Thank you so much. Kimberly Anderson Watkins: Thank you, Alex. Operator: We'll move next to Kasthuri Gopalan Rangan of Goldman Sachs. Your line is open. Kasthuri Gopalan Rangan: Hard to follow Alex Zukin, but I'm going to try my best. So I look at my congrats to Kim, but also to Jeff incoming. He's been waiting for a while. So well-deserved promotion. The question for you, Sasan, is the delta and growth rates between accounting, which certainly is very, very strong, and online services, a bit of a wider delta than what I would have thought. Maybe some of it has to do with Mailchimp in there. I remember the good old days into it, online services would typically grow faster than accounting because of the payroll payment attached, that sort of thing. Is there a break in that pattern that explains this performance and that you since you're getting going with IES, maybe there's a bit of a heavy accounting finance emphasis and maybe these services will follow suit in the future. If you can just help me understand the cycle of what you're going through, that will be great. And since this is my last Intuit Inc. call, I wish you many successes in your journeys ahead. Thank you. Sandeep Singh Aujla: Hey, Kash, it's Sandeep. Let me take this one. We continue to see tremendous opportunity across money and payroll offerings on our platform. It's a key part of our addressable market and it's a key part of the $90 billion addressable market that we have on mid-market as well. The deceleration that you're referring to is really due to pricing. That was a contribution in the last four quarters and now we are lapping across both payments and payroll. We continue to see strong momentum in our core business. And would point you to the charge volumes, 18% overall, 29% bill pay, and we're seeing improved adoption of services across both small and mid-sized businesses. As you pointed out with some of these things, it takes a while for those volumes to ramp up as their service providers. Furthermore, the innovation that we're rolling out, whether it's our agents or the new QuickBooks user interface, they provide us more opportunities to build upon the strength we have in platform adoption and services over time. So I would not read too much into the deceleration. We are quite excited about the opportunity that lays ahead. Sasan K. Goodarzi: And Kash, we wish you an amazing retirement. Kasthuri Gopalan Rangan: Thank you so much. Much appreciated. Operator: Cheers to the journey ahead. We'll move next to Raimo Lenschow of Barclays. Your line is open. Please go ahead. Raimo Lenschow: Hey, thanks. And following Kash is always an honor. Kim, all the best for you as well. Quick question for me was on Credit Karma. You talked about credit card loans driving it, insurance a little bit. How do you think about it in terms of the health of the consumer? Sasan, you talked a little bit about it earlier, but like Credit Karma has been kind of performing a lot better than you guided for several quarters now. Like how confident are you about what you're seeing there? Thank you. Sasan K. Goodarzi: Yes. Let me start with one element and I'll tag team this with Sandeep and actually it's really important to leverage this opportunity for everyone, to make a really a broader point. Credit Karma is working because of all the innovation that we've done customer back and the integration with TurboTax. So if you really think about the 45 million monthly active users, the fact that they engage more than five times a month, and the fact that we now can help them with so many things more, compared to when we first bought Credit Karma when the member has the opportunity to understand what to do with their debt to get access to financial products like credit cards, personal loans, insurance. Where they can get their taxes done, get help with what they can do with their money, get early access to that money, that customer then engages more and, and engages more because of the trusted benefits and the insights that they're getting, but also the fact that things are personalized, and we're doing it for them. And so that is what helps us then be able to accelerate taking market share that we that Sandeep and I talked about earlier. So that's a really important element to think about. It's not just about the health of the consumer. It's actually about what we are now doing for the consumer that is so far more advantageous for the consumer versus where we were just even a year ago, the two years ago. And from just a health perspective, you know, credit scores and balances are generally stable. You know, credit scores over the last several years have for the near-prime customers and subprime customers have gone down 10 plus points, but they've sort of stabilized. And credit balances and credit card balances, although higher for Gen Z by 20 to 30% now versus a couple of years ago, they've generally stabilized. So that's what we see from a consumer health perspective, but I think the most important is the innovation that I talked about earlier. Let me just also invite Sandeep to add a few thoughts. Sandeep Singh Aujla: Raimo, the only thing additional I would double down on is further that we're driving across the platform. It's that innovation that's helping our partners see better ROI of their spend on our platform, which is why we continue to take share. That's a tailwind into the business driven by innovation. Also from a consumer point of view, if the economy does get to a place where the consumer is under pressure, they'll be looking to a trusted platform to understand where they can consolidate debt on personal loans. Keep in mind, some of these near-prime customers, if they apply for a credit card, where they get dinged, they could become subprime and this is where our innovation such as Lightbox gives the customer the utmost confidence of their odds of getting approved. These are all innovations that are key to driving confidence and allowing us to continue to take share regardless of the macro environment. Raimo Lenschow: Okay, very clear. Thank you, both. Sasan K. Goodarzi: You're very welcome. Operator: We'll move next to Michael Turrin of Wells Fargo Securities. Please go ahead. Your line is open. Michael Turrin: Hey, great. Thanks so much. Appreciate you taking the Just a quick two-parter on the numbers, if I may. In terms of the QBO strength, you mentioned price is a leading factor there. So just any commentary you can add on how we should think about the shape of pricing on that line? Throughout the rest of the fiscal year? And then on margin, fiscal Q1 was very strong. 2Q was a touch lower than we were maybe modeling. So can you just also speak to expense timing and whether there are marketing-specific impacts to consider between those quarters as we're updating our forecast? Thank you. Sandeep Singh Aujla: Yes, absolutely. Hey, Michael, it's Sandeep. On the QBO side, we continue to see our innovation resonate with the customer and even after we did the price changes and the lineup innovation there last July, we saw that our customer attrition again came in below our expectations. So just highlighting how the pricing power we have as well as how well the innovation truly is resonating with our customers. And when we see some of this innovation, such as 45% of our customers telling us that they're saving up to twelve hours a month, that's a meaningful increase in the productivity of getting paid five days faster. A meaningful increase to the net working capital. So these I would highlight these as areas where we're driving innovation. And it's resonating. Pricing contribution is relatively consistent throughout the four quarters. And the other thing I'll point out on QBO is momentum we have as a point of the 40% revenue growth in IES. As well as in QBO Advanced that is a contributor to the accounting line on the online ecosystem. The second part of your question was around margin. So a couple of things I would point out there. If you look across the first half, we are actually ahead of what the Street expectations were on our margin. And what we saw for is for the full year and I continue to feel really confident in our ability to deliver on our commitments for the full year. There's always things any one quarter, for example, we learned from our consumer marketing this past year that allowed us to really hone in the timing of this spend between Q1 and Q2 to really maximize that ROI. So it's really our continued discipline in spend management making sure we're maximizing the money that we're driving with our spend that drove some of that shift. But look across the first half and you'll see that we are nicely ahead of consensus. On both revenue as well as EBIT. Michael Turrin: Appreciate all the details there. Thank you. Operator: We'll move next to Steven Lester Enders of Citi. Your line is open. Please go ahead. Steven Lester Enders: Okay. Great. Thanks for taking the question here and congrats to Kim as well. I guess I want to ask on the in-person, I guess, TurboTax experience that you're rolling out here. I guess, what's the hope or what's the kind of view of maybe how that changes, I guess, types of customers or could change the dynamics going through tax season here? Sasan K. Goodarzi: Yes. Thanks for your question. A couple of things I would say. This is really the strategy which is very consistent with what we've been talking about for several years to show up where the eyeballs are. And the notion of being in, you know, 600 locations and 20 stores, one of them being a flagship in New York is actually to be seen. When you do search, whether it's through an AI app or Google, or any other platform, that we show up locally. So that's a huge part of the strategy in terms of the type of customers and same customers that we serve today, this is about reach, and it's about access because what we have found is when we engage a customer and a customer finds us and we find the customer and we are where the customer is, we win hands down based on experience, price, and then access to money. So this is just based on our incredible progress last year. The incredible results last year. What you're seeing is we're just doubling down on winning in the assisted segment. And this is one key how to do just that. Steven Lester Enders: Thank you. Sasan K. Goodarzi: Yes, you're welcome. Operator: We'll move next to Brent John Thill of Jefferies. Your line is open. Please go ahead. Brent John Thill: Thank you. This is John on behalf of Brent Thill. Just kind of one question. So the advantage of Intuit Inc.'s platform is the ability to consolidate the dozens of apps for small businesses. I just wanted to see if you could talk about the progress there and then maybe compare between the small businesses versus the mid-market you reaching the potential? Thank you. Sasan K. Goodarzi: Yes, thank you for your question. It is really the essence of why we are winning. When you look at smaller businesses, they could have, you know, between three to 10 apps. When you look at larger businesses, they can have between 25 to 30 apps. And there's a real issue with that now more than ever where customers are spending more time trying to figure out what's going on in their business across all of these apps. They're actually spending more money than they did before. They're getting less value. Because they may have fallen in love with 34 apps. Then when they zoom out, don't know what's going on in their business. That's really been our strategy of a platform that helps customers from lead to cash but also a platform that does everything for customers. This is the power of data, AI, and HI. And ultimately being able to do everything for our customers. And so the acceleration that we are seeing across the board and particularly in mid-market and when you look at the results that we just talked about, which is online growing 20%, you've got mid-market growing at 40%. This is actually more and more customers and particularly the larger ones that see the value of having everything in one place, one because it can do the work for them. They get a better experience. But two, they may pay off more and more than likely they actually do. But they're actually spending a lot less, and that's a game changer for customers. And I think we're just based on all of our capabilities at the beginning of that cycle. It's another reason why you are seeing an accelerated set of partnership announcements with accountants. Because they actually see not only us being able to partner with them to help digitize their firm, through the Intuit Inc. accountant suite, which is a revolutionary platform we've launched, but also what we can do together to really digitize the clients that they serve. Because when clients use a lot of apps, it drives accountants crazy. And so this, this really is where the network effect comes in. Brent John Thill: Thank you very much. Sasan K. Goodarzi: Yes. You're very welcome. Operator: We'll move next to Bradley Hartwell Sills of Bank of America. Your line is open. Please go ahead. Bradley Hartwell Sills: Great. Thank you so much and I'll echo the congratulations to Kim on your next move. So many great agents in QuickBooks, this accounting agent, payments, customer, finance, the list just keeps going. Have you seen any one in particular or any use cases that you're seeing traction and what would customers say as to kind of the ROI, some of the savings here? Are there any that have surprised you that gosh, these are actually more effective than we thought and driving more value? Then what would that say about your kind of confidence and your ability to monetize these? Obviously, now it's through premium mix, eventually through separate SKUs. Thank you. Sasan K. Goodarzi: Yes. Thank you for the question. Actually love the nature of the question. Let me start with just a zoom out first and then I'll answer your specific question. The biggest thing that we continue to learn from customers is I need help for you to do it for me and with me. Because if you think about businesses of any size, unless they're an enterprise, they do not have all the resources that come with an enterprise to do data analytics to help. They don't have a large marketing team sitting around, a large finance team sitting around, a large data analytics team sitting around. They need help in terms of how to run their business. And really, that's where the power of our platform comes in, which is that can help them with making decisions, do the work for them, can do the work with them. By the way, when technology runs out of capacity, which it always will, that's where our human intelligence comes into play. So fundamentally, this is really, really important for customers, which has helped me get things done. It's by the way why they are always seeking advice in these AI apps. To get more specific, I'll just remind us with all of the AI agents we've been in the market for about four months, a lot more improvements, enhancements, and adoption. What we've seen in four months is one, the discovery and repeat engagement since we've launched is over 80%. And the two areas that are having the largest traction are the payments AI agent and the accounting AI agent. That's why we've cited the stats where with the use of the accounting agent, folks are saving twelve hours a month, which is significant and such as the time savings. It's actually the accuracy and the insights that they get. Second is that the customers that are getting paid five days earlier foremost, because we're learning literally every day in terms of how to make these more effective. Customers don't care about AI agents. They care about getting the work done for me, and that's really where I think the best is yet to come. Bradley Hartwell Sills: Very exciting. Thank you, Sasan. Sasan K. Goodarzi: Yes. Thank you. Operator: We'll move next to Taylor Anne McGinnis of UBS. Your line is open. Please go ahead. Taylor Anne McGinnis: Yes. Thanks for taking my question and Kim. Appreciate all the help these last couple of years and wishing you all the best. So I'd like to unpack the strength of the 2Q revenue guide. With the later start to the tax season this year and also a tougher Credit Karma comp, I think it would be helpful if you could just offer some additional color on the drivers of growth. Are there any segments where you're expecting growth to be more durable with the levels that we saw in 1Q or higher than implied in the full-year guide? Sandeep Singh Aujla: Hey, Taylor. In terms of the Q2 guide, it is a continuation of us continuing to execute on our strategy. The momentum that we saw in fiscal 2025 compared into fiscal 2026, you saw the Q1 results and you're seeing this in our Q2 guidance. Expect the momentum to continue its strength in GBSG online. We continue to expect strength in mid-market, continue to expect a CK offering to resonate with both partners and consumers. And on the TurboTax side, we're expecting similar to last several years that the IRS opens up towards the end of January. So that's our expectation going in. The couple of things that I would point out that we do expect desktop to start decelerating in the second half as we go from the 6% we saw in Q1 likely will be, you know, near the mid-single digits for Q2, but then decelerate in the second half. And on CK, in the second half of the fiscal year, the comps do get harder as we lap prior year's strong performance. But in the areas that are the key growth vectors for the company, you should expect us to continue to execute and continue to build upon the momentum. Taylor Anne McGinnis: Super helpful. Thank you guys so much. Operator: We'll move next to Arjun Rohit Bhatia of William Blair and Company. Your line is open. Please go ahead. Arjun Rohit Bhatia: Perfect. Thank you so much. Sasan, if I can just go back to the OpenAI partnership for a second. I know this is just about to come live, but I'm curious if you would just venture to take a guess on when do you think customers would use Intuit Inc. apps inside ChatGPT versus when they would use kind of core or use Intuit Inc. within your own application and use your Intuit Inc. intelligence capabilities, which also have sort of natural language answers and I'm wondering if in your perspective, if that makes a difference at all or if your goal is kind of just to drive increased engagement and maybe that drives more attach and of services and agentic adoption and all the other good things that come with increased usage? Sasan K. Goodarzi: Yes, thank you for your question. I'll start by saying companies that win will be companies that have platforms. And that they are where the eyeballs are. And that's really what we're doing with this partnership with ChatGPT. It's really for us. It doesn't matter whether the customer comes directly to using our platform or we are where they are within an app, in this case, ChatGPT. As I mentioned earlier, one, they get personalized experiences right within ChatGPT. Two, they're using our apps so the accuracy, safety, and privacy are all protected. There's unchanged. And we get to enjoy the economics that we enjoy today. So what we care about is actually being where the customer is and making it easy for the customer to have the experiences that they need to have. In terms of, you know, only time will tell. We being OpenAI and Intuit Inc. are going to absolutely nail this experience. It's going to be an amazing experience. And only time will tell relative to how much customers are at the end of the day, they're using an Intuit Inc. app, whether they're using it within ChatGPT, or they're directly coming to us, it really doesn't matter. I think only time will tell. The customer behaviors are. The good news is we're positioned for wherever the customers are, and that's what's exciting about this partnership. Arjun Rohit Bhatia: Perfect. That makes a lot of sense. Thank you. Sasan K. Goodarzi: Yes. You're very welcome. All right. I think that's all of the questions. Hey, before we end, I also want to thank Kim. She has been an amazing partner for all of us. Internally and she's made us better. And we are so fortunate to have had the opportunity, Kim, to work with you and the best of luck in your next chapter. And you're gonna miss all of our amazing earnings calls going forward, but we'll see you on the other side. And for everybody that joined, thank you for your time. We'll talk to you next quarter. Bye everybody. Operator: Ladies and gentlemen, thank you for participating. This concludes today's conference call.
Marc Ronchetti: Good morning, and welcome to our Half Year '26 Results Presentation. I'm pleased to be here to present a really strong set of results for the 6-month period, results which clearly demonstrate the enduring strength of our sustainable growth model and most importantly, the exceptional talent and commitment of our teams across the group. And I'd like to start by thanking everyone at Halma for their individual contributions that enable us to deliver consistent growth and positive impact. Carole will provide more insight into our financial performance shortly. But first, let me start with the highlights. As I said, it's great to report another set of record half year results, and I'm really pleased to see these results underpinned by strong organic growth. And fantastic to see the strong performance across all three sectors in addition to the premium growth of our Photonics business. We've also delivered a very strong margin performance and continued high returns on capital, and this supporting further substantial investment in the significant opportunities we see for future growth. And these results put us on track to deliver our 23rd consecutive year of record profit. Delivery of this financial performance demonstrates the power of our sustainable growth model, a model which has supported strong compounding growth and returns over decades, and a model which when combined with the opportunities we see in our markets, underpins my confidence in our continued long-term success. The strength of our model lies in the way that each of the elements are interlinked, aligned and complement each other. Together, they remain critical to the delivery of our performance, both in the short and long term, a topic which I'll come back to later in the presentation. But first, let me hand you over to Carole for more details on our financial performance. Carole Cran: Thank you, Marc. And a very warm welcome to everyone on the call. I'll be taking you through some of the detail behind this excellent set of results. First, let me give you the highlights. For me, these results are a great demonstration of what the Halma model can deliver. First, strong growth. We reported headline revenue growth of 15% and EBIT grew 27%. Excluding a one-off benefit in E&A that we've already flagged in our trading update, revenue grew 14% and EBIT 23%. And we delivered an exceptionally strong first half margin of 22.3%, up 160 basis points. I'll give you more detail of the drivers of this increase in the sector reviews. A fantastic performance, and as you will see, driven by organic growth broadly spread across our sectors. At the same time, we've continued to make substantial strategic investments to support our future growth. We've invested GBP 300 million in the first half, including nearly GBP 60 million in R&D, around GBP 130 million in acquisitions, and over GBP 100 million in CapEx and working capital to support growth in a number of our companies. While this investment resulted in cash conversion being below our KPI at 79%, we expect it to be more in line with our 90% KPI at the full year. All in all, a substantial level of investment, reflecting the significant growth opportunities our companies see in their markets and our confidence in continuing to deliver strong growth and returns. The strength of our financial model means that we've been able to make these investments while maintaining a strong balance sheet and delivering high returns. Net debt to EBITDA is essentially unchanged since the year-end at just over 1x, and returns have increased significantly, up 190 basis points to 16.2%, a very strong performance. All of this supporting a further increase in our dividend, putting us on track to deliver our 47th year of dividend increases of 5% or more. Now let's look at our revenue growth in more detail. This slide bridges the year-on-year revenue growth of 15.2%. Organic revenue growth was very strong at 16.7%. This reflected healthy growth broadly spread across all three sectors and a continued benefit from premium growth in Photonics, which accounted for around half of the organic growth. Most of the growth was volume driven with price increases averaging between 1% and 2%. There was a modest contribution from acquisitions of 1.6%, reflecting the number of deals completed in the last year. This acquisition contribution was partly offset by the disposal of AAI, which we sold in July. As a reminder, AAI's revenue last year was approximately GBP 42 million, so there will be a larger effect in the second half. There was also a translational currency headwind of 3.2%, primarily due to the weaker U.S. dollar. Based on latest currency rates, we expect a similar headwind for the year as a whole. Finally, the one-off benefit was equivalent to 0.9% growth. Excluding this, reported revenue growth was strong at 14.3%. Let's now move from revenue to profit and margins. EBIT was up 22.8%, excluding the one-off and a very healthy 22.7% on an organic basis. This was ahead of revenue growth and reflects margin expansion across all three sectors. Acquisitions contributed 3.1%, again, ahead of revenue, reflecting the quality of the businesses we have bought, while disposals were also accretive to margins. The currency headwind was similar to revenue at 3.4% and the one-off benefit of 3.9% completes the bridge. Moving on to the sector commentaries, starting with Safety. It was great to see further momentum in Safety following 2 years of double-digit growth. On an organic basis, revenue grew 6%, led by strength in the Public Safety and Worker Safety subsectors. This was partly offset by a mixed performance in the other two subsectors given some specific end market trends and customer project delays, notably in the U.S. Profit grew 16%, reflecting a 280 basis point margin increase to 27%. This is a historic high for the sector and was driven by four main factors: the sector's continued revenue growth; favorable portfolio and product mix; strong operational delivery and benefits from accretive acquisitions; and disposals. Our safety companies continue to invest at a good level to support their future growth, with R&D spend increasing by 11% to 6.1% of revenue. Turning next to Environmental & Analysis. This slide shows E&A's performance excluding the one-off. There's a slide in the appendix, which shows performance including it. The sector delivered an exceptionally strong organic revenue and profit growth of 36% and 38%, respectively. And it's really pleasing to see this driven by growth across all subsectors. Strength in Water Analysis & Treatment was driven by water infrastructure demand in both the U.S. and U.K. A strong performance in Environmental Monitoring reflected growth in U.S. gas detection and gas management in Asia Pacific. And in Optical Analysis, we saw continued premium growth in Photonics, reflecting increased demand from our long-standing hyperscaler customer. The profit increase of 38% on an organic basis included a 90 basis point increase in margin to 23.6%, driven by growth in all subsectors and continued cost discipline. At the same time, it was pleasing to see a good level of investment with R&D up 7%. Adjusting for Photonics, where development is part of the revenue we earn, R&D for the sector is at a healthy level at over 6% of revenue. And finally, it was good to see a strong 4.3% contribution from acquisitions, including Brownline and Minicam's bolt-on Hathorn. Now let's turn to Healthcare, which delivered a stronger performance compared to last year, reflecting good execution against a background of steady recovery in health care markets. This was supported by improving customer confidence and demand for solutions, which improve our customers' efficiency given increasing health burdens and rising patient backlogs. This resulted in good levels of organic growth in both Therapeutic Solutions and Healthcare Assessment, which together account for over 90% of the sector's revenue. Therapeutic Solutions saw strong performance in a number of surgical and respiratory device companies, although this was partly offset by continued softness in eye health therapeutics in Europe. Growth in Healthcare Assessment was broad-based with most companies in the subsector delivering solid organic growth. Sector profit was 10% higher and on a reported basis, up 8% organically. Margin increased 50 basis points to 21.3%, reflecting benefits from stronger revenue growth and improved pricing and mix. Our health care companies remain well invested with R&D at 5.4% of sales. Finally, there was a good contribution from acquisitions, reflecting the quality of businesses we recently acquired such as Lamidey Noury. I'll now talk about our cash flow and the balance sheet and how we've allocated capital during the first 6 months. The cash-generative nature of our companies means that we've been able to make a substantial investment to support our future growth while maintaining a strong financial position. Our first capital allocation priority is organic investment to support our long-term growth, represented here by investment through R&D and CapEx of GBP 93 million. Our financial strength means that we have also been able to support a number of our companies in making strategic investments in working capital. This resulted in a larger-than-usual outflow of GBP 75 million. Together with higher CapEx investment, this was the driver behind our lower cash conversion in the half, and we expect it to drive a stronger position at the full year. Our second priority is continued value-enhancing acquisitions, where we invested a net GBP 148 million. And our third is a progressive return to shareholders through the dividend, with GBP 53 million returned in this first half. In total, we've invested over GBP 300 million in the half to support future growth, both organically and through acquisitions. And our leverage has remained almost unchanged at just over 1x net debt to EBITDA. So before I look at our financial KPIs, let me briefly describe the M&A investments we've made this half year. First, Brownline, which is a fantastic purpose-aligned acquisition, which extends our strength in the trenchless technology market. Its location services deliver pinpoint accuracy underground for operators of horizontal directional drilling equipment. This is increasingly vital as utilities and data providers look to improve resilience and safety by burying their pipelines and cables. At the same time, they also want to reduce the surface disruption of digging trenches while safely navigating increasingly congested underground spaces. Brownline's best-in-class technology and deep technical know-how make a great addition to Halma. Next, Nu Perspectives, a small but strategic acquisition for our eye health assessment company, Keeler, enhancing its capability in cryogenic technology. This reflects a broader trend across Halma of our companies using bolt-ons to expand into adjacent markets and deepen their presence in existing nations. We also remain disciplined in managing our portfolio. The disposal of AAI reflects our commitment to continually assess our portfolio for strategic fit and to ensure each company contributes to our long-term ambitions for growth and returns. Looking forward, I'm confident we'll make further progress in 2026. We have a healthy pipeline of acquisitions and a good mix of deals by size and type, both bolt-ons and stand-alone acquisitions. Now let's turn to our performance against our financial KPIs. It's clear that this half year represents a strong performance by any measure, driven by broad-based growth and strong returns across all three sectors, combined with premium growth from our Photonics business. We are substantially ahead of our targets for organic revenue and profit growth, and delivered margins and returns well into the upper quartile of our target ranges. And while acquisition profit and cash conversion were below our KPIs, this principally reflects the dynamics in this specific half year. Over the longer term, our performance is ahead of our targets. So all in all, a very pleasing half year, but one that I'm aware comes from an unusual combination of broad positive momentum in both revenue and margins across all three sectors. Taking a longer-term perspective, this half year provides another proof point of what the Halma model can deliver. And these KPIs frame our ambition to deliver strong and compounding growth and returns over the longer term and further extend our strong track record against our targets. Moving on to my last slide on full year guidance. The strength of our first half performance across our portfolio, together with our current expectations for the remainder of the year means we have upgraded our full year guidance for the second time this year. While our companies continue to experience varied conditions in their end markets and the economic and geopolitical environment remains uncertain, we've made a good start to the second half of the year. For the year as a whole, we now expect to deliver mid-teens percentage organic constant currency revenue growth, including a continued benefit from premium growth in Photonics and an adjusted EBIT margin of around 22%. I'll now hand you back to Marc. Marc Ronchetti: Thanks, Carole. Fantastic to see the excellent performance against our financial KPIs and the further upgrade in our full year guidance. In this section, I wanted to take a step back from the results themselves and provide insight into the role of our sustainable growth model in driving our continued success. It's a model which has always been key to our past success, including in the first half of this year, and it underpins our ability to deliver compounding growth and high returns over the long term. You'll recognize the core elements of our sustainable growth model. In June at our full year results, I looked back over the last 50 years and shared how our model has been tested and proven to be resilient in a wide range of environments. And this enabling us to continue to scale through many different geopolitical events, economic cycles, technological advancements and changing market dynamics. And while our model continues to evolve, its fundamental elements remain at its core. Today, I want to highlight how our model enables one of Halma's most important characteristics, our ability to combine a long-term view with short-term agility. At Halma, we're guided by our clear and ambitious purpose and powered by long-term growth drivers that underpin our markets. And this enables us to think in decades and take a long-term view for determining the talent and capabilities we need or for the organizational model required to scale and when we're choosing the markets and opportunities in which to invest. If I take our markets as an example, we invest in markets with resilient, often regulatory-driven growth drivers that extend over decades. And our disciplined approach targets niches with high barriers to entry, strong societal benefit and sustainable demand, markets and niches where we enable our customers to tackle some of the biggest challenges we face today, better health care for everyone, clean air, clean water and how to keep us safe in our cities and in the places where we work. All of these fundamental challenges, which are intensifying, supporting our growth and returns for decades and giving us the confidence to invest ahead of the opportunity that's in front of us. And thinking in decades also enables us to continuously scan the horizon to identify long-term trends and reshape our portfolio to align with those evolving markets and technologies. And at the same time, our decentralized model and the quality of our leaders means that we're able to seize new opportunities. Agility is embedded in Halma's DNA. It enables us to respond quickly to fast-changing challenges and opportunities without losing sight of our long-term goals. Our model puts our companies close to their customers and their end market. And this gives our entrepreneurial leaders who are not dependent on other parts of the organization, the freedom to innovate and adapt rapidly to changing market conditions. This means that while maintaining their core long-term focus, they can also look for opportunities to apply their deep technical expertise to those faster-growing end markets for a period of time. Let me just bring that to life. Crowcon is applying its gas detection expertise into battery energy storage, detecting hazardous gases to protect these systems that provide critical backup power for sectors like health care. Sentric is applying its industrial interlock technology to keep assets and people safe in the fast-growing data center space. And Alicat's proven ability to apply its flow and pressure control expertise to many different fast-growing end markets. Just a few examples of how our companies are always looking to capture emerging additional growth opportunities. And this combination of long-term thinking and short-term agility is a powerful combination. Let's look a little bit closer at how we can maintain our agility as we continue to scale. And this is why we insist on talented entrepreneurial leaders with the ambition to act quickly and to innovate. Our structure enables fast decision-making. And by having our companies close to our customers, they can anticipate and adapt their changing needs. And this focus on the long term alongside the importance of agility means that we're constantly balancing seemingly contradictory requirements at the group sector and the company level. At Halma, we see these as complementary. It's not either/or, we call it yes/and. It's embedded in our DNA and our sustainable growth model. It's part of our culture and a source of our strength. Our leaders have the autonomy to grow their business in the way that's right for them, and they are held accountable for delivering that growth. Our leaders are focused on delivering this year's results, and they're focused on where the growth is going to come from 5 years from now. Our companies have the agility and speed of SMEs, and they get the benefits of being part of a global group. And it's this ability to combine the long-term and short-term agility that enables us to capture those fast-growing emerging opportunities with pace and invest ahead for future growth. And it's this same approach that we're adopting through this period of premium growth in Photonics, a great example of everything that I've just said. When we first acquired the company in 2011, our long-term view recognize Photonics as an enabler of technologies across many end markets. We could also see how the company was showing exceptional agility in capturing growth opportunities by accessing new faster-growing markets, a consequence of great leaders and deep technical expertise. And one of these opportunities has led to a period of over 10 years of working closely with their hyperscaler customer. They're using their substantial application knowledge to support their customer with the development of a relatively small but critical component of a wider solution in data centers. Our model allows us to maximize the opportunity with the customer while remaining focused on the continued delivery of our group strategy of sustainable compounding growth and returns. And this outstanding delivery in the short term through excellent local execution allows us also to reinvest for the long term to enable future organic and acquisition growth. Investments in innovative R&D at our companies in building out our teams for scalability, in our M&A capability and in the addition of great value-added acquisitions such as Brownline. As we heard from Carole, Brownline, another great example of a fantastic acquisition underpinned by long-term growth drivers. Urbanization, the need for resilient infrastructure, including water, electrification and the rollout of fiber and data networks. And this combination of a long-term view and short-term agility is critical in the continued delivery of our strategy. Being invested in niche markets underpinned by long-term growth drivers and having that org model and culture that gives us the ability to operate with agility is a fantastic start point. However, it's our talent that is the enabler and the multiplier. We structure for growth and agility, but it requires leaders and a culture that can realize it. It's our entrepreneurial and ambitious leaders that maximize our potential. And the criticality and therefore, the focus on talent isn't new. It's been there since the beginning, embedded into Halma by our founders, David Barber and Mike Arthur. In fact, it remains such a critical element of our model that we brought together all our MDs and presidents for our Accelerate event last month. And we spent 2 days solely focused on how we, as a leadership team, can all become even better at spotting and developing talent to help maximize Halma's potential. A truly inspiring event and a demonstration of how our great individual leaders benefit from the power of our network. But don't take it from me, let's hear from some of our leaders on why talent is so important to their businesses. [Presentation] Marc Ronchetti: Some fantastic comments from our leaders in the video, illustrating just how important talent is at every level of our business, both Alex and Alan capturing why talent is critical to seizing those faster-growing opportunities. Robert picking up on the importance of accountability driving that ownership mentality, and Natalya on why we've been able to attract and retain fantastic talent and the ability for them to make an outsized impact at Halma. As you heard from the video, we create a culture where leaders can thrive. This is what enables us to keep scaling and maintain our culture as we grow. And it's why we continue to invest in our people and our capabilities to support our future growth. For example, we've grown our M&A teams, and we've added two new Divisional Chief Executive roles over the last year. Our DCEs are critical to our growth. They're responsible for acquiring new companies and then they chair those companies once they join the group. So the strengthening of both of these teams gives us greater capabilities to find more companies and the ability to continue scaling. We also continue to invest in our development programs and our graduate scheme, the Catalyst Program, both critical in enabling us to grow and develop our own future leaders, ensuring that we maintain our culture as we continue to scale. And it's really pleasing to see those investments bearing fruit. For example, we heard from Alan in the video, who's one of three company MDs that have come through our Catalyst Program. Also the continued strength of our organic growth, a direct result of our continuous investment in R&D and the acquisition of Brownline, a result of the targeted investment in setting up a dedicated E&A sector M&A team when we transitioned to our three sector structure 4 years ago. So bringing it all together, Carole described the strength of our performance in the first half of 2026, another record result delivered in varied markets. You've heard how this continued success is enabled by our sustainable growth model, a model which enables us to take a long-term view, staying focused on and investing in capability needs and structural growth drivers, and a model which gives us that agility to capture emerging opportunities and mitigate risks. It's a model amplified by the exceptional talent at Halma, accountable to deliver long-term sustainable growth and empowered to act with agility to capture those short-term opportunities. A model that continues to deliver consistent, sustainable and compounding growth and returns. And a model that underpins my confidence in our ability to continue to deliver for decades to come. And that's the end of the presentation. And now we have time for some questions. Marc Ronchetti: As ever, there's two ways that you can ask your questions. You can either raise your hand using the tool at the bottom of your screen, and I'll invite you to ask your question verbally, or you can type the question which Carole and I will read out and then answer. So Bruno, let's come to you first. Unknown Analyst: The first question is just on the strong growth seen in E&A this half. And it relates to -- I guess, the growth in Photonics was good to see. But what was more surprising for us actually was the very strong implied growth in E&A outside of Photonics, which we calculate to be roughly around 17% to 18% on an estimated organic basis. Could you maybe just speak to the drivers of that a little bit more? So why was gas detection so strong in the U.S. and gas management solutions so strong in APAC and also the water infrastructure market? Marc Ronchetti: Yes. Great. Thanks, Bruno. As you say, really pleasing to see that broad spread growth, not only in the E&A sector, but across the whole group. I think that really is the story of these results in this 6-month period. Picking up on the specifics of your question, again, really pleased to see growth across all subsectors within Environmental & Analysis. As you say, Optical Analysis, very strong with that exceptional growth from Photonics. Beyond that, spectroscopy was mixed. We saw some recovery in certain end markets around semiconductors, personal electronics and other OEM customers, but slightly weaker in areas such as biopharma. But again, no real read across there. It's a really small part and pretty specialist in terms of what we're doing. Within Water Analysis & Treatment, yes, great to see the strength of the performance in Water Analysis. That was driven really by water infrastructure demand in the U.S. and the U.K. We also saw a recovery in water testing and disinfection. So again, there's still a bit of uncertainty certainly in the U.K. as we transition through the AMP cycles, but good to see the recovery come back and that underpin of the demand. And then finally, to your point in Environmental Monitoring, strong across both Environmental Monitoring and gas detection and analysis. We've seen that really, as you say, notably in the U.S.A. There is a little bit here just in terms of the specific companies have got a few more projects in them. So there's a bit of phasing in terms of the number of the projects, but growth across all regions in gas analysis. So net-net, a really strong performance. Always worth just remembering within that, it is a 6-month period and some of those are a little bit more project-based. But strong underlying growth and also actually pretty unique to have all of the subsectors moving forward in the same 6-month period. But net-net, really pleased with the wider performance. Unknown Analyst: That's very clear. And I guess just a follow-up on Photonics. And I know you're limited in terms of what -- but I was wondering if you could help us understand the driver of acceleration in the half a little bit more. So more specifically, are volumes for Photonics simply scaling up with CapEx or investment like your customer? Or is it more complex than that and you're perhaps taking share of CapEx wallet at the same time? And then finally, maybe a little bit on how you expect this relationship to evolve in the coming years. Is the base case that you just, again, simply scale with investment at your customer? Or is it more complex than that? Is there a replacement angle that we should factor in or again, share gains in terms of customer wallet? Just some thoughts around that would be super useful. Marc Ronchetti: Yes, I'll sort of pick up on the specifics. But I think before I do that, I mean, there's no doubt going to be a few questions on Photonics. As I said at the outset there, I think the big message from today is the wider performance of the group, really pleased in terms of what we've delivered. I guess for me, we're now here executing what we said we were going to do sort of 6, 9, 12 months ago, and that is we're maximizing the opportunity in front of us. So a phenomenal job by the team in the company in terms of execution and really scaling what is complex manufacturing. We're then continuing to deliver a strong performance in the rest of the portfolio and then using this period of premium growth to reinvest for future growth. So really good to see that coming through. To your point then more specifically, we're going to get some questions on Photonics. So it's probably worth me just giving a few reminders, setting a bit of background and then coming back to your specific questions. Firstly, as a reminder. As you say, we have got customer confidentiality to work through here. So I'll be a little bit guarded. I think we have been increasing our disclosures, but we've got to be careful and adherent to the confidentiality. Again, as a reminder, a business we acquired back in 2011, around GBP 4 million of revenue at that point. And as I said in the presentation, we've recognize that Photonics had many use cases. We've recognized the quality of the team and the technical expertise. And our org design means that they've had the autonomy to look for those opportunities. And then within the business, and we've talked about it before, the drivers of success and their core characteristics are largely the same as many other companies, if not all the companies in the group. So they've got that agile and entrepreneurial talent, still the founders, in fact, in this instance. They're very close to the customer. In fact, it's an embedded relationship. We work closely with all parts of the team with the customer, including the R&D team, and that's a relationship that's been embedded for over 10 years. And as I say, we've got significant technical skills. We're solving a really complex problem, and it's highly complex manufacturing of what is a small but critical component. So a bit of a reminder there in terms of the background. I've talked to how we're managing it in the group. I guess taking a view at the wider market, which will feed in a little bit to your point in terms of how do you scale is it linked to CapEx. There's no doubt there's lots of commentary and a wide range of views across a number of topics in and around AI, in particular, whether that's valuations, economics of investment, timing and scale of investment. And there's no doubt there's a lot of investment going in and around and a lot of interest in and around AI. I guess we look through the short term there. And if you think about the adoption of AI, in particular, whether that's in our daily lives at home or at work through productivity, automation, innovation, all of that continues to happen. I think it's been referred to as transformative technology in the last week or so. And there's no doubt that we're aligned to that point around compute demand accelerating. So if you've got an underlying demand for compute, then underneath that, that shift is going to require infrastructure and investment. And that's where data warehouses come through. So again, I'm sure lots of different views as there are out there around the absolute scale and timing of that build-out. But fundamentally, as I say, there needs to be a foundation in an infrastructure. And I guess if you take a more specific focus on data centers, there's that real focus at the minute on speed, on latency and more and more now on efficiency and energy consumption. So it's likely that Photonics can play a role in solving some of those problems. So net-net, and we can talk about kind of short-term forecast and all of those things, regardless of absolute scale, regardless of precise timing, we still see that medium-term demand in terms of the operations. All of that said, we mustn't forget that it is a very dynamic market. Whether that's the technology, whether that's the demand cycles. And specifically, again, as a reminder, for our business, we are operating on that 10-year relationship. It's PO-based. We've got sort of 6, 12 months of visibility, but fundamentally, not a contract in place because of that embedded nature, because of the strength of the relationship. So a lot of information there, but hopefully, it just means that everyone on the call is in the same place. Coming back then to your specific questions. As you know, we've been working with the customer for over 10 years. It's iterative in terms of the innovation. We continue to innovate with them. And we grow with them, to your point. So their CapEx investment, what they're investing, we're investing with the customer. In terms of the potential for replacement and upgrade, absolutely, that remains potential in fast-moving innovation, fast-moving technology. We haven't seen that as yet. But clearly, as you take a much longer-term view, there is that opportunity potentially. But again, I'd just come back to that thought around the dynamism in the market, the shifts in technology, et cetera. But certainly, as we sit here today, I think the team are doing a fantastic job locally of executing. And I think the rest of the group are doing an excellent job in terms of continuing to deliver that long-term growth and compounding returns. Unknown Analyst: Very much appreciate it. Maybe just a final one on Safety and the very strong margin that we saw in the first half. And I appreciate that a 6-month window is narrow when it comes to assessing profit margins. But I guess, could you just help us a little bit more with unpacking just why the margin was so strong? Were there any mix elements or anything else that we should be aware of? And just a little bit around how we should be thinking about the trajectory of the safety margin from here? Carole Cran: Bruno, Carole here. I hope you're well. Yes, I mean, as you say, I mean, first and foremost, across all three sectors, a brilliant job in the 6 months and great execution across the piece. As you rightly point out, it is a 6-month period. And so we would never be suggesting that you take 6 months as sort of inferring longer-term trends. And I think it's worth saying as well, it is actually quite unique that we have all three sectors growing with margin progression in a 6-month period. To your specific point on Safety, I mean, as ever in these explanations, there's a number of factors and variables. I mean, as you know, Safety has come off the back of 2 years of double-digit growth. So there's continued momentum through the top line. There is a bit, as you alluded to around, product and portfolio mix in there. And I suppose as we look forward, taking those points. While Safety is well invested, the reality is that you don't grow at that rate without having to then step up your investment further to make sure that you can sustain that growth. So as we look forward into the second half and beyond that, that's our thought process. And as we've said many times before, we're not in the business of chasing the margins higher. It's more that combination of keeping the margin strong whilst keeping the top line moving, too. So a couple of small examples for Safety. You heard Marc talk about two new DCEs in the group. One of those is Safety. You've heard Marc reference investment in M&A. Again, that's the sort of thing that Funmi and the team are thinking about. So as you look forward, think about the need for that additional investment. And I think also worth saying and not something that we major on because it's not a big spend for us, but CapEx-wise, one of the bigger CapEx investments this year is in one of our biggest safety companies where because they've been growing strongly, they're needing to expand their facilities. So that same thought process and logic applies to some of our other safety companies, too. Marc Ronchetti: Thanks, Bruno. So just looking at the list. Jonathan, we'll come to you, Jonathan Hurn. Jonathan Hurn: First question is just coming back to Photonics, Marc and some of the comment or one of the comments you made there just in terms of the visibility. Obviously, you have visibility on the revenue, I think you alluded to through the second half of this year. Can you just talk about the revenue visibility into your next fiscal year? How much of it or how much visibility do you have on '27? And then also just maybe sort of following up on Photonics. Just in terms of the customer exposure, obviously, you've got one key hyperscaler customer. Have you made or are there any efforts within the Photonics business to widen that exposure, maybe get some more customers on board? Essentially, that's the first question. I know it's got certainly two parts. Marc Ronchetti: Carole, do you want to pick up on the first point, and then I'll do the strategy on customers? Carole Cran: Yes, absolutely. Jonathan, I mean you've heard us reference, if we just take half 2 '26 first in terms of the visibility on Photonics. So we've spoken about the premium in the first half being about 8 percentage points of the group growth, and we're expecting similar for the second half. I mean beyond that, you heard Marc obviously articulate and remind everyone the whole position with this customer and how dynamic the market is. And whilst we do get a forward view from the customer for the next 12 months, I think it's fair to say that we would -- we consider that to be directional. And so I suppose coming back to Marc's description clearly, we'll guide for the whole group next June. But the way that I would sort of encourage you to think about the Photonics opportunity at the moment is that we would envisage it being a tailwind going into FY '27. Marc Ronchetti: Thanks, Carole. And Jonathan, just picking up on that point around the customer. As you say, we've got that strong long-term relationship. At this moment in time, strategically, we think it's the right thing to continue with that relationship from a commercial viability perspective. As I say, it's more than just that transactional relationship, that embedded nature and insight from the R&D side, we believe, is a good place to be. That said, both within the individual company, but also the sector in the group, clearly, we're looking at other opportunities to diversify. The reality is with the team and the scaling up, I mean, that is just a phenomenal job in the amount of time that takes -- that's proving difficult locally, but they have set up separate teams, and they'll continue to look. And then as you've heard today, we're doing a great job at the E&A sector of wider areas to look out. We saw Brownline coming in, and then the wider group continuing to grow. So as I say, strategically, today, it's maintained, that customer relationship, but options are always open as we go forward, and we're looking for other opportunities. Jonathan Hurn: Great. Very clear. If I could just ask a second question, just on Healthcare, please. First part of it was just on Life Science. Obviously, a smaller part, probably sort of 10% of the division, but it's the one area that's struggling. Just your views there, when do you start to think that will recover? Do you think that's potentially going to come through in H2? And the second part was just on the margin really. Obviously, we're a long way from the peak in that. Can you just give us a feel for how you think that sort of margin develops for Healthcare going forward, please? Marc Ronchetti: Yes, I'll pick up the first point around Life Sciences. As you say, it is a relatively -- well, it is a small part of the group, relatively small part of the Healthcare portfolio. And particularly, what we're doing there is mainly around specialist pumps, valves and manifolds. We've seen a mixed performance. We've actually seen pretty strong growth in the U.K. and Mainland Europe and then offset by a decline in wider Asia Pacific. But again, it's difficult to read anything into that fundamentally. I wouldn't do a read across anywhere in terms of other businesses in this arena. The reality is, again, we're starting to see a recovery. We're starting to see a bit of confidence in customers. I think we're through the destocking, but we're not at the stage that I'd want to say we were back to normal levels of demand just yet. Carole, if you pick up on that? Carole Cran: Yes, sure. And then on the margin point, actually just picking up what Marc said there, Jonathan. So we're characterizing it as a continued recovery. And there's still some uncertainty clearly in some of the markets. So Steve Brown, our sector CEO and the team are doing a great job and in particular, in the more challenging period sort of last sort of couple of years or so have been quite measured in terms of investment, although not underinvesting. So I suppose in the mix of making sure that we're investing into the recovery and the growth, we would expect to see the margins continue to move forward back towards historic levels. But I think you should think of it as progressively getting towards that point. Marc Ronchetti: Thanks, Jonathan. Just looking at the list. So, if we now go to Christian. Christian Hinderaker: I want to start on Photonics, perhaps unsurprisingly. And apologies if this is a naive question, but you've mapped the macro. As we think about the actual product set, how do we think about useful life of what you sell? And is it a fair assumption to assume that effectively any of your sales are really greenfield data expansion rather than, say, upgrades in existing facilities? Marc Ronchetti: Yes. I've got to be a little bit careful here, Christian, in terms of the confidentiality. I'll just come back to the point that I made to -- I think it was Jonathan's question. At this moment in time, we believe that a lot of that demand is CapEx and build-out. But we do believe that haven't seen it yet, but just by natural instance of the pace of change and the increase in innovation, there may be a replacement cycle. But as I say, we're not seeing that yet, and this is a dynamic market. So I certainly wouldn't want to pin any future definite guidance on that at all. Christian Hinderaker: And maybe pivoting to the Safety business. I was interested in your regional growth commentary there, marginal growth in the U.S., which compared to good growth in the U.K. and it seems strongest growth in Mainland Europe. Curious what's driving that distinction. It seems to be a bit at odds with maybe broader macro trends. Carole Cran: Christian, Carole here. Yes, I mean, I think as you probably heard us say before, we don't particularly sort of focus on the explanations around the geographies. And you have heard us reference the particular strength in public sector and worker safety. So that's really what you're seeing coming through the geographies. So nothing that we would consider to be structural, I suppose. And yes, I mean, really sort of one of our bigger business, bigger safety businesses is doing particularly well, which is benefiting the European numbers. And then in the U.S., for example, we talk about the other two subsectors being a little bit softer in Infrastructure Safety and Fire Safety. Some of that is in the comps where there was a couple of bigger projects last year. So I suppose in the round and I guess the genesis of your question about whether there's something more structural by geography, then no, we're not seeing any discernible trends that would indicate that. Marc Ronchetti: Christian, I'd see you've got a written question. So maybe we just pick that one up as well. And if I just read that out to the Brownline acquisition sits among the top 3 deals by size over the last 20 years. Does this reflect an appetite to do more medium-sized acquisitions? Secondly, when we think about those M&A ambitions, does the increased concentration of sales from Photonics affect your preferences across the segments? So I guess if I just pick up the second part of that first, not necessarily. We're open for business across all of our sectors, all geographies. So it isn't that we're looking to avoid certain areas or double down in certain areas. We're looking for those opportunities much through the lens as we always do with that disciplined approach that we have to M&A. From a deal size perspective, I guess the reality is as we continue to grow, we do get a higher level of confidence in our ability to bring value to larger companies. So those businesses at the top end of our portfolio around sort of that GBP 30 million, GBP 40 million, GBP 50 million of EBIT, they're still growing at the same rate as the rest of the group. So we've got confidence that we can bring value to those businesses. All of that said, with our aspiration at 7.5% each year on M&A, take that on GBP 0.5 billion, we're looking to acquire GBP 40 million next year, double that in 5 years, double again. It's a long, long time before you have to do anything transformative. So I think we've got the opportunity, we've got the appetite. I think we've -- as we've seen before, we've got the opportunity to do even more bolt-ons as our companies get bigger by size and they use bolt-ons to deliver their own growth strategies. But at the same time, we've got that confidence to do bigger deals than maybe we have done historically. But I don't see it as a significant shift in strategy, it's much more aligned to us being clear on the value we bring and having confidence in those future cash flows. No worries. Thanks, Christian. So is there anyone else just on the call? Dylan, I can see you've got your hand up. Dylan, on mute maybe. Dylan Jones: Apologies for that. Can you hear me now? Marc Ronchetti: Yes, perfect. Dylan Jones: Just another follow-up on Photonics and obviously, being appreciative of the fact that you're limited somewhat to what you can say. But I'm just wondering if there -- along with product sales, there's also opportunities for service and maintenance sort of post sale, particularly with this hyperscaler sort of customer in the aftermarket that could potentially sort of help smooth the growth trajectory over time. Obviously, I understand that the market dynamics are incredibly favorable and they look favorable for the foreseeable future and perhaps getting a little bit or perhaps a little bit early to be thinking about this. But just sort of wondering what levers are within that Photonics business' control to sort of deliver a sort of steady return or normalized sort of growth rate in the longer time, sort of avoiding that sort of sharp drop off, if you will? Marc Ronchetti: Yes. I think, unfortunately, what we're talking about here, Dylan, is kind of hypothetical in what is a very dynamic market. I guess I would just come back to three points there to think through. One is just the embedded nature in the long-term relationship. Two is the real -- and I just cannot undercommunicate the real expertise that we have in our company in terms of the use of photonics and the application in solving the problems. And then finally, I think coming back to that point I made earlier, if you think about kind of the need for increased speed, the need for increased energy efficiency, there's quite a bit of commentary out there that Photonics potentially has a role to play. So you put those things together, and I think you come back with hypothetically, but I certainly wouldn't want to be sitting here today making a call for something 10, 15, 20 years out. Dylan Jones: No, I appreciate that. And one last question. I think you sort of guided for, obviously, the step-up in CapEx. You kind of alluded to there's a bit sort of going on in Safety, but also the sort of corporate cost line, I think you've guided to be just a little bit higher. Should we sort of think about that as the sort of recent investment in the M&A capabilities? Or is there some other investment going on in the sort of corporate cost line? Carole Cran: Dylan, I'll take those. Yes, and I'll pick up actually on your CapEx point as well, which is well made. Yes. So we've moved our CapEx guidance up by about GBP 5 million. So the majority of that actually relates to Brownline, which is obviously a good news story because it means that the prospects are good, and it's something that we envisaged in completing the deal. So that addresses the CapEx increase. And then on the central costs, they tend to run around 2% of revenue and the slight increase is a bit of a mixture of things actually, a little bit more into the central costs that support M&A. So for example, we support centrally the integration activity of new acquisitions and also more specialist areas around tax advice and those sorts of costs. And then the broader sort of theme of technology, also make sure that we're well invested in the center around areas like AI that Marc has obviously been talking about and what that can mean for us as a group, and also the ever-present investment that is required in things like cybersecurity. So hopefully, that gives you a flavor of what's driving those. Marc Ronchetti: Thanks, Carole. That nicely answered a written question from Rory as well. But Rory, put your hand up if it didn't cover it, but I think it did. So I think we've got time certainly for one more question. Bruno, is your hand up for a new question? Or is that a legacy of having the first question? You're on mute as well, I think. Unknown Analyst: Just a follow-up question really around reinvestment in the group. I was wondering how you think about reinvestment during a period of premium growth in one area and allocation across the portfolio of the group. So do areas outside of Photonics essentially disproportionately benefit during this period? And so does your confidence of strong growth in, say, Safety and Healthcare actually start to increase as you look towards the following years? Or is it that your investment plans remain largely unchanged regardless of where the premium growth is occurring? Marc Ronchetti: Yes. It's a good question. I think the philosophy, certainly from an R&D expenditure is it's largely unchanged. That's very much bottom up. We've never restricted capital to the individual business. It's our #1 capital allocation priority in terms of R&D spend. So that doesn't necessarily change. We're not saying no to businesses. There's an opportunity there to invest. I do think to the point that Carole just alluded to, there's a bit of investment that we can do in the M&A teams. There's a bit of investment that we can do in the sector teams. And of course, the other opportunity, as we've talked to many times, is the opportunity to accelerate M&A, which, again, you make those investments, we cannot lose the discipline. So I think net-net, absolutely, that's part of our strategy, how do we reinvest through this period of premium growth to give us that future compounding growth. But I don't think it is specifically to the point in R&D per se. It will be more around M&A and anything that we can do at the sector level because, as I say, the R&D is very much bottom up and open for everybody. Unknown Analyst: Got it. That's very clear. And just a small, I guess, clarification. When we speak around orders growing year-over-year and positive book-to-bill, does that hold for, I guess, Photonics and also outside of Photonics? Carole Cran: Yes, it does, Bruno. Marc Ronchetti: Excellent. Thanks, Bruno. And thank you all. I don't see any other written questions, and I don't see any hands up. So many thanks, and have a great morning, and we will speak to you soon.
Operator: Welcome to the Soitec Half Year Results 2025, 2026 Presentation. Today's conference will be hosted by Pierre Barnabe, Chief Executive Officer; Albin Jacquemont, Chief Financial Officer; Steve Babureck, EVP, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations. [Operator Instructions] Now I will hand the conference over to Pierre Barnabe to begin today's conference. Please go ahead. Pierre Barnabé: Hi, everyone, and welcome to Soitec H1 '26 Results Conference. I'm Pierre Barnabe, Soitec's CEO, and I'm very pleased to be with you today as well as with Albin Jacquemont, our Chief Financial Officer; Steve Babureck, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations. Before we begin, please take a moment to read the disclaimer included in this presentation. We have a lot to cover today. But before we start the formal presentation, let me share a few words about the current fiscal year. Fiscal year '26 is a special year for Soitec. As you know, I have decided to leave the company at the end of March after 4 years, and I personally recruited Albin as our new CFO, giving him a clear mandate to strengthen our financial discipline and clean up our balance sheet. This job has already been done and done very well. H1 '26 reflects that discipline and the priorities we set back in May, meaning focus on what we can control, give absolute priority to cash and take deliberate sometimes tough, actions to correct inventories and improve cash conversion. These actions have been fully launched, but the impact has just started to materialize. We are being methodical and sequential, managing our own inventories, optimizing working capital and adjusting our cost structure accordingly, while maintaining selective investments in strategic areas. At the same time, we are progressing on multiple fronts, expanding our product portfolio, preparing for new end markets and rolling out our new client and product-centric organization, which positions us to capture the next phase of growth. Our incubators introduced last May are also delivering promising results. We are identifying significant opportunities as key players explore SOI for advanced computing applications and memory. This is a large and fast-growing market, and we are at the forefront of materials innovation, combining cutting-edge R&D capabilities with the ability to industrialize rapidly and produce at scale, a unique differentiator for Soitec. These initiatives comes with a high risk reward profile. So we will remain prudent in our commitments until we see clear customer engagement. That said, recent developments confirm that our efforts are well targeted and aligned with where the market is heading. As you will see, I have asked the teams to continue executing this disciplined plan, combining financial rigor and strategic focus, so that Soitec emerges stronger and ready for its rebound. Let's begin with the main highlights of our first half -- first year -- first half year. Our H1 '26 performance reflects the actions we have taken to strengthen cash generation with lower production volumes to support the reductions of inventories. Revenue reached EUR 231 million, down 29% organic, compared with last year. Our 34.1% EBITDA margin mainly reflects the smaller revenue base and a temporary increase in inventories supported by continued volume production. Initial cost measures have had a limited impact so far, as expected, given their recent implementation. Their benefits will start to materialize in the coming quarters. Finally, our EUR 26 million operating cash flow reflects our effort to reduce production volumes to correct inventories and a temporary increase in working capital as inventories rose in H1 to support our H2 deliveries, partly offset by lower CapEx. Looking at revenue by quarter. Q2 confirms the expected rebound from our low Q1 '26 with a 47% sequential organic increase. Our first half revenue reflects different dynamics across divisions, strong growth from AI-related products with the Edge and Cloud AI division, up 34% organic year-on-year, excluding the impact of the anticipated major SOI phaseout, offset by continued weakness in mobile and automotive. Let's start with Mobile Communications. H1 revenue reflects the continued inventory correction at certain foundry customers as anticipated. RF-SOI inventories remain high, but they are going in the right direction. We expect further correction in H2 '26 and fiscal year '27. We also continue to expand beyond RF-SOI. POI remains a major growth driver with 11 customers in production and 12 in qualification. While we saw a temporary slowdown in Asia after a very strong initial ramp last year, adoptions continue to expand among leading fabless companies, supported by new design wins for flagship smartphones. Beyond RF-SOI, we continue to make solid progress in next-generation communication product with FD-SOI adoption advancing in Wi-Fi 7 SoCs for premium smartphones, confirming our position in future communication architectures. We are also progressing in our 18-nanometer FD-SOI road map as shown by the announcement on Tuesday of a design win from a key customer. FD-SOI technology brings advanced low-power computing with high level of reliability, which is critical for satellite communications applications. Our Edge and Cloud AI divisions continue to show strong momentum. In the first half, revenue reached EUR 96 million, flattish organic year-on-year, but up 34% when excluding the anticipated Imager-SOI phase-out, reflecting robust demand for AI-related products. The increase was mainly driven by higher Photonics-SOI sales, benefiting from AI-driven investment in data center infrastructures and by strong demand for FD-SOI across both edge and cloud applications. On Photonics-SOI, we are leveraging the AI acceleration across the industry, supported by large-scale CapEx investment. The technology stands out as the most efficient solution for high-speed optical interconnects, including co-package optics, which enable faster, more energy-efficiency and cost-effective data center architectures. Photonics-SOI continues on its fast growth trajectory from a very low point in fiscal year '22 to approaching $100 million in revenue for fiscal year '26. On FD-SOI, our product portfolio continues to expand, supporting new generations of AI computing devices and edge applications with strong customer engagement and committed capacity investments. On Imager-SOI, we completed the phaseout of first-generation product in H1 '26, which represented an impact of around $32 million. Residual purchase order in Q2 '26 generated a few million euro revenue. Let's move to Automotive & Industrial, where market weakness continues to weigh on activity. In a challenging automotive context, we continue to see increasing adoption of our products and rising content per vehicle, driven by infotainment, autonomous driving, functional safety and electrification trends. Power-SOI sales were impacted by inventory adjustment at customers following a strong restocking at the end of last year. We are preparing the transition to 300-millimeter to meet growing demand for battery management systems and vehicle electrification applications. FD-SOI adoption continues to progress, supported by leading foundries and IDMs, developing automotive solutions for ADAS and edge computing in radars, microcontrollers and wireless connectivity. On SmartSiC, we have revised downwards the market perspective set. When Soitec launched the program in 2021, reflecting intensified competition from Chinese monoSiC players. We are continuing to qualify 5 customers. While we are seeing growing interest in SmartSiC's efficiency benefits for next-generation power supply and data center applications, these opportunities are unlikely to materialize in the near term. Let me now say a few words about our new organization, which the entire Executive Committee has been working on for several months. This new client and product-centric structure strengthens Soitec's readiness to expand into new SOI and beyond SOI end markets and applications. It is built around 4 key pillars: one, the acceleration of our product portfolio expansion and diversification, structured around 5 established product lines, already industry standard or on their way to becoming SoCs, FD-SOI, Photonics-SOI, RF-SOI, POI and Power-SOI. Recent progress on the product development front supports our strategy to enter new markets and new applications with SOI and beyond SOI. Two, a more balanced customer, supplier and geographic base, expanding our ecosystem influence. Three, an innovation powerhouse driven by more targeted R&D investments focused on future growth opportunities; and four, agile industrial capacity management, ensuring optimized utilization of our state-of-the-art production tools and greater asset fungibility across sites. Let me now leave the floor to Albin for the financial review. Thank you, Albin. Albin Jacquemont: Thank you, Pierre, and good morning, everyone. Let me begin with the key financial highlights for the first half, some of which Pierre has already touched upon before taking you through the details of our financial performance. As Pierre mentioned, we have mandated teams across the organization to reinforce financial discipline and accelerate the cleanup of our balance sheet. I will update you on the progress we have made on this front. Our first half results reflect the deliberate actions we have taken to initiate a reduction in inventories in the second half of the year and to strengthen cash generation, all while maintaining close oversight of customer demand and inventory levels. We delivered revenue in line with our first half guidance, although organic revenue declined 29% year-on-year, reflecting continued complexity of the market environment. Our EBITDA margin improvement is largely attributable to a lower revenue base and should be viewed in conjunction with a temporary increase in inventories, supported by ongoing production volumes. Our net result was minus EUR 67 million, primarily reflecting nonrecurring items including the SmartSiC impairment and the one-off noncash foreign exchange conversion loss, recorded in the first quarter. Excluding these nonrecurring effects, current net income was broadly stable at minus EUR 2 million. Free cash flow was minus EUR 31 million, reflecting seasonality, lower revenue and a temporary increase in inventories ahead of second half deliveries, partly offset by lower capital expenditures. Turning to the balance sheet. Our position remains solid. We closed the half year with EUR 483 million in cash and investment, pro forma the repayment of the OCEANE, which took place on October 1 -- October 2025 and with EUR 145 million in net debt. This maintains a robust financial profile with 0.5x EBITDA leverage, including leases recorded under IFRS 16 and provides us with ample flexibility to support our strategic and financial priorities. Pierre already addressed the revenue performance, so let me move directly to the P&L. As you heard from Pierre, reducing working capital and reinforcing cash generation are top priorities, and we have advanced on these fronts. First, we actively managed fab utilization to better align production with planned deliveries, thereby paving the way for a reduction of our own inventories in the coming months. Second, we launched a comprehensive cost reduction program, addressing our major cost drivers. Third, we scaled back capital expenditures. These actions are all aligned with our objective to enhance cash generation, improve operational efficiency and secure lasting savings across the company while preserving our technological capabilities. The key message I would like to leave you with is that while these actions will take a few months to translate into meaningful results, we will remain relentless, systematic and disciplined in the execution. Gross margin declined 490 bps year-on-year, driven by 3 factors: the disposal of Dolphin Design, representing 120 basis points; lower fab loading as an initial step towards reducing inventories and an unfavorable mix price effect. Going into H2 2026, do expect a significantly lower loading of our fabs and that will weigh obviously on our gross profit. Net R&D expenses decreased by EUR 23 million year-on-year, reflecting the disposal of Dolphin Design, a favorable phasing of public funding and lower material purchases linked to reduced use of pilot lines. Excluding the effects of the Dolphin Design disposal and the timing of public funding, gross R&D spend was broadly stable year-on-year, underscoring our continued commitment to technology leadership. SG&A expenses declined by EUR 6 million compared with the prior year, driven by lower compensation-related expenses, tighter control of discretionary spending and the disposal of Dolphin Design. Other operating expenses totaled EUR 46 million and include a EUR 41 million impairment loss on SmartSiC, noncurrent assets following a downwards revision of business prospects as a result of increasing competition from Chinese players and EUR 3 million downward adjustment to the earn-outs related to the disposal of Dolphin Design. As a reminder, the SmartSiC program was launched well before 2022 at a time when prices for alternative competing products were significantly higher than they are today. For context, Dolphin Design acquired in 2018 generated EUR 40 million of operating losses over the period since its acquisition. We also incurred a EUR 17 million one-off noncash foreign exchange conversion loss in Q1 of our financial year. This loss results from the reevaluation of balance sheet, foreign exchange exposures following the depreciation of the U.S. dollar against the euro with the euro-USD moving from 1.08 at the end of March 2025 to 1.18 at the end of June 2025. As background, in 2021, the company began contracting euro-denominated loans at the level of our affiliate in Singapore, whose accounts are kept in U.S. dollars. Converting euro-denominated debt into U.S. dollars had been beneficial to our financial results as long as the U.S. dollar was appreciating against the euro, and we repeatedly recorded foreign exchange gains. However, in Q1 of our 2026 fiscal year, the situation reversed, leading to the foreign exchange loss recorded this quarter. Because experiencing significant foreign exchange volatility on our results is clearly not in line with our standards, we took action. As a first step, we implemented appropriate hedging instruments to prevent foreign exchange movements from impacting our financial results. This is now in place. In addition to that, we engaged external advisers to conduct a comprehensive review of our foreign exchange risk management framework, and this review is now well advanced. Now moving to the free cash flow. First, let me note that we have aligned our definition of free cash flow with prevailing market practices. The updated definition incorporates 3 key changes. First, all tangible and intangible capital expenditures are included in the free cash flow calculation regardless of how they are financed. Capital expenditures that were previously funded through finance leases and therefore, excluded from the CapEx base are now fully taken into account. Second, free cash flow now includes both interest received and interest paid as well as other financial expenses. Previously, only interest received was taken into account in the free cash flow calculation. Lastly, the free cash flow definition now excludes inorganic CapEx, which incidentally was nil over the period. Operating cash flow was EUR 26 million for the period, down EUR 103 million year-on-year mainly, reflecting lower EBITDA and an increase in working capital driven by higher inventories built ahead of deliveries scheduled in the second half of the year. Working capital resulted in a cash outflow of EUR 57 million compared with an inflow in the prior year. This primarily reflects the seasonal buildup of inventories to support second half deliveries and the reduction in trade payables, partly offset by a decrease in trade receivables following the strong fourth quarter 2025 activity. Capital expenditures were largely directed towards industrial investments, including manufacturing tools for SOI and POI products in Bernin and Singapore, upgrades to our industrial facilities and targeted IT investments to enhance operational efficiency. This results in minus EUR 31 million of free cash flow under the new definition. We maintained a moderate leverage ratio with net debt to EBITDA at 0.5x EBITDA at the end of H1 2026. Let me conclude my remarks with a few comments on the balance sheet. As part of the financial discipline mandate issued by Pierre to the teams, we have carried out a restatement of the prior year account. In accordance with IAS 8, we have retrospectively restated consigned raw materials as inventories with a corresponding amount recorded as trade payables to reflect the transfer of control upon receipts at our sites. This restatement has no impact on the group consolidated income, EBITDA, working capital, free cash flow or equity. As a result, EUR 37 million of additional inventories and trade payables were recognized as of March 2025. For context, this compares with EUR 31 million of consigned inventories as of September 30, 2025. As of September 30, 2025, cash stood at EUR 808 million, reflecting a temporarily high level of liquidity ahead of the repayment of the EUR 325 million OCEANE 2025 bonds, which took place on October 1, 2025. Post OCEANE repayment, net cash was EUR 483 million at closing. As of September 30, 2025, we are undrawn on the maximum EUR 150 million use of proceeds loans secured from EIB. Our available liquidity post OCEANE repayment, including our undrawn confirmed revolvers was EUR 603 million. Financial debt totaled EUR 953 million, up from EUR 782 million at the end of March 2025, reflecting the new EUR 200 million Schuldschein loans and prior to the OCEANE repayment. This brings my prepared remarks to a close. As you can see, we did not shy away from making tough decisions. As I mentioned, our first half performance reflects the mandate to take decisive actions on inventories, strengthen balance sheet discipline, reduce costs and improve cash conversion. While the initial measures were implemented in the first half, we will accelerate and amplify these actions in the second half and expect to see inventory improvement by year-end. Our focus remains laser sharp on generating positive free cash flow under the new definition by the end of the fiscal year. At this point, let me pass you on to Pierre to take you through our strategic priorities and guidance. Pierre Barnabé: Thank you, Albin. That's very clear. Let's now have a word on our guidance. On revenue, we expect Q3 '26 organic growth in the mid- to high single-digit range sequentially. For the end of this year -- fiscal year, we expect continued undershipment in RF-SOI as we pursue the inventory correction, persistent weakness in automotive and a strong momentum in Edge and Cloud AI, supported by sustained demand for Photonics-SOI and FD-SOI. On capital allocation, we remain fully committed to a disciplined and agile investment strategy. We now expect fiscal year '26 CapEx of around EUR 140 million, down from the EUR 150 million previously indicated and well below the EUR 230 million spent in fiscal year '25, reflecting our selective approach and focus on cash generation. We continue to leverage the fungibility of our industrial footprint to optimize asset utilization. On financing, we redeemed those EUR 325 million OCEANE 2025 convertible bonds on October 1 and successfully secured new funding. Finally, on profitability, our H2 gross margin will reflect fab unloading with headwinds from mix price, FX and lower volumes. Some important data points for profitability, a 10% decline in fab loading resulted in a 300 bps negative impact on gross margin. The 5% -- $0.05 removed in the euro-dollar rates represent roughly 150 basis points impact on EBITDA and EBIT margin. And our net exposure is about 95% hedged at around 1.10; as well deliberately reducing production to bring inventories down year-on-year by the end of fiscal year '26, while moderating our CapEx profile. All actions remain focused on securing a positive free cash flow for the full year. To conclude, H1 '26 was in line with our expectations. We are focusing on what we can control, taking deliberate actions to reduce inventories and applying strict financial discipline to improve our cash generation. Our new client and product-centric organization ensures tighter alignment between innovation, product road maps and customer needs, reinforcing Soitec's readiness to expand into new SOI and beyond SOI markets and applications. We are also progressing on our incubators with strong traction in advanced computing and memory. A large and fast-growing market, where Soitec materials innovation and ability to industrialize rapidly give us a unique position. I have decided to leave the company at the end of March, but I remain fully committed until then to deploying our new organization, accelerating the company's shift towards AI-driven markets and application and preparing Soitec for its rebound. We are strengthening the foundation of the company. Our growth potential remains intact in an addressable market set to expand at a double-digit pace. I have full confidence in Soitec's ability to deliver meaningful value. This concludes our remarks. Thank you for your attention. Now let's please move to the Q&A. Operator: [Operator Instructions] The next question comes from Aleksander Peterc from Bernstein. Aleksander Peterc: I have 3 to start with. So the first one is, if you could explain what drove the relative resilience of your gross margin and your EBIT margin in the first half? And how we should think about margins sequentially. You do cite headwinds into the second half on unloading charges. Could you quantify them? And when you say you have headwinds, is that implying a sequential decline in EBITDA margins in the second half? Second question is on your investment in SmartSiC. Is that now a total write-off? Or do you still keep assets on your balance sheet that are attached to SmartSiC? And can you also tell us what you're going to do now with Bernin 4. Is it going to be repurposed? What are you going to do aboutit? And then final question on your situation with your former licensee GlobalWafers. Now your press release suggests that the cross-licensing agreement between you and them has been terminated. But it seems to me that they continue to manufacture SOI wafers, they have a big fab being built in Missouri in the U.S., 12-inch fab that they described in their third quarter results as an SOI facility. So does this mean that they have a work around your patents? And if they do it, will others follow? Pierre Barnabé: Thank you, Alex. What I propose is the question one regarding the EBITDA H1 and H2 to be treated by Albin as well as the first part of your second question of SmartSiC, I will take over the B4 fulfillment as well as your third question on GlobalWafers, then Albin, please. Albin Jacquemont: Yes, sure. Alex, of course, what we are doing will have a meaningful impact sequentially and on the full year on the profitability very clearly. Like Pierre said, the priority for us is to reduce our inventories. In a context -- in market context where revenue is under pressure, it is probably not very easy. And what we are doing to achieve our objective is to significantly reduce the loading of our fabs. It's quite mechanical. When revenue is stable or under pressure, if you don't reduce the loading of our fabs, then inventories do not decline, and that wouldn't be consistent with our objectives. Now when you look at our profitability and our gross profit, I think that the 2 main key drivers of our gross profit are: first, fab loading, which is very important; and second, the mix and price. So what we will see in H2 is significantly lower fab loading, whereas typically, the loading of the fab would be higher in the second half of the year for the company. That will not be the case this year. We will see lower process costs, and we will see a much lower absorption of these process costs in the inventories. To put things -- to take -- answer your question with a different angle, idle costs or underutilization costs will be significant in H2. And that will weigh on the profitability. So yes, you should expect a sequential decline of gross profit, EBIT and EBITDA in H2. As for your second question, Pierre said that we review downwards prospects on SiC, but still, the product is -- has great technical capabilities, and we are in the process of qualifying with some customers. So we do expect some business, and the impairment that we took against our assets reflects our expectations. And overall, what we are doing is maximize the fungibility of our assets to minimize the financial consequences of these prospects being revised downwards. Pierre Barnabé: Then I will take over, if you don't mind, Albin, on the Bernin 4 capacity. First of all, we need to keep -- we need to keep in mind that we're going to continue and we'll have to continue to produce SmartSiC. First of all, because we have 5 customers today under qualification and pre-advanced qualification, and that is progressing on automotive applications. Second, we are working on new prospects for new applications in the data centers areas and the lower efficiency, let's say, management. And third, SmartSiC as a road map going to evolve and going to improve because this product is recognized and has an excellent product. That's the reason why we believe that despite the postponement in the business plan, this product is going to find several market applications in the future. And we need to keep Bernin 4 product line for SmartSiC. That said, as you know already, B4 is busy with other applications in our process because close to 1/3 of the footprint of B4 is dedicated for refresh, SOI refresh that is, as you know, a very important piece in our process, a very important milestone in our process. B4 is already partially used for refresh SOI. And talking about rebounds, B4 going to be used for the rest of the footprint for any other application, particularly around SOI, if necessary, to produce more of the product, we will have to deliver to our customers in the coming years. And we are not concerned by the ability to use as it is already the case, B4 for SmartSiC, refresh-SOI and other SOI production in the near future. Regarding your third question on GlobalWafers, then it has been said that we terminated our license agreement with GlobalWafers. We are today in a transition period of this application. Of course, you can't make SOI without using SmartCut and our dedicated and patented processes. Then we're going to observe in the future, in the near future the way GlobalWafers going to produce SOI product in their brand-new U.S. factories. And we are today in transition and in observation. Operator: The next question comes from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: One on the inventory situation, both on RF-SOI at your large foundry customers, and also, on the other hand, on auto and industrial market. Where are you standing right now in terms of level of inventory in mobile? Are you still in RF-SOI, are you still expecting to go back to 11 months of inventory in December or you are a little bit trending behind this target? And the second question is on -- a follow-up on the first one on fab loading. What was the fab loading in H1 exactly? And where do you see the loading trending in H2 based on the Q3 guide and what you can expect for Q4? And the last one is on the OpEx trend for H2 because in H1, you had big subsidies impact or tax credit, I don't really know, but the OpEx were quite low. How do you see OpEx moving to the back half of the year? Pierre Barnabé: Hello Seb, then I propose to take the first question, and I will ask Albin to relay me on the fab loading and the OpEx evolution. Then regarding inventories, what we said in July is that the equivalent 8 inches, 200-millimeter wafers in our customers' inventories, Soitec's inventories by our customers, were around 2.5 million wafers units. What we are measuring today, what we are observing is around 2.3 million, then we are clearly in a trend of depletion, that's a fact. And we want to focus on what we can measure, and this one is measurable. Then what we see is a continuous depletion of these inventories, meaning that some of the customers going to go for a minimum level of inventories. We can translate it in the fact and this is what we already said in July, and we repeat it right now is that H2 is going to be another semester of depletion to reduce the level of 8 inches wafers inventories equivalent by our customers. But we think also that the year 2026 going to see even further depletion to reach a level that's going to be pre-COVID. But what we believe is really to give you a maximum of information on what we can measure. And what we can measure is the evolution of the overall inventories by our customers. And 2.5 million equivalent 8 inches July, 2.3 million equivalent 8 inches September, and we're going to give you another point for the next call in February. Albin, for fab loading. Albin Jacquemont: Sébastien, yes. Sébastien Sztabowicz: In automotive, Pierre, where do you see the inventory? Pierre Barnabé: Sorry, I missed the automotive. For the automotive, of course, we are not a major player with Power-SOI, but we see what is observed everywhere in the automotive world, meaning that there are quite big inventories still, then Power-SOI is experiencing a big drop this year. We don't see, let's say, a clear rebound for the year after for calendar '26. It seems that what we have today engaged with some customers going to be sufficient for this year and next year, provided the execution of the existing LTAs. And we don't see, let's say, a clear rebound in automotive before 2027 so far on Power-SOI, linked to, of course, a low level of electrification volumes in units of cars that is not very high. The good news is that we see a shift with more and more qualification by new customers on 300-millimeter platforms that's going to give another [ double ] of oxygen to develop Power-SOI beyond 200 millimeter. Albin? Albin Jacquemont: On fab loading, Sébastien, look, traditionally, our loading is much higher in H2 than what it is in H1. For instance, last year, in H1, our loading was slightly below 60% in H1, and it was in excess of 80% in H2, that was for fiscal year 2025. In the current year, in H1, our loading was a little bit lower than what it was in H1 2025. And that was because the actions -- the decision, the actions Pierre, referred to have been taken in July. And there is a time line for us to -- a time lag, sorry, to adjust the production planning. So the decision we have taken will take full effect in H2. And for H2, I'm not going to give you -- I'm not going to share our forecast fab loading. But think of it as being slightly lower than what it was in H1 of the current fiscal year. So you see that compared to the fab loading in H2 2026 compared to the fab loading in H2 2025, it is much, much lower, and that's a very significant shift, which, like I said, we will have significant impact, temporary impact on our gross profit in H2 2026 fiscal year. Very atypical for Soitec. As for the OpEx, the first thing to say is that while we are telling you that our profitability will be will be lower, we do not stay idle, and we have engaged a comprehensive program to reduce our cost drivers. Our OpEx line is not very easy to comprehend in our net income because it is OpEx, what you see is a net of our gross OpEx, net of what has been charged to the process cost. So of course, what we are doing on the production has an impact on the OpEx level that you are seeing. On H1, as you could see, OpEx are down EUR 5 million. And for the full year, OpEx will be down as well. And in fact, the financial impact of what we are doing on our SG&A is higher than the EUR 5 million that you are seeing, but not fully visible on the P&L because of this charge-out framework that you see -- that we have in place. Operator: The next question comes from Francois Bouvignies from UBS. Francois-Xavier Bouvignies: I have a couple of quick questions. So Albin, maybe on this cost saving program that you are also delivering on top. Can you quantify a bit the cost saving program that benefit you could bring maybe for '27 once it's fully implemented or a bit more time line and details around this cost savings at the group level? And then the gross margin, I mean, what kind of gross margin do you target in terms of range post all these adjustments and inventory correction. How should we think about Soitec's gross margin in the medium term? And then my last question, if I may, is on POI. I mean it seems that you have good prospects and the penetration is increasing, but we feel like now your revenues are under pressure because of Asian customers. How should we think about POI trajectory from here? Is it going to recover like in the second half of the year? Or would that take longer? Albin Jacquemont: Yes. On cost savings, we did tell you that we did not shy away from transactions. To give a little bit of color, we have agreed with the unions about a thorough being put in place across the company. That does include absolutely everyone, not only the production, but also the innovation and also the G&A and functional departments. So it shows, it testimonies how resolved we are at driving costs out of the system. First -- that was the first thing. Second thing is that incentive related and the profit sharing related expenses will be lower and will reflect our results. So the impact of this is significant -- is significant and goes -- is above EUR 5 million savings that you see in H1. The third things that comes on top of that is that there is a frugality which is being put in place under the direction of Pierre across the company. And all in all, we expect the savings to be significant on the year. As for fiscal year 2027, we will see lasting impact of these savings, but we don't want to hamper the potential of the company for a recovery by doing inappropriate cuts into our resources. It's too early for me to -- for us to guide on 2027, obviously. Pierre Barnabé: Francois, on POI, to take your question. POI experienced a very, very intense growth last year to equip our Asian, particularly Chinese customers, and that really made our POI as a standard in this area. And we see clearly a relay coming from Western world customers for flagship smartphones. This year being, as we already said, a transition between these 2, let's say, these 2 moves and to shift of, I would like to say, continents. But we clearly see and we continue to see a 20% growth CAGR on POI because we see more and more adoption, more and more customers than plus 50% may be flattish for this fiscal year. And -- but we see, over the years, clearly, a strong growth, around 20% CAGR and more and more adoption. Francois-Xavier Bouvignies: And on the gross -- and on the gross margin potential for the company, I mean what kind of target do you -- anything you can add here? Pierre Barnabé: I'm trying to -- I will try to answer this question and help with modeling. The first thing is that we don't want any more to guide on the gross margin. And the reason for that is not because we don't have visibility on what the gross margin will be, but we don't want our action on the inventory reduction to be hampered or constrained by the guidance we gave to the market on the gross margin. So we don't guide. Nevertheless, you need to model what our gross margin will be and we'll help you in so far as we can. So a few things for you to know. When you look at our costs, of course, raw material cost is 100% variable. So needless to elaborate on this. When you look at our direct manufacturing costs and indirect manufacturing cost, I would say that around 30% are variable, 70% are fixed. So if you combine these manufacturing costs with the raw material, it's 1/3 fixed, 2/3 variable. And to go a bit further helping you with the modeling, when you look at our cost split in terms of cash and noncash that may be useful because we fully realize how difficult it is to model, I would say that our manufacturing costs are approximately 70% -- 30% minus cash and 30% plus noncash. And I hope that helps. Operator: [Operator Instructions] The next question comes from Jakob Bluestone from BNP Paribas Exane. Jakob Bluestone: Firstly, you made a comment, I think it was part of the SmartSiC write-down around increasing competition from Chinese players. And I just wanted to clarify, is that just purely for SmartSiC? Or are you seeing broader competition emerge from Chinese players? If you could maybe just clarify that comment. And then just secondly, I think you mentioned further inventory destocking in FY '27. So maybe if you can maybe put that in the context of where do you see the EUR 2.3 million kind of going next year? And is that your expectation that, that's the bottom? Or just kind of what are your thoughts around FY '27 in the context of the comments you made on inventories? Pierre Barnabé: Yes, Jakob, on the first question, yes, very fierce competition coming from monoSiC has impacted our SmartSiC, let's say, initial plan that was built in 2021. And we revised it to really bring SmartSiC as a premium product that fits with the 5 customers' expectations we have today under qualification. And of course, competition is everywhere. But so far, so quite good because we are maintaining our market shares everywhere, including in China. As you know, if we look at just RF-SOI that used to be our mono product a few years ago, and we're still, of course, observing cautiously this market, we are proceeding with many tier downs of smartphones coming from any integrators, any OEM, and we clearly see that SOI is a standard, first for particularly radio front end and more and more for filters with our POI solutions. And in many cases, it is Soitec solution. Then our market share today are, let's say, protected because we continue to innovate because we are able to deliver in terms of quality to our customers wherever they are, including in China. But that said, we are not naive, and we are very picky in the observations on any players trying to promote SOI-like solution. But today's impact, we have clearly disclosed that concerns the monoSiC particular competition that is changing the trajectory of SmartSiC. If we look at the evolution of the 2.3 million 8 inches equivalent inventory Soitec by customers, we clearly -- we're going to continue to undership. It means that the trend of depletions going to continue semester after semester for sure. Then in H2, we're going to undership. And we do believe that even further, we're going to undership in the year '26. We don't know, at the end of the day, what's going to be the objective of each of our customers. It's going to depend on their strategy of inventories, but we are taking cautious assumptions, meaning that we do believe that many of them, a large part of our customers, going to reach the pre-COVID level of inventories, and we prefer to have this cautiousness than under shipment, depletion of the inventories, and it is highly probable the 2.3 million to decline semester after semester at minimum end of year '26. Operator: The next question comes from Emmanuel Matot from ODDO BHF. Emmanuel Matot: I have 2 remaining questions, maybe for Albin. First, what do you target in terms of inventories in the balance sheet, what normative level would be growing given the current visibility you have for the business? I mean maybe an indication as a percentage of your sales revenue would make sense. And second, has there been any progress in the tax adjustment procedure with the French authorities? Albin Jacquemont: Very good question, Emmanuel. The company said in the previous year, I wasn't there, that the normal working capital requirements as a percentage of revenue should be within a range of 30% to 40%. And I fully subscribe to what has been said. We will not guide for now in terms of components of working capital requirements, but I do confirm that 30% to 40% is something, which is a level, which is adequate, which should lead you to the conclusion that there is much cash generation opportunities ahead of us. Because obviously, as things stand today, we are at a much higher level. So that's for the working capital requirements level. As for the tax reassessment. So we are done, as you know, on responding to the request of the tax authorities. We did not receive an answer to our response yet. We will -- I will not forget. In the meantime, we have strengthened our defense, worked a lot with independent experts. I could not say more than that, but it should bring you some level of confidence on this. Operator: The next question comes from Craig Mcdowell from JPMorgan. Craig Mcdowell: Just the first one on pricing. You've talked about pricing in the context of gross margin. I'm wondering whether you can translate that back to what that's doing to your top line? And is this pricing pressure, more negative pricing pressure on particular products? Or is it particular customers? Any commentary probably on pricing impacting your sales would be helpful. The second question, I just appreciate your thoughts at this early stage on the merger between Qorvo and Skyworks, I understand both of them are your customers. Just if you could give any thoughts on what that might mean for both pricing, but also how that might impact your sort of channel inventory worked on, presumably, they'll look at some kind of synergy on inventory if they do merge. Pierre Barnabé: On the pricing than what we can see that, of course, there are continuous pressure depending on the product. But overall, we are in low single-digit decrease and quite limited because we are also promoting more and more high and added value product. We are also -- we are having road maps. There are projects that is increasing the overall value. And we are protecting, thanks to a good mix and a better mix, the level of prices to compensate the pressure we are getting. And of course, as a kind of parallel of this pressure that we are limiting at the end of the day, we are benefiting from lower prices from bulk providers, thanks to the fierce competitions we have today. Of course, we continue to have this discipline and to invest in our existing road maps to invest in our innovation and R&D to keep higher the value and the prices of our product and putting in the market new products and new features. Just I will not comment that much on the Qorvo-Skyworks, let's say, ongoing project of merger. What we can tell you is that these 2 companies are customers, but complementary customers. We don't see any de-synergies and potentially rather synergies, but it's going to be a long process, and we'll have to -- I'm sure, to comment later when they're going to be completed. Operator: This concludes the question-and-answer session. I'd like to hand the program back to Pierre Barnabe for any closing comments. Pierre Barnabé: Thank you all for following our H1 '26 analyst call and for the quality of your questions this morning. The next date in our agenda will be the release of our Q3 '26 revenue on February 4 after market close. In the meantime, we'll be very happy to host you in Shanghai on November 25, where we'll be hosting our first Soitec China Day with key industry leaders and customers from the China SOI ecosystem. This ends our call for today. Operator: Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Friederike Thyssen: Good morning, and welcome to NFON's Third Quarter and 9 Months 2025 Earnings Call. Thank you for taking the time to join us today. My name is Friederike Thyssen, Vice President, Investor Relations and Sustainability at NFON, and I'll be your host for this session, which we are holding together with NuWays. Today's presentation will be led by our management team: Andreas Wesselmann, our CEO; and Alexander Beck, our CFO. They will take you through the key operationals, the strategic and financial development of the first 9 months 2025. As usual, we published our quarterly financial statement and our full investor presentation earlier this morning. You can find both, as well as the corporate news, on our NFON website under Investor Relations. The presentation will follow a clear structure. We'll start with the business highlights, then move on to the financial review, our outlook and guidance. And finally, we start the Q&A session. Please note that questions can only be asked live during the Q&A at the end of the presentation. [Operator Instructions] Thank you for understanding, and thank you in advance for your contribution. And now I will hand over to Andreas Wesselmann to start the presentation. Over to you, Andreas. Andreas Wesselmann: Yes. Thank you, Friederike. It's a pleasure to be here today for my first quarterly call as CEO of NFON. Many of you know me from my previous role as CTO, where I was already deeply involved in defining the NFON Next 2027 strategy. And as a consequence, stepping into the CEO role doesn't mean changing direction, but rather expanding the perspective, bringing strategy, product technology and market even closer together to turn the ideas into tangible results faster and more consistently. So my focus is clear. We want to accelerate NFON's transformation as an innovative growth company, driven by customer value and operational excellence and leveraging the latest AI technology. The course we have set with NFON Next 2027 is the right one. And our task now is to execute it with speed and discipline. And with that, I'm happy to introduce my colleague and our new CFO, Alexander Beck. Rather than me describing his background, I think he can do that best himself. Alexander? Alexander Beck: Yes. Thank you, Andreas. Also from my side, I'm very happy to join today's call for the first time as part of the NFON team. In the first 7 weeks since I have joined, I have had the chance to get to know people, products and the culture of the company. And what impressed me most is the energy and the commitment across the organization. This is really a genuine drive to move things forward together. A few words about myself. I bring around 20 years of international experience across several sectors like retail, like fast-moving consumer goods like software and also technology. In previous roles, I have led and developed finance organizations and supported businesses during phases of international expansion, growth, profitable growth and also transformational restructuring. From a financial perspective, I see NFON in a solid position. Profitability has been restored. Cash flow is positive and our financial base is stable. The strategy is clear, well communicated and is being consistently implemented across the company. What I particularly value is how strongly the teams identify with our strategic priorities and how focused the execution is. At the same time, we are aware of the challenges. Revenue growth has been slower than we would like and the commercialization of new products take time. But the direction is right and the fundamentals are strong. So overall, I'm very pleased to be here and I see a company that combines the right mindset, the right technology and the right talent to build sustainable value in the years ahead. With this, for the moment, back to you, Andreas. Andreas Wesselmann: Yes. Thank you, Alexander. Now let's take a closer look at the key highlights of the last month. So the last month showed tangible progress and growing momentum. We strengthened our market presence, we refined our brand positioning and further shaped NFON's perception as an innovative leader in intelligent communication. Let's start with Bits & Pretzels, one of Europe's leading founders' festival where NFON participated for the first time. We presented the company with a clear, technology-driven identity that reflects who we are today, an innovative growth company, combining communication expertise with AI-driven intelligence. More than 250 people joined our expert sessions and over 90 tech leaders took part in our CIO Summit talk, where we explored and explained how AI can make communication more human, efficient and secure. Another highlight was our executive dinner in Munich, held under the theme, From Europe with Intelligence. This event brought together decision-makers from business, technology and media to discuss how AI is reshaping communication and leadership. It also marked the live debut of Nia FrontDesk, our newest AI solution, which was received with strong interest and very positive feedback from customers, partners and analysts. It captured exactly what NFON stands for, turning innovation into real-world value. And finally, we received strong industry recognition. NFON was named Manufacturer of the Year and our EVP AI & Innovation, Jana Richter, was recognized as IT Woman of the Year. These awards underline our credibility as a European AI-driven technology company, one that combines innovation with responsibility, diversity and technical excellence. Altogether, these milestones show that we are executing our strategy with focus and consistency. Under NFON Next 2027, we are positioning NFON as an innovative growth company that drives AI-powered business communication from Europe for Europe, combining innovation, customer value and efficiency. And this brings us directly to one of the most exciting examples of this development. The NFON intelligent assistant, Nia FrontDesk. Nia FrontDesk is a practical intelligent assistant for reception and service areas that help organizations manage incoming calls, messages, visitor interactions, et cetera, more efficiently. The solution automates routine tasks such as call routing, scheduling and information requests, while always allowing a seamless handover to human colleagues with personal contact, if it's needed. What makes Nia FrontDesk stand out is its combination of NFON's communication platform with conversational AI. It's fully integrated, is GDPR-compliant and built on European infrastructure, which is an increasingly important differentiator for many of our customers who value digital sovereignty and data protection. The first reactions from partners and customers have been very positive. We see particular interest from sectors such as health care, education and public administration, areas with high service intensity and recurring communication needs. These organizations face increasing pressure to improve efficiency, while maintaining personal service quality, and Nia FrontDesk exactly addresses this. Its ease of use and measurable time savings help improve service availability and customer experience, delivering a clear return on investment. From a business perspective, Nia FrontDesk expands our portfolio beyond traditional voice services. It opens new cross and upselling opportunities within our installed base and helps us to enter new customer segments, particularly in sectors with high service intensity. Nia FrontDesk is about customer satisfaction and increased productivity. It's about making communication smarter, more human and more efficient. It shows how innovation, when done right, can improve customer experience, employee satisfaction and business performance. For us, Nia FrontDesk is more than a product launch. It's a proof point of our innovation strategy. And over the coming quarters, we will continue to expand the AI solution portfolio as we go, always focused on real customer benefit and profitable growth. To walk you through the details of our Q3 financial performance, I'll hand over to Alexander. Alexander Beck: Yes. Thank you, Andreas. So let's turn to the key financial figures for the first 9 months of 2025. In this period, we achieved a solid top line growth and stable profitability despite a continued cautious market environment and investment climate, particularly among small and medium-sized enterprises. Our total revenue increased by 2.7% to EUR 66 million, while adjusted EBITDA amounted to EUR 8.7 million, 3.5% below the prior year level. This performance shows that we are able to maintain profitability while continuing to invest in our strategic priorities, including AI and product innovation, including partner enablement and also sales effectiveness. At the same time, we remain realistic about the challenges. Revenue growth in the core SME business has been slower than anticipated, reflecting both uncertainty and extended decision cycles. The commercialization of new products also takes time, which is normal at this stage. Overall, the fundamentals are solid. Our cash position remains strong, and our strategy is clear. I'm confident that NFON has the right mindset, the right technology and the right team to translate these foundations into sustainable growth. Let's now take a closer look to the developments behind these figures in the following slides. In the first 9 months of 2025, NFON delivered moderate top line growth. The total revenue of EUR 66 million. This development was mainly supported by the continued strong performance of botario, which contributed positively through its project businesses. Our recurring revenues, the backbone of our business, rose by 1.9% to EUR 61.8 million, maintaining a high share of 93.6% of total revenues. Nonrecurring revenues developed even stronger, up by 15.3% to EUR 4.2 million, mainly driven by project implementation and again, service revenues from botario. At the same time, our seat base declined slightly by 2.6% to 648,000, reflecting a still cautious investment sentiment in our core markets. Despite this, our blended ARPU remained stable, increased slightly to EUR 9.92, supported by price adjustments and consistent customer usage levels. Overall, this combination underlines a resilient recurring revenue model and the stabilizing effect of portfolio diversification through botario. Turning to our profitability and cost structure. Material expenses declined by 6.3% to EUR 9.1 million, primarily due to lower hardware volumes and a more favorable cost mix. As a result of this, our gross profit increased by 4.3% to EUR 56.9 million. The material cost ratio improved to 13.8% versus 15.1% the year before, supported by a higher share of margin accretive project revenues. At the same time, our operating expenses rose moderately by 4.1% to EUR 22 million, mainly reflecting higher marketing activities, partner commissions and advisory costs are related to strategic initiatives. Overall, the adjusted OpEx ratio remained broadly stable at 33%, demonstrating our ongoing focus on cost discipline and operational efficiency, but also investing into strategic areas. Personnel expenses. Personnel expenses increased by 9.9% to EUR 28.2 million. This development primarily reflects the integration of botario and targeted staffing in product development, sales and AI-driven innovations. The average number of employees rose to 427 compared to 415 in the prior year. We made adjustments of EUR 0.9 million, mainly related to restructuring costs in management, sales and marketing. After these adjustments, personnel expenses were in line with expectations, consistent with our strategy to strengthen capabilities for innovation and customer value creation. In terms of profitability, EBITDA decreased slightly to EUR 7.7 million. After adjustments, EBITDA amounted to EUR 8.7 million, down 3.5% from EUR 9.1 million the year before. This decline was expected and reflects planned operating expense investments in personnel and infrastructure to support our AI-related initiatives and the ongoing execution of our strategy, NFON Next 2027. Adjustments totaled EUR 1.1 million, primarily related to restructuring measures and IT harmonization. As a result, the adjusted EBITDA margin came in at 3.2%, maintaining a solid profitability level while ensuring we continue to invest in our future growth. Looking at the cash flow and liquidity. Operating cash flow came in at EUR 4.9 million compared with EUR 5.1 million in the year before. This slight decline mainly reflects timing effects in receivables and provisions. Investing cash flow amounted to minus EUR 4.7 million, driven by higher capitalized development costs and earn-out payments of EUR 1.9 million related to the botario acquisition. Financing cash flow stood at minus EUR 1.7 million compared with plus EUR 4.8 million a year ago as the prior year period included loan inflows to finance the acquisition. At the end of September, this cash and cash equivalents totaled EUR 11.4 million, and this underlines our solid liquidity position and provide sufficient flexibility to fund both day-to-day operations and our ongoing strategic initiatives under NFON Next 2027. As already shown in the half year results, this slide summarizes the broader market environment and our key strategic priorities. It continues to provide the right framework for navigating the current conditions, steering NFON towards sustainable growth. But the macroeconomic environment remains challenging. Inflation, geopolitical uncertainty and budget caution, particularly among SMEs, continue to weigh on investment decisions and prolonged sales cycles, especially in communication infrastructure and digital transformation projects. At the same time, AI-driven innovation is reshaping the market. Many companies are still assessing how AI can be embedded into their operations. This extends decision-making, but also creates key opportunities. Across Europe, stricter compliance standards and the growing debate on data sovereignty continue to drive demand for secure GDPR-compliant solutions. NFON's position as an independent European provider with development, hosting and infrastructure entirely in Europe remains a key differentiator. Building on this foundation, we are executing the measures introduced earlier this year, which directly support our strategic priorities. And these are improving operational efficiency, strengthening the channel enablement, maintaining a market growth focus and driving profitability. We are seeing early signs that our initiatives are taking hold, also the momentum is developing more slowly than we would like. As we progress through the fourth quarter, our focus remains on disciplined execution, cost control and efficiency gains, while continuing also to invest selectively in growth areas such as agentic AI. So let's turn to the next slide for the details. As a part of our regular forecast update, we have reviewed our full year expectations based on the performance in the first 9 months. Given the continued investment restraint in part of the market and revenue trend that remained below expectations in Q3, we have slightly adjusted our guidance for the full year. We now expect total revenue to grow between 1% and 2.5% and adjusted EBITDA to range between EUR 11.5 million and EUR 12.5 million. This outlook already takes into account the ongoing macroeconomic caution, extended decision-making cycles among SMEs and the delayed recovery in investment activity in our core markets. At the same time, the measures implemented earlier this year, particularly pricing, cost control channel enablement, are delivering the expected effects and continue to support our profitability. Our midterm ambition for 2027 remains unchanged. Overall, we focus on innovation and efficiency, keeping our financial discipline strong so that growth remains healthy and sustainable. And with this, I will hand back to Friederike to open the Q&A session. Friederike Thyssen: Yes. Thank you very much, Alexander and also Andreas for the presentation and the detailed insight. We will now open the line for questions. [Operator Instructions] So we're now looking forward for your questions. First line in row is John Karidis. John Karidis: So it's John Karidis from Deutsche Bank. I know this has been a very tough quarter for NFON. And because of this, I wonder if you would be happy to tell us how many seats you ended the period with -- in Germany specifically? I know that in the first half, the seat loss was roughly split equally between Germany and the U.K. But I'd be sort of very interested in the number in Germany. And any other additional color you can give us, please, about the areas where you saw the most pressure? Alexander Beck: Thank you very much, John. Yes. So the seat growth, you're right. We lost seats in the first -- in Q3. Our total seat base declined slightly by 2.6%, around total 648,000 compared to 665,000 in the prior year period. So this was mainly the result of a lower order intake compared with last year, while our churn rate is also important, remains stable at 0.5% [ hard ] churn per month, the same level of quarter 3 2024. The stable churn aligns the high quality our products and services have and the resilience of our recurring revenue base in a challenging environment. However, growth in new seats came in below expectations, that's right and below last year's increase, reflecting both the more cautious investment climate and the expanding decision making cycles. The German numbers, I do not have exactly here, but I can tell you roughly, in Germany, we have around about 470,000 seats. And in U.K., we are about 73,000 seats. Friederike Thyssen: Okay. Next in line, Stéphane. Stéphane Beyazian: I've got 2, 3 questions, if that's possible. The first one would be, can you tell us a little more on how many more staff do you plan to hire and when you think you will start to see some stabilization on your staff costs? The second one is a follow-up on the number of clients. I was just wondering whether you are also seeing, let's say, do you think overall, it's a market, as you suggest, or also perhaps some competition that is more aggressive in cloud telephony? And I was just curious to know if there are any names of competitors you would highlight as being very pushy right now in the market? And finally, as a third question, if I may. Do you think now that it's quite likely that 2026, we should also see, let's say, the impact that we've seen in the third quarter carrying over into 2026 and therefore, potentially revenues and EBITDA could be down in 2026? Andreas Wesselmann: Thanks a lot, Stéphane, for your questions. Let me try to answer them in one shot and then after that, please let me know if some questions remain open. So the first question was about the hiring. There you can see along the numbers that we also adopted our growth in personnel expenses by the reduced top line so that we always stay in the same quote, and this is the same planning as we go forward. For the number of clients, maybe I'll just give the example of Nia FrontDesk that I outlined and why I think that's so important is -- the first time that we really combined the botario AI platform with our core voice platform in a very tight and integrated fashion. And just to share some numbers there with you, for the first 4 weeks after the launch, we see it as essentially our fastest-growing adoption of all products that we saw in the last years. So we already have a mid-double-digit number of sold licenses here, and we have very, very positive feedback. So that's, for us, the confirmation of our portfolio. And why is that important also looking forward? Because it shows that we have different revenue streams going forward that we are going to materialize. So one is that these capabilities integrated in our business, telephony, which we call AI Essentials or FrontDesk, help us to up and cross-sell existing customers and it makes our existing offering more attractive. That's one thing. On the other hand side, we see that these voicebots and the agentic AI capabilities, so to speak, get more from the botario side of the portfolio also help us in combined up and cross-sell in the contact center business, and that the botario portfolio offers us access to new customers and partners also in enterprise AI projects. So having that said, we are confident that in '26, we will get back to a growth strategy because in addition to the products, there are 2 other things I would like to mention. We also introduced in October a new way how we can sell easily with a new modular license model, we sometimes internally refer to as T-shirt sizes. This makes it easier to sell. Think of that as a kind of a self-service, and it's immediately available for deployment and getting it running. And the other important part is that we support our partners also in their transformation. So to enable them on the existing solutions, also expand to new partners and expand our solution portfolio with the existing and new partners. And therefore, also our partner program, Nexus, which we will unveil in more breadth and depth in January next year, will support us to have that. Overall, and your question was also about how we see the market. We see the market that the core cloud telephony market is essentially more or less stagnating. Why is that the case? If you take a look, for example, at some numbers in Germany, we had in August, the highest number of companies that needed to file insolvency in the last 10 years. If you take a look at the overall economic numbers, Germany and Austria, for example, unfortunately, they rank lowest within Europe, which is plus -- 85-plus percentage points of our business, as you know. And there is another thing that you should not underestimate. So this whole AI disruption, as I framed it, causes also some additional uncertainties, which causes a delay in decisions. We do not see that it's a question if you go with us in the solutions or not, it's a question of when do you do that, and you just need some more room to discuss with the partners and explain. So that's maybe -- overall, I hope that answered your question. Stéphane Beyazian: It does. If I may just to follow up a little bit and apologies for taking a bit of time here. I was just wondering if you think that adoption of AI could also, in a way, reduce a little bit demand from some of your clients as they may be replacing some of their staff? I'm thinking of call centers, for instance also, and reducing the number of seats potentially. Andreas Wesselmann: We see it the other way around. We see it as a strengthening. We see that from the tightly integrated AI capabilities. For example, in the cloud telephony, it makes the offering more attractive. So there, we have possibilities to increase the ARPU and to expand the number of seats that we have. That is one dimension. And we see great and interesting effects in cross-selling opportunities of the contact center solution and the agentic voicebots we have in the botario solution, which we can then sell to the same customer. So we see it more not as taking away from existing business, but accelerating and strengthening the different pillars of our solutions portfolio. Friederike Thyssen: Okay. Next line, [ Maximillian Pasco ]. We can't hear you. Now we can hear you. Unknown Analyst: Sorry for that. I have a 2-part question. Do you anticipate a normalization in customer investment patterns, potentially supported by your progress in AI? And as a result, could you -- could this provide greater visibility for 2026? Andreas Wesselmann: Yes. Maybe I'll start with that. So your first part of the question was about the investment normalization. This is certainly a trend that we see. We see a delay. And as I said before, we do not see that people decide against an investment. So in that sense, taking the first insights in the fourth quarter and looking forward, we see an investment normalization in the course of the year '26 despite the not so easy overall economic conditions. And exactly what '26 will mean, we will unveil at the beginning of the year when we then have the forecast for the year '26. Friederike Thyssen: Does that answer your question, [ Maximillian ]? Unknown Analyst: Yes. Friederike Thyssen: Next in line, Ross Jobber. Rosslyn Jobber: Can you hear me okay? Friederike Thyssen: Yes. Rosslyn Jobber: Perfect. I'm interested in the trends over the next year or 2 in some of the costs, which at the moment are high, but which hopefully are going to fall, things like consulting costs, IT harmonization costs and also capitalized development costs. Can you say a little bit more about where you would expect those to go over the next 1, 2, 3 years? Alexander Beck: Yes. Ross, thanks for your question. So in general, we are cautious when we talk about cost development. On the other side, we also want to invest into our strategic areas. You mentioned right now, a couple of them like consultancy costs, like other costs, we already tried now in Q3 and Q4 to bring these costs down. But on the other side, we are also going to -- as I said before, we are also going to invest into growth areas. So for next year, -- we are, in the moment, we are in the process to put our budget together and to finish the planning and we will communicate this at the beginning of next year. But overall, I think I can already say -- yes, we will continue our path. We try to eliminate costs, which are not necessary any longer. We try to gain efficiencies, especially in the things you mentioned. And on the other side, we try to invest as much as we need, as much as we can, as much as we want in order to grow in our strategic growing areas. So this is overall, the part for the next years. I hope this -- this is not very precise for the next 3 years, Ross, but I hope this gives you at least the color of where we want to go. Friederike Thyssen: Okay. I see Stéphane is still raising the hand? Stéphane Beyazian: Sorry, I'm all right. Friederike Thyssen: Yes, no probs. But Ross, you can unmute yourself. Rosslyn Jobber: Yes. Sorry, I got more questions. I just wanted to make way for others. Can you say whether or not the AI functionality is changing the procurement process amongst customers? I mean you've talked about uncertainty based on the macroeconomic environment and how maybe it's taking longer for customers to decide whether to buy. Does the fact that you're adding a lot of kind of enhanced customer experience change the sort of people who are getting involved in that procurement decision at your clients? Is that also a factor or not? Andreas Wesselmann: Yes. Thanks, Ross, for asking the question. Let me maybe start with -- we have one part of the solution that if you want to buy a click integrates with existing business telephony. And that's important because we want that the same people that currently administer and are responsible for the existing solutions with a very seamless path can activate them. So in the example of the Nia FrontDesk that I outlined, you can imagine that you go to the administration part you are used to. And then you just choose, I want this front desk capability, I want this as a language. And this is the content it should be based on and then you go. And this is really important because especially the SME customers can simply not afford to invest, take time in AI projects or consultancies or hire people themselves. So this, I think we are in a unique position by tightly integrating that for the existing market. If you go to the other segment of our offer, if I talk about enterprise AI projects and large customers and large partners, this is then a different approach, and you also meet different buying centers. And there, the telephony is not the leading capability, but the leading capability is on how you optimize your customer service, how you automate your processes, how do you integrate in the existing business processes and then offer a solution that can cover, if you want, the breadth from voicebots via contact centers to then the underlying cloud telephony. So that maybe gives you an overview about how we currently see the variety of the go-to-market activities. Rosslyn Jobber: Great. And can I just check one statistic? Did you -- am I right in thinking you said that churn for the 9 months is unchanged from a year ago at 0.5%? Did I hear that correctly? Unknown Executive: Yes, Ross. That's right. Friederike Thyssen: Okay. No further questions so far. Stéphane, go ahead. Stéphane Beyazian: There are no more questions. Let me ask just a follow-up. I was just wondering whether you're already seeing let's say, in the fourth quarter, a little bit better commercial momentum or if you think that those impacts will continue into Q4 on your customer base? Andreas Wesselmann: Yes. Thanks, Stéphane, for asking that question as well. Let me maybe get back to the Nia FrontDesk example which we launched at the mid of October. So there, as I outlined, we see already very fast-growing adoption in licenses, et cetera, which makes us very positive. But the reality is also that based on our recurring revenue model, this only has minor impact on the fourth quarter and then the total numbers. Why? Also we came to the conclusion as we outlined today. But that makes us confident looking forward to '26 and beyond that we start with a good foundation in those years and laid the foundation in this year for accelerated growth in the next year. Details to be shared in the first quarter next year. Friederike Thyssen: Good. So then no further questions. Let me ask a little -- last time. Are there any final questions from your side? So please raise your hand. If this is not the case, -- and it seems not to be the case. Thank you, again, for your time, for your interest and also from my side. And now I'll hand back to Andreas for a short closing statement. Andreas, back to you. Andreas Wesselmann: Yes. Thanks, Friederike. A big thank you from my side to all of you joining the first earnings call in that combination with Alexander and myself, thanks for asking questions -- and the very constructive and right questions and already looking forward to talking to you soon. Have a nice day. Thank you.
Operator: Greetings. Welcome to the ClearSign Technologies 3Q '25 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Matthew Selinger. You may begin. Matthew Selinger: Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation Third Quarter 2025 Results Conference Call. During this conference call, the company will make forward-looking statements. Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to, whether field testing and sales of ClearSign's products will be successfully completed, whether ClearSign will be successful in expanding the market for its products and other risks that are described in ClearSign's filings with the SEC, including those discussed under the Risk Factors section of the annual report on the Form 10-K for the period ended December 31, 2024. Except as required by law, ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. So on the call with me today are Jim Deller, ClearSign's Chief Executive Officer; and Brent Hinds, ClearSign's Chief Financial Officer. So at this point in the call, I would like to turn the call over to Brent Hinds. So with that, Brent, please go ahead. Brent Hinds: Thank you, Matthew, and thank you to everyone joining us here today. Before I begin, I'd like to note that our financial results on Form 10-Q were filed with -- last week with the SEC. And with that, I'd like to give an overview of the financials for the third quarter of 2025. For the third quarter of 2025, the company recognized approximately $1 million in revenues compared to approximately $1.9 million in the same period in 2024. This year-over-year decrease in revenues was driven by our activities in the prior year. Recall, during the third quarter of 2024, we shipped a large order with multiple burners to a California refinery customer. Aside from the comparison and revenue numbers, I believe it's also important to note the difference in the year-over-year order volume. Last year's Q3 revenue was predominantly driven by one large order. And recall, this order accounted for approximately 50% of our 2024 annual revenue. Whereas juxtapose this with this year's quarterly revenue, this year's Q3 revenue was driven by our execution of several orders from our backlog, which has also grown year-over-year. To be more specific, our Q3 2025 revenue was generated predominantly by delivering multiple spare parts orders, delivering a midstream order, delivering a flare order, finalizing a CFD analysis for another flare order, providing engineering services and completing a customer witness test at the Zeeco test facility for our large 26 burner order. This also highlights the fact that our diversification strategy is adding incremental revenue to our top line. Now for the full income statement. Our net loss increased by approximately $274,000 compared to the same period in 2024. This year-over-year increase was predominantly driven by the decrease in sales volume discussed earlier. However, I'd like to point out a silver lining in this year-over-year change. Our Q3 2025 gross margin increased approximately 6.1 percentage points compared to the same period in 2024. And it's not just an isolated event to Q3. Our year-to-date Q3 2025 gross profit margin increased 5.3 percentage points compared to the same period in 2024. We believe this year-over-year increase in margin reinforces our overall long-term strategy to target margins between 40% and 45%. Now I'd like to shift the focus to cash. Our net cash used in operations for the third quarter was approximately $1.8 million compared to approximately $1.4 million for the same period in 2024. This $400,000 unfavorable year-over-year change was predominantly driven by our change in net loss discussed earlier. As of September 30, 2025, we had approximately $10.5 million in cash and cash equivalents with approximately 52.5 million shares of common stock outstanding. From an overall financial perspective, we believe our current working capital positions us well to scale our business while also providing our customers and suppliers a level of confidence to do business with us for the long term. And with that, I'd like to turn the call over to our CEO, Jim Deller. Jim? Colin James Deller: Thank you, Brent, for the financial overview. As always, I'd like to thank everyone for joining us on the call today and your interest in ClearSign. For the call today, Matthew will lead a question-and-answer session, where he'll go through the different business units much like our previous calls. We will end with an outlook for the remainder of 2025 and into 2026. We will then open up the call for Q&A from our investors. Many of you may have seen this, but you can send in questions ahead of time to our investor relations at mselinger@firmirgroup.com. So Matthew? Matthew Selinger: All right, Jim, let's get started. We've got a lot of exciting developments to cover. So Jim, there's been an uptick in order flow in the last quarter leading up to recent days. The orders are not just with one product line as we've seen orders across process burners, flares and even the new M series line. So from a macro or kind of high level, what do you believe is fueling this? Colin James Deller: Yes. Thank you. I think that's right. It is very pleasing to see that the increase is coming across our major product lines. I think there are some high-level drivers that are behind this and playing to our favor. The key one, I think we've said this for a long time, just getting equipment out in the field, getting the customers to trust what we do is very important. We are getting equipment out. And in particular, we've got some very large orders that are well in progress, and those are being seen. And I think that, that is playing into this uptick, especially in the process burner orders where we've seen orders and many inquiries from major customers that are watching our projects. There are ongoing regulatory pressure. There's new regulations being worked on in the Texas Gulf Coast area, a key market for us. And in the California regions where there's a lot of industry South Coast and San Joaquin Valley, those regulations have been in place for some time, but the due dates are coming up, and we are seeing inquiries from customers to meet their obligations under those. And I think finally, as we've got more products out there, we spend more time our products are evolving, they're maturing. And I think the same initiative I just getting installations out there. We're getting a lot more interest from our clients because they are becoming much more acceptable and usable for them. Matthew Selinger: But I want to ask almost the same question. Thank you for the answer on the macro level. How about then more specifically with the product lines. How about -- let's start with process burners. Colin James Deller: Yes. I mean the macro play across these, especially on the process burners, getting the major orders that we have, getting the progress through the testing, having the industry see the products develop and hearing about how that work is going, I really think is influential work spreads very quickly throughout this quite closely community. Definitely, the regulations in Texas, the orders we just announced, one is from California and one is from Texas, they're right in the regions where the regulatory pressure is playing a part. And on the process burners, we have a very big financial driver for our clients. The cost of installing an SCR is multiples of a burner solution. As the clients come to trust our solution, it is by far the most efficient choice, at least in our opinion. I mean just a point of reference, the -- what we've heard in the industry for an SCR installation on a major heater is probably going to be in the region of $40 million to $60 million, somewhere around that range. ClearSign is going to be significantly less than that. So that's a very big financial driver for the customers in choosing -- we believe ClearSign as a solution for emission requirements. Matthew Selinger: And how about in flares? Colin James Deller: So flares, I mean one -- again, down to the client experience, this is actually our fourth order with this customer for flares. So they have knowledge of our flares. They've seen what we do. So then I mean, clearly, their experience is playing into this. And we believe they have potentially more orders to come. The -- also regulations in California. They do regulate NOx emissions, which is not the same in every region, but California, we're seeing in Texas and now requires NOx regulations that means that ClearSign has a very valuable product. Matthew Selinger: And lastly, what are the drivers that on the M Series, a bit different. Isn't it? Colin James Deller: The M Series is different, especially the market that we've sold into with these last couple of orders. The M Series burners are really targeted on the gas industry and the midstream gas. This is a very big growth sector of the energy industry, especially with export LNG. So there's a lot of new equipment being manufactured and sold in this area. And for us, what's particularly interesting is a lot of the equipment that's out and installed is being upgraded, bought into compliance, minimize the downtime. So that leads to a very strong retrofit market. We developed that M25 burner based on that feedback. We've got a client that does that retrofit work wanting a good burner product. Based on their input, we develop this burner. There's a lot of proposals out there, but these 2 orders are great examples of why we developed that burner. So that's a more unique driver for the [ M Series ] and the gas business in general. Matthew Selinger: Okay. Great. Jim, let's dive into and dissect some of these orders if we can. I'd like to start with an order that seemed a little bit out of the ordinary, not a Core equipment or engineering order, rather testing. And I'm going to read a couple of things here, the headline. The headline read, ClearSign Technologies Corporation announced its order for comprehensive testing of 100% hydrogen capable burner. And then with the subhead, petrochemical client requesting performance mapping for future deployment. What's this all about? Colin James Deller: Yes. This was a very interesting order. This is not a typical order for us. There was no product sale with this order. The customer is a repeat customer of ours. They paid significant money for us to conduct a demonstration of our technology working in -- or working with fuel gas is that they picked to represent the operations of their global facilities. That includes up to 100% hydrogen. So looking at the future options that they may need and being global, the use of hydrogen is very much a consideration for the international market, even if it's slowed down here in U.S. at present. The work was to be conducted at Zeeco test facility. And it was truly an expansive testing, I think, forward-looking on the part of our client. Matthew Selinger: Okay. I'm going to unpack a couple of different things here, Jim. You say repeat customer. So are we safe to assume a, this is an existing customer. And let me also say it's referred to as a petrochemical customer. So the only other customer that's referred to as petrochemical customer is the customer that has a 26 burner order going to the Gulf Coast. So is it safe to assume it's the same customer? Colin James Deller: Yes. I mean this client has a very good understanding of our technology. They've been engaged with us on major testing and demonstration of our burner as part of that project. That's important because the -- this work is not usual. With that background, this is a major customer, we believe that they have a genuine interest in the potential use of ClearSign technology throughout their fleet going forward. And that was a major consideration when we agreed to do this particular project. It's not something we would do for everyone, but this was a very specific case. And that relationship and their understanding of our technology was a very big factor in us undertaking this work, and it is complete and went very well. Matthew Selinger: Okay. There's another thing you just said right there, Jim. You said it's been completed, right? So past -- so this project was announced, and this testing project has already been completed. Is that correct? Colin James Deller: It is virtually correct. The demonstration is completed. We still have -- we're still formalizing a test report, but the work is done. And the background to this burner, just to take a little segue, we've undertaken a very significant project funded by the DOE and the SBIR program to develop a new burner technology capable of running from 100% natural gas to 100% hydrogen. We've been working on this now for almost 2 years. It's gone extremely well. The final product of that testing was going through its last physical testing at the Zeeco test facility. That burner was then in place and able to be demonstrated to this Gulf Coast chemical plant. For us, the really appealing thing of having a burner that runs from 100% natural gas to 100% hydrogen is you really hit the extremes of the burner operations. So this chemical client, when they came with a wide-ranging global fuel requirements, that burner is already there to do it. So we're able to demonstrate that burner, which is the product of the DOE SPR program, and it just worked amazingly across all of those product lines, completing every requirement. So it was a very efficient and effective way wanted to show our new technology to this very high-profile client and a very good demonstration of the value of that SBIR program. Matthew Selinger: So let me just parse this a little bit. The petrochemical client testing is virtually complete. You did mention the DOE SBIR testing project, where is that project? Colin James Deller: So that project is almost complete. Let me explain that a little bit. The technology development and the engineering is complete. That burner met all of the DOE requirements. It met all our requirements, which I'd argue were probably more stringent than the DOEs. It showed its versatility and robustness and ease of use in being able to develop -- demonstrate it to the Gulf Coast chemical client, which really is the big opportunity for us. What is left to do with the DOE project is our objectives and the DOE expectations are not that we develop a single burner to demonstrate this capability, but we develop a range of burners for future deployment. We are in the process of running a much smaller version of that burner through its paces. That's in the early phases at Zeeco at this point. The reason we're doing this is we need to validate the scaling criteria so we can have a complete range of burners of that DOE design. So this -- I think the -- in easy terms, the hard part is done, the burner technology is developed. We are able to just validate in the scaling criteria. So we can put a bow on this and have a brand-new product line and seeing the way this performs, the way this burner operates. I'm very excited about what this can both do for us and the potential for further applications and different technologies going forward. Matthew Selinger: So it's partially complete. We've got more to do, but that will be executed and we'll announce that when that's complete. It's gone very well. Colin James Deller: Absolutely. Matthew Selinger: That's great. So let's move ahead, I'm going to talk about another order here that was recently announced, Jim, and it was announced -- you called it a new, super major ordered an engineering for a retrofit of 2 process heaters,at a California refinery for a total of 32 ClearSign Core burners. Can you give a little more color on this order? Colin James Deller: Yes. So this was announced on October 23, right? This is a new super major customer for us. The order that was announced was for the engineering order. I think to put this in perspective and help explain what this is, when we work with the client and we put the proposal together for these projects, we look at the scope of the entire project. And that proposal covers the initial engineering, also any computer modeling and the testing and the fabrication and the delivery of the burners and anything that goes beyond it. So we deliver a proposal for the complete scope of work. Matthew Selinger: So we're bidding on the comprehensive project... Colin James Deller: On the whole thing. That's what the client assesses. As we've seen with other projects, they often -- the initial step is often just to -- they purchase this step by step. So this order is that very first engineering phase based on our proposal for the entire delivery of this business. Matthew Selinger: Right? So this is just like other orders we've announced in the past where, again, just to parse this, we're bidding on the full project. They basically look at it and they say, we want to move forward, they release the PO, the initial PO for the engineering order. Is that correct? Colin James Deller: That's correct. And that's the way that we're seeing many of our previous orders being released. Matthew Selinger: Fantastic. And this is for, again, we're calling it a new super major customer and going to California. Is that correct? Colin James Deller: That's correct. Yes. When we say new, it's -- we know the customer, we know the people. This is our first purchase order from this super major customer. Matthew Selinger: And it's been a direct relationship from ClearSign and the customer. Colin James Deller: That's correct. Yes. Matthew Selinger: Fantastic. Let's talk about another one. There's another larger process burner order, and we call this from an integrated petroleum producer. And this is for 36 ClearSign Core burners. And this is to be installed in the U.S. Gulf Coast refinery. Colin James Deller: That's correct. Matthew Selinger: How about a little more detail on this order? Colin James Deller: So this one was announced September 17. As you said, it's the same structure. We bid the entire project, the entire scope. And again, the client as I've done here, has given us the initial order for the engineering to kick this project off. The drivers behind this are a little different. NOx is definitely a part and a consideration of this project. This is also an unusual mechanically structured heater and standard burners would not fit. So we believe that a significant part of selecting ClearSign for this project were also our engineering capabilities, our ability to develop a burner to fit into this heater and deliver the right frame profile and with the CfD modeling and the engineering to make right to show the customer and to simulate that working in a heater. I think this speaks to the strength of the engineering that we have here at ClearSign in addition to the technology. Matthew Selinger: Okay. And that order was in the press release, we called it a name brand petroleum company. So this brings up a point, Jim, I'd like to move into kind of take a side bar here that one topic I get asked frequently is naming customers, right? Jim, why don't we name them in releases? Colin James Deller: Yes. Great questions. We would love to name the customers, too. The reality is that in the purchase order contracts that we have with most of these customers, there are strict disclosure requirements, and it prohibits the release of the client's name. So this is -- whether we have ClearSign in my product, this is quite typical, but that is the reason that we don't. Now what we do, do in the press release is we do describe the companies quite carefully. So that description that you've mentioned, whether it's a global super major or... Matthew Selinger: Any brand petroleum company. Colin James Deller: A global chemical company. We choose that name and descript it carefully to at least try and give the investors a good understanding of the prominence and the status of that customer. So while we cannot name them, if it's a global super major, you've got a good idea of what that customer is like if you don't know specifically. Matthew Selinger: And how many super majors are there? Colin James Deller: Customers? There's various descriptions, but 5 to 7 seems to be the general consensus. Matthew Selinger: And we're working with how many... Colin James Deller: So we now, as a company, since I've been with the company, we've received purchase orders from 3 of those global super majors. So give it just over or just under 50% depending on what description of global super major you use. Matthew Selinger: Right. And again, if they're not a super major, like you said, they're also a name brand petroleum company, a multinational energy company. These aren't in a sense, mom-and-pop operations. We're dealing with bigger and bigger companies that... Colin James Deller: Yes. If it's a global chemical company or -- yes, you will recognize that is a household and then we try and describe them and their breath as accurately as we can. Matthew Selinger: Okay. I'm going to get back to the order topic. Thank you for that side bar. Let's shift to the M Series. We've seen 2 separate orders just 1 week apart for this new product, and both were through our heater manufacturing partner, Devco. And you did touch on this in some of your early comments, Jim, but could you talk about the M Series and kind of what's going on with that product line? Colin James Deller: Yes. So this is -- it's primarily targeted into the midstream industry. We have different levels of technology. We have the M1, which is capable of delivering well below 5 ppm, so beating any emission requirements we have heard of. And then since then, with the feedback from the customer, we have developed an M25 specifically for retrofit applications. Both burners are great reception. These orders are the M25. So this enables our customers to go out and to have a very effective burner product to retrofit heaters. So to go out and to come up with a more reliable burner to reduce the emissions. But this is designed to take out an existing burner and have a ClearSign burner to plug back in the hole and to upgrade that heater. That's proven to be very successful. There are a number of proposals still out there. And we actually believe that there are more projects being quoted with our burners that we know about because once we provided a proposal for a certain size of burner, our clients are free to go ahead and use that proposal in other projects that they're chasing that would require that same burner. So it's quite common for us to jump on a conversation with a customer for a project that they're working on that we didn't even know about and include our technology as that project gets close to fruition. Matthew Selinger: So these sales channels are kind of operating in the sense are bidding on their own. Colin James Deller: That's the goal, especially in cases like this, where it's not a customized product, it's a standard product that give them the tools to allow them to go and then to run with it and to use that product more as they get traction that way, it's very efficient on our resources. It cuts our clients free to go and sell them and chase whatever projects they can without having to come back to us for every detail in the early phases of that project. Matthew Selinger: And because it's a more standardized size as then, Jim, I'm assuming then the sales process might be quicker and then even the sales to delivery, is that correct? Colin James Deller: The whole process is more efficient, right, especially with a -- with this type of client, we typically got standard purchase order conditions. The order to delivery cycle is much quicker once we've already build that burner, once we've got the drawings. So we'll turn these orders in typically 10 to 12 weeks from quote to delivery. So it's -- while it's the same ClearSign technology at the Core is a very different order process to the previous orders we talked about where there are engineering and testing and multiple stages and also a very bespoke product for all the process heaters. These are very much designed to be standard burners that we can turn quickly and let our clients run and go and chase a larger volume of opportunities. Matthew Selinger: Okay. Great. Well, keeping with the theme of multiple orders, and you didn't touch on this in the very early comments, though. We did receive our fourth order for flare and this is for our California who's a -- California customer, who's a producers there. What's driving this? And what's going on kind of with the flare product? Colin James Deller: Yes. I think 2 major points on the drivers. First is there are certain regions of the country that we have a NOx emissions limit on continuous flare and California is one of them in at least most regulated areas of California, especially where the oil fields are. And the second is just the clients' needs. So this is an oil-producing customer. As part of that process, there is an off gas that comes out from the wells that client has to dispose off responsibly. If they cannot dispose off that gas, it actually can limit the production rates from the field. So they need more flaring capacity that they have to do in a manner that meets the regulatory requirements to enable them to maximize their oil production. So this could potentially limit their oil production if they don't have the flaring capacity to meet their needs. Matthew Selinger: Interesting. Okay. Very interesting there. And this -- and I think you talked about this in the past on previous calls, Jim, that this isn't just a simple kind of dumb flare, right? Is that correct? This is a more complex kind of project and product? Colin James Deller: Yes, 2 parts. I mean our flares are quite sophisticated because we do maintain the emission regulations that is normal across most players. We're quite unique in that field. For this one, in particular, I have talked about systems projects and expanding the ClearSign scope on previous calls and our ambition to get into bigger projects where we can leverage our technology and then include the vessels and the equipment that surrounds that burner basically to multiply the size of our scope. This order is actually a long way of that process. This is not truly 100% of the supply of the flare, but we are replacing major components of an existing flare. And we're probably up in the 75% to 80% of that flare range. I don't normally give revenue numbers, but to emphasize the point here, a typical flare burner will be $150,000 to $200,000, somewhere in that range. With the other parts for the flare that we're able to sell here, we're up in the region of $0.5 million for this 1 particular order. Thinking more generally for the systems projects, this is probably the bottom end of what a systems project will be, and they've certainly got a scope to go up above $1 million per piece. But the intention is to take a special ClearSign burner and then leverage that to supply the scope of the product that, that burner fits into rather than just selling the burner have somebody else build that scope. There are certain products where it makes sense for us to actually sell the whole thing, which allows us to expand our revenue significantly. Matthew Selinger: Interesting. So again, for us, it's very interesting because it's not only an emissions product, but then it's also helping the customer maximize their production. Colin James Deller: Yes. Matthew Selinger: Okay. is a new -- I think it's a new kind of reasoning that I don't think our customers fully -- excuse me, our investors fully understand. Colin James Deller: It's certainly a very valuable lever for the customers as well. Matthew Selinger: Let's turn to the sensor product, if we could, Jim, the ClearSign Eye. On the last call, we had a previous update about a pilot installation going to a super major. Can you give an update on this product line? Colin James Deller: Certainly. So that has -- as we expected, this project is going ahead. The sensors were shipped and installed and are operating in the clients team. We've had some very beneficial feedback from that client. We also have further opportunities to quote those sensors now to this client actually for a sister refinery, which is very encouraging, I think, speaks to their experience to date. Incidentally, we also have a another site that we are installing the sensors on ClearSign burners, which will be a first for us. So there's -- I'm actually very encouraged to actually getting some traction on the sensing technology. Matthew Selinger: Great. More to come there. On the last couple of calls, we have spent a long time talking about our partner, Zeeco, right? So can you give an update on the relationship? How is that going with Zeeco? Colin James Deller: It's going really well. I mean just going back through what we've talked about here today, the DOE testing and the testing for the Gulf Coast chemical company is a fantastic example. That testing was extensive, right? They have limited -- they have the world's biggest test facility I have to say, but they have given us extensive access to develop our products in that testing. I think to emphasize, if we look at the project that we recently talked about, the validation of the demonstration project for the chemical company, that wide range of fuels was the most extensive range of fuel that I think I tested in my career, and I've seen a lot of burner testing. They had to move in fuel tanks and actually rearrange the fuel system for the test burners to do that, which they willingly did. They took the ball around with it and put -- they had everything in place. And that testing went smoothly, both the burner performed wonderfully, but also my house off of the Zeeco team, they did an incredible job running that furnace and getting set up and making sure that everything was running consistently in the lead up to and throughout the testing. On the -- right, the other major thing they do for us is fabrication of burners. We have, I think, our biggest burner production brand going through the Zeeco shop right now. They're building those burners. The updates and the interaction, we are obviously the shop that the clients inspect us. So they have been extremely supportive of the ClearSign business. If I can, just one is, we've actually started receiving proposals now or request for proposals from Zeeco sales team. So we've had a couple to address as well. It was nice to see. Matthew Selinger: It's great to see. I think that's what a lot of investors are interested to hear. So Jim, we have the year-end insight mid-November. What do you see for the rest of the year and then moving into 2026? Colin James Deller: Yes. Well, there's not a lot of the year left, but there's some very specific things this year. The big one is we have 26 burners being manufactured at Zeeco. Those are on schedule. We're looking to get those shipped by the end of the year. We also have a flare in California that's starting up. But really for this year, shipping those 26 burners is a big focus. Looking forward, there's a lot of quotes out there, a lot of the M Series that we said, also a lot of flare and process burners. I'm very much looking forward to further traction and orders coming in from those. We've got the 2 process burners we've talked about so far, the engineering phase. I look forward to those projects progressing, rolling in through testing and ultimately, the equipment orders. Speaking personally for me, the burner that came out of the SBIR program is very exciting. I mean this burner is subtly different from our previous burner, but what it does and the way that it does it, I think, is going to be extremely significant in the industry. I think it delivers -- it provides a platform for us to develop into new areas and to really develop that burner and getting that news out to the clients is going to be very important. So for everyone looking out, look out for a lot more promotion. We'll be engaging with the key technical people with our customers. We expect to be putting news out on social media, especially, but a lot of promotion around the burner. b think that's got a great potential for ClearSign's future. Matthew Selinger: All right. Referring back to the first time you mentioned there, Jim, the 26 burner order. I know we don't give guidance, but if that shifts, I'm going to go and lever what could that Q4 -- what could our Q4 look like? Colin James Deller: Yes. Thank you. I think we answered this. We talked about sales before, but we've given ability to do back of the envelope math, and maybe stick with that, I think, conservative pricing for our burners we stated it's 100,000 per burner. There's 26 burners in this order. We've recognized a little bit of this revenue from perhaps testing, but very much the vast majority is still left to be recognized. So I'm not going to go through the math. But basically, it's comfortable easy to say, I think that shipping these burners will be well north of $2 million in revenue to be recognized by year-end when they ship. Matthew Selinger: That would be a great quarter, Jim. So with that, I'm done with my questions. Operator, we're going to turn back to you, and we're going to open up the call for some questions, please. Operator: [Operator Instructions] The first question comes from Sameer Joshi with H.C. Wainwright. Sameer Joshi: Congrats on a great quarter and it looks like the next quarter will also be good. I think Matthew asked a lot of the questions that I had. But just I would like to step back and look at the type of orders that you're receiving. You have the M Series, the flare product, the sensor product upcoming. It seems that the process of receiving these orders and deploying these particular products is quite different from the process burners where it would be -- you would have to wait for a substantial period of time before a burner would be deployed. Does this help you in like understanding your 2026 expected revenues better and timing and cadence of quarterly revenues over the next 4, 5 quarters? Colin James Deller: Sameer that is a great question. I think the -- the key point is, obviously, the process burner orders are substantially bigger than the M Series or even the flare orders. The 2 that we talked about on this call, 32 and 36 burners, but mean a lot more meaningful in terms of total revenue. But as you point out, the duration of those projects is significantly longer. So the way that I see it, the long-term process burner orders and that business is based on my expectations going to be the -- clearly, the biggest product line for ClearSign, especially in the stage of development we're at right now, the revenue flow is going to be lumpy. We are chasing those orders, but there's going to be a significant duration before the total revenue comes in. That's where -- from a revenue perspective, we're really looking to and promoting products like the M Series and the midstream and even the flares and the sensor will be the same, that they are projects that turn much more quickly through the sales process and especially through the execution process. So they -- as I see it, they will fill in the gaps of the -- in revenue while we build up the pipeline of those big process orders in time. I expect to have a significantly greater number of process orders in various stages of completion so that, that revenue from those process orders will smooth out. We will still continue to get the quick turn orders and the spare parts and everything else that we do. I think as we go through this growth transitioned, the 2 different types of product, the quick turn and those longer orders, right, both fill in different parts of our revenue picture. Sameer Joshi: Yes, understood. So given the success of these products that sort of fill in the revenue build up while the process burners are chugging along. Are there new opportunities for new -- other kind of products? I think the sensor product is one of those, which you probably would talk about. But are there other products that could be developed by the company or are under development by the company? Colin James Deller: I certainly believe that there is potential. Obviously, we -- if we roll something out, we will bringing that to the front. But I think especially, I'll go back to my comments on the outcome of the SBIR program. The underlying burner structure that we developed in that program is extremely versatile. And I think that 4 different process applications gives us great opportunity to expand into other applications in the process field. And always, as we develop the M25, we're always talking for our customers, we're trying to understand their needs and the gaps in the market and looking for opportunities that play to ClearSign's strengths. And can both be -- provide for good products for our customers and, of course, good products for ClearSign. So I certainly expect to develop more products in it and is a great focus of ours. Sameer Joshi: Understood. And then just one last one on the regulatory front. Of course, it seems the California and Texas regulatory action or pending deadlines are beneficial for the company. But at the federal level, is there any risk of headwinds as a result of EPA reducing or walking back some of its requirements. Do you have any visibility on what steps the EPA might take over the next year that could result in some headwind for your sales process? Colin James Deller: Yes. So it's difficult to talk in absolute what could possibly happen. But from what we have seen and going back over my career, the regulation of NOx emissions is a criteria. It's fundamental to the EPA regulations. And we've not seen that be subject to political pressure to the same extent as more recently in the United States, we can point to decarbonization. So we're seeing increased regulations in Texas coming out now that's being driven by the EPA. So I do not expect any headwinds on the NOx side. And then when we look at carbon, I mean, that was always a long-term development, especially when we start looking at things like hydrogen as a fuel, we are seeing inquiries now that are very interested in the optionality and our burner's capability to burn hydrogen as a fuel. I think part because it's a longer-term need and also because our clients are global. And while there may be short-term political deemphasis of decarbonization in the United States, that is not the case in other countries around the world and our clients are global. Operator: [Operator Instructions] Matthew Selinger: Great. Operator, while we wait, I'm going to go ahead and read a couple of questions. I thank you to our investors for sending questions in ahead of time. We do -- we very appreciate that, and those also help us with the messaging of the actual content of the call. We hope to be able to address every question that was sent in. Jim, one question I have is it dovetails a bit into what you were talking previously there with Sameer. We do see a potential reduction in larger scale hydrogen projects, will this or could this affect the development of, let's say, the 100% hydrogen burner? Colin James Deller: I mean -- okay. So I think there's a few parts. First, the quick answer is that burner development from our side is done, especially from the development of the technology, as I described earlier. But I think importantly for ClearSign and even the big consideration when we embarked on this project, developing a burner that runs across that fuel range is extremely valuable in the market today. On an oil refinery, they have a wide range of gas mixtures that make up their fuel gas. The off gases that come off the refinery process get pushed into the field gas stream. And even today, we have burners that run on oil refinery fuel gases that are in excess of 80% hydrogen. So the burner we've developed under the DOE program specifically is extremely robust. And as we showed the chemical client that we've talked about, I think the industry knowing that a burner will operate on 100% hydrogen and 100% natural gas gives them great confidence that that's a very robust and reliable product for use in their refineries no matter what the fuel gas composition they run in. So from my perspective, I'm actually not concerned about the -- or not concerned from a business sense about the deemphasis of decarbonization for our burner business because my primary interest in developing that burner was to develop a burner that was going to be an excellent product for the refining and chemical industry in its form today. And if we've got the optionality for the future of hydrogen, then that is icing on the cake. Matthew Selinger: Here's another one. And thank you to the investors who sent this in because you're obviously an astute listener. It was mentioned that spare parts were part of the revenues this quarter, and I believe spare parts were mentioned as the chunk of the revenue last quarter. Can you talk about what this might mean for the business -- this portion of the business going forward? Colin James Deller: I can. So just in general for everyone in the burner business, the spare parts is a very important part of the business. It's based on the installed equipment. And as you get more equipment out, it will become an increasingly large part of our business. The nice thing is it's also very consistent. It tends to turn very quickly, and it tends to run with a high profit margin, which, of course, we like. Just to put some perspective, Brent, the -- this last quarter, we had -- what was the spare part in that mix? Do you remember the... Brent Hinds: We had about $300,000 of a $1 million. Colin James Deller: All right. So even now, we're getting a very significant steady income from spare part sales with the equipment we have out in stores right now. And as we get more income out there, that is only going to increase, and we'd expect it to increase proportionately to the amount of equipment that we have out in the field. So I look for this to be a very meaningful and high-margin revenue stream for ClearSign as we grow. Matthew Selinger: Great. Okay. One more question here. We're now hearing more and more orders from Texas and the Gulf Coast. What do you believe has led to this shift? And is this a general shift to that region? Colin James Deller: It's a good point and a good observation. When you say shift that region, I define that differently. I don't see the business in California dropping off. And in fact, with the process burner order we talked about today, I think the California business remains strong. I do think what we're seeing, though, is a significant pickup in what is our -- the largest refining and petrochemical market in the U.S., which is the U.S. Gulf Coast. We've got the 26 burner orders shipping down there. We talked about the 36 order going down there today. I think there's a number of factors behind that. One is just our acceptance in the industry. This is where a lot of those users are based. We've also talked about the regulations. The California regulations have been -- the new regulations have been in place for some time. The Texas regulations are almost complete. We believe the formal proposal has been submitted by the Texas Board. It's just waiting on the EPA to approve it, but the industry is aware that there are new regulations and potentially more fees on the near horizon. So we believe -- I don't know that, that is the driver, but we think that, that is also possibly playing into the uptick in interest that we are seeing. And we are seeing interest beyond these 2 orders. We do have significant interest across the U.S. Gulf Coast expanding actually beyond Texas. Matthew Selinger: I have no more questions. Operator, I'll put it back to you. Operator: There are no further questions in the queue. We've reached the end of the question-and-answer session, and I will now turn the call over to ClearSign's CEO, Jim Deller for closing remarks. Colin James Deller: Thank you, operator. And thank you, everyone, for your continued interest in ClearSign and for taking the time to participate today. Look forward to updating you regarding our developments and speaking with you on our next call. In the meantime, please keep checking for development on our websites. And for more behind the scenes updates, please follow us on LinkedIn, and we have also recently reengaged our ClearSign X accounts, so there's another social media post to check. Thank you all for your time. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Ioannis Stefos: Welcome, everyone, to PPC's Capital Markets Day. Today, we will present our strategic plan for the period 2026-2028, along with an update on PPC's financial performance for the first 9 months of 2025. A very warm welcome to those joining us here in London and to everyone connected via the webcast. We are here today with our Chairman and CEO, Georgios Stassis; and our CFO, Konstantinos Alexandridis. Since 2019, Georgios has been guiding PPC's transformation, steering the company towards clean energy and sustainable growth. With nearly 2 decades of experience in the energy sector, he has positioned PPC as a leading player in Southeast Europe's energy transition. Konstantinos, who joined PPC in 2020, brings strong financial expertise and a proven record in managing large listed and private companies. He has played a key role in strengthening PPC's financial foundation and supporting the execution of its transformation strategy. Together with a wider management team and all PPC employees, they continue to advance our strategy, delivering growth, efficiency and long-term value for our stakeholders. Let me briefly walk you through today's agenda. We'll start with a short introduction where we will initially present 9-month performance, proceeding next with how PPC positions itself in the Southeast European region as well as highlighting its strong track record to date. We will then outline PPC's strategy and how the company continues to lead across all parts of the value chain. And after that, we will move on to our financial targets before closing with some final remarks and conclusions. And of course, we will end with a Q&A session where we will be happy to take your questions, both from those here in the room and from everyone joining us remotely. If any question remains unanswered, our Investor Relations team is always at your disposal to follow up after the event. We expect the session to last no more than 2 hours. And now let me hand over to our CEO, Georgios Stassis, to begin the presentation. Georgios, the floor is yours. Georgios Stassis: Thank you, Ioannis. Hello, everyone, and welcome to our Capital Markets Day from the City of London. Before we present our track record, let me provide you an update for the 9-month 2025 financial performance, focusing on the main areas. Robust profitability in the 9-month period with adjusted EBITDA reaching EUR 1.7 billion, up by 24% year-on-year. Strong performance in the third quarter, which has been driven by improvement in our integrated business and by higher revenues in the distribution activity in Greece, following the implementation of the new network charges as of June 2025. Adjusted net income after minorities amounted to EUR 400 million, being fully on track for the target we have set for the full year, which will also lead to increased dividend per share as we have committed since our previous CMD 1 year ago. We will further discuss on this later in the presentation. Investments stood at EUR 1.9 billion, mainly driven by renewables, flexible generation and distribution projects, which are the key focus areas for our business plan. Free cash flow stood at minus EUR 1 billion due to high investments despite improved FFO performance in line with our plan. Net debt at EUR 6.7 billion at the end of September with a net debt-to-EBITDA ratio at 3.1x and below the ceiling of the 3.5x that we have set in our financial policy and in line with our strategic priorities as we progress our investment plan. Let me now turn to our performance against our 2025 targets. As you can see on the slide, we are well on track on all key metrics. On the financial side, adjusted EBITDA is expected to reach EUR 2 billion, while net income will close at EUR 400 million with dividend distribution increasing to EUR 0.60 per share. CapEx, even though below our initial estimates, are expected to reach at EUR 3 billion area, reflecting our continued investments in renewables, flexible generation and distribution networks. And all that, keeping our net debt-to-EBITDA ratio comfortably below the 3.5x ratio, supporting a strong and balanced capital structure. In terms of strategy, we continue to deliver on the transformation we set out. PPC is becoming greener and more predictable as we remain on track to phase out lignite by 2026, end of 2026 with no additional decommissioning liabilities thereafter. We have extended the PPC model across Southeast Europe, strengthening our position as a regional energy champion. We are also driving customer centricity, expanding our reach through new cross-sector touch points and digital services. And we have enhanced our balance sheet through disciplined financial management and higher cash flow stability from our network business. Finally, all this progress is reflected in the performance of our share price, which, combined with our increased dividend distribution, adds value to our shareholders. PPC delivered a 168% total shareholder return over the last 3 years, outperforming the EURO STOXX Utilities Index, which stood at 62%. Overall, our progress demonstrates that our strategy is delivering the targets we have set both operationally and financially, delivering ultimately increasing value to our shareholders. During the last years, we have been consistently growing our operations, aiming at becoming a leading clean power tech and critical infrastructure player in Southeast European region. Our activities span from electricity generation to electricity distribution as well as the sale of advanced energy products and services in our 2 key countries in Greece and Romania, while also expanding our renewables footprint in Italy, Bulgaria and in Croatia. We have a total installed capacity of 12.5 gigawatts, of which 50% from renewables, including hydro, while our total regulated asset base amounts to EUR 5.6 billion. We are also the leading supplier of electricity in Greece and one of the leading in Romania, servicing 8.6 million customers in total. As highlighted at the bottom of the slide, our Energy Management unit acts as a strategic catalyst driving profitability. At the same time, we are expanding in new sectors to extract additional value and new avenues of growth. First, we have entered the telecom business, rolling out one of Europe's fastest-growing state-of-the-art fiber-to-the-home networks in Greece based on the competitive advantage we have of the rapid development of the new network at low cost through the use of our existing infrastructure. Second, we are active in e-mobility through the deployment of public charging points, being the leader in the Greek market, having also a strong presence in Romania. Last, we are also exploring further opportunities in the data center space, given our position in Greece, as we will see later in the presentation. Getting into more detail. Let me start with the distribution activity, which is keep growing, leveraging on the attractive regulatory framework with long-term periods that follow European DSO regulation with regulated asset-based models having a WACC of close to 7% in Greece and Romania. Distribution grids are the backbone of the energy transition and require major investments to keep pace with rising electrification, renewable rollout and grid flexibility demands. And towards this end, we are upgrading our networks in both countries, focusing on the digitalization of the infrastructure, implementing a nationwide rollout of smart meters, especially in Greece, which is lagging compared to the other European countries. As a result of continued investments, we have increased our total RAB at EUR 5.6 billion, having doubled the EBITDA to EUR 800 million over the last 4 years. Next, a few words about our integrated business model, which is supported by a total generation capacity of 12.4 gigawatts, about half of which comes from renewables and a customer base of 8.6 million customers in Greece and in Romania, where we hold -- when we are the leading market in both of the countries positions. This integrated model covering generation, retail and energy management has consistently driven our profitability while providing a natural hedge against volatility in energy markets. It allows us to deliver resilient performance even during periods of extreme market disruption. We have seen both sides of the cycle in low prices environments, such as during COVID, when wholesale prices and generation margin declined, our retail line provided a stable revenue stream from our large customer base, keeping overall profitability within the targets. On the other hand, during periods of high prices, such as the recent energy crisis, retail margins came under pressure, but our generation business benefited from stronger wholesale prices, again, balancing the overall performance. As a result, PPC has managed to consistently meet its profitability targets, effectively leveraging the advantages of its integrated business. Between 2021 and 2024, we doubled our adjusted EBITDA, achieving a 26% CAGR, and we are now on track to reach EUR 1.2 billion in 2025. PPC's growth trajectory is further supported by favorable macroeconomic trends in its core markets despite some headwinds in Romania, especially in Greece, is among the fastest-growing economies in the European Union with GDP growth expected to outpace the European Union average over the coming years. The macroeconomic environment in both countries continues to strengthen, particularly in Greece, where the 10-year government bond spread has normalized significantly, now trading below Italy's for the first time in many years. This improved macro backdrop supports investment confidence, providing a stable foundation for PPC's continued expansion and value creation. A growing economy, combined with ongoing electrification, is expected to drive power demand higher in both Greece and Romania, reaching an approximately 25% increase until 2035 for both countries. We have already seen such inflection points in Greece with power demand increasing in the last years by 4% between 2020 and 2024, which sets the basis for the evolution of the years to come and provides comfort in our projections. Beyond macroeconomic growth, both our key markets are also benefiting from European Union funding, which continues to support investments across multiple sectors, stimulating GDP and further boosting electricity demand. In addition, the acceleration of data centers development is expected to become a significant new demand driver. However, in our projections, we have taken a conservative approach, assuming a base case scenario for data centers in Greece and Romania. Let us now pass to the next section of our presentation, focusing on how our company will continue in the next 3 years, its journey of transformation in one of the most significant European utilities. Over the past few years, we have been focusing on our integrated model, aiming to capitalize on the opportunities presented by the ongoing energy transition and digitalize all our operations. The digitalization theme becomes more and more important, especially given the AI revolution that is underway. In the distribution activity, we have been increasing our investments to modernize our networks and improve service quality. However, we need to continue investing further to address the new challenges posed by rising demand, also driven by the rapid deployment of data centers. On the generation side, we have been scaling up investments in renewables and clean energy technologies, and we will continue to do so as these are much needed in the Southeast European region. At the same time, we are not investing only in renewables. We are also deploying capital in flexible generation assets, which are critical to balancing the market and are able to secure higher capture prices compared to other generation sources. And for that purpose, we are investing in batteries and in new gas assets, in new CCGTs. And of course, all these initiatives are supported by our retail activity and our customers who remain central to our strategy. We are committed to meeting their energy needs and offering additional complementary services, focusing in particular on high-value customer segments that are key to our long-term growth. Before we proceed to the various activities analysis, let me make a brief reference to the strategy we follow focusing on 4 key areas. At first, we are a vertically integrated utility with presence in the generation, distribution and sale of electricity, having, therefore, an internal natural hedge that protects us from the volatility of energy markets, making our business more resilient to exogenous shocks. And it's very important part of our strategy. Then we are technologically agnostic, I would say, investing in all kinds of electricity generation technologies, which are competitive and sustainable for the long run. Technologies which complement each other, so we can be well prepared for power price fluctuations, which we think will continue in the years to come. We are investing in renewables; solar, wind and hydro. We are investing in batteries as well as flexible gas units. So technology diversification is a strategic choice for us. Third point, we are doing a regional play, expanding in neighboring countries, all of them interconnected as a common European market, but with physical interconnections linking them to each other. Countries that have high growth potential where renewables rollout is not yet in a mature stage and the decommissioning of coal assets has not finished yet. In fact, in some of them, just started. These are countries with interconnections between them that provide significant cross-border trading opportunities. In the Southeast region, we are operating in the utility space where the power prices are impacted by, I would say, 4 main forces in the area we are. First, the energy transition itself. So those countries have their own growth potential. Then the energy saving, meaning that through technology improvement, there is an energy saving. But also on the other hand, the electrification coming from other industries moving to our industry, meaning heating and cooling or the automotive industry, for example. Then again, in these regions, we have also something unique that you cannot find elsewhere. And that is, unfortunately, the Russian-Ukraine conflict that is draining energy through interconnections and that will continue to do so in a much higher pace, especially, god willing, during the reconstruction phase when hopefully, the war will end. So Southeast Europe is an area with relatively high prices versus the rest of Europe versus Central and West Europe, a situation that we don't expect to change by the end of the decade, being impacted a lot by the reconstruction of Ukraine. So to conclude on this point, our regional play strategy is very important for us and of course, a source of value. Then the fourth point of our strategy is our focus on customers, which, as I have said many times, are the anchor for our growth, and that is why we are strengthening our retail services to achieve best-in-class holistic customer experience. We try to offer a holistic service to our customers in various different ways, so to stay in every household and on back of this to support our generation transformation and growth. And to achieve all this, we are leveraging on the AI and digital evolution, assessing its impact across all operations, as I will elaborate in the next slides. PPC has been in a growth path all these years, increasing its renewables footprint, investing in flexible generation assets while at the same time, decarbonizing its generation portfolio. We saw earlier that we have achieved a good track record so far in the renewables build-out, but our targets are even more ambitious going forward. We are targeting a 12.7 gigawatts of renewables capacity by 2028, which is 5.5 gigawatt increase compared to the projected capacity at the end of this year, increasing its share in our energy mix up to 77%. At the same time, we are phasing out lignite by the end of next year, shutting down the last unit of Ptolemaida V and starting its conversion to a gas unit. Initially, it will be converted to a 295-megawatt open cycle by the end of 2027. And next, it will be upgraded to a 400-megawatt CCGT by the second quarter of 2029, having already locked a total CapEx cost, which is significantly below EUR 1 million per megawatt. On top of this, we are also adding a new 840-megawatt combined cycle gas turbine unit in Alexandroupoli, as you know, which is ongoing its construction in Northern Greece. Those 2 new high-efficiency units will actually replace 2 older units, improving the efficiency of our overall generation portfolio. As a result, our portfolio is becoming greener and more efficient with significantly decreased CO2 emissions, which will be even further reduced driven by decommissioning of oil capacity given that additional Greek Islands are interconnected in the mainland in the coming years. Let us now take a closer look at our renewables rollout, our forward targets and the confidence we have in achieving them. As we saw earlier, our goal is to reach 12.7 gigawatts of renewable capacity by 2028, representing an increase of 6.3 gigawatts from where we stand today, more than doubling our current installed base. And while this may appear quite ambitious, we are fully confident on delivering it. Our strong track record, as highlighted in previous slides, supports this confidence. But even more importantly, we have already secured 3.9 gigawatt of projects that are either under construction or ready to build, including our operating capacity of 6.4 gigawatts. This brings the total to 10.2 gigawatts already operational or secured, which accounts for about 80% of the target we have for 2028. And on top of that, we have a total of 20 gigawatt, anyhow, gross pipeline of various in development stages and technologies projects, giving us significant optionality and flexibility in selecting the most attractive projects for future investments and replacing also projects which things might not go well. Volatility is another thing. Volatility is one of the most commonly used words over the last years to describe energy markets. In the key markets where we operate, such volatility is evident from the increase of average spreads of power prices in the day-ahead market that has been recorded in the recent years. And of course, we do acknowledge the role of 0 and negative power prices that we have started experiencing within the last 2, 3 years, which we have embedded in the assumptions of our business plan since this has become a part of the environment we operate. It is true that the renewables evolution inherently produces periods of excess generation with wind and solar output exceeding grid or market capacity. Traditional systems view this as a failure. However, we think there is a great opportunity which lies in monetizing this surplus of generation. Curtailment is a feature of the clean energy system, a reflection of abundance, not of inefficiency. By embracing this as a resource, we transform volatility into profitability and variability into resilience. For us, it is not a story of constraint, but of integration and smart capital allocation, turning a systemic challenge to a competitive advantage. Batteries are the most compelling asset absorbing excess generation when they charge and discharging at high value during low renewables times, particularly in the evening. As the cost of solar and wind continues to fall and their contribution to the power mix rises, flexibility is becoming a top priority. Fossil fuel currently provides the bulk of flexibility in the power system, both in terms of dispatchability and meeting peaks in demand. It is a feature, a signal of successful decarbonization and the market opportunity for those positioned correct to extract value for flexibility, integration and optimization. As a vertical integrated utility PPC, we are uniquely placed to transform curtailments viewed as a waste into sources of margin, resilience and growth. Flexible generation is key in the current market environment, both for profitability optimization as well as to support the stability of the grid and the security of supply. With wind and solar playing a central role in the power systems of the region, assets that can adjust their output in response to system needs bring substantial value. There is a range of technologies that satisfy flexibility needs. Their contribution depends on their ability to react over shorter or longer periods and their cost competitiveness. Flexibility requirements over shorter periods can be better satisfied by batteries, while flexible hydro and gas are better positioned for longer-lasting challenges. Flexible assets unlock earnings by turning volatility into opportunity, capturing intra-day price spreads, firming our renewable output and protecting supply when the system is tight. Through the combination of multiple revenue streams, these assets sharpen our commercial edge, boost cash flow resilience and support disciplined growth in a more volatile power market. And that's why on top of the significant renewables build-out that we are implementing, we are also investing in flexible generation assets. We already have a significant portfolio of pumped hydro and gas assets, and we are also developing batteries. Our main focus is stand-alone batteries. By charging in low-price hours and discharging when power prices are high, stand-alone batteries give us flexibility when it's most valuable. Additionally, they provide ancillary services where reserve capacity is tightening. And this allow us to monetize volatility, combine revenues from both day-ahead and balancing markets, creating a flexible trading asset that enhances our commercial performance across the portfolio. There are also certain cases where batteries co-located with the renewable assets in the same physical site also work for us. Colocated batteries paired directly with our solar and wind assets unlock a different value proposition. They reduce curtailment and cost of imbalances, stabilizing output profile of the renewable asset, enhancing its economics. The main constraint is that charging is limited to the paired asset, which reduces arbitrage optionality. However, the availability of subsidies and grants outweighs that constraint in Romania, for instance, making their business case very solid. And that is why we are proceeding with the development of additional 232 megawatts of co-located batteries by 2028. Overall, our business plan includes the development of approximately 1.5 gigawatt of batteries in Southeast Europe over the next 3 years. These batteries are coming mainly from our internal licenses development, but we will not exclude further batteries capacity deployment also through partnerships. Gas. Gas has a dual role to play in the region, both as bulk generator and a source of flexibility as well. With approximately 13 gigawatts of thermal capacity coming offline over the next 5 years due to both technical and economic constraints, the region faces a structural capacity deficit, which is a huge opportunity for us. Apart from renewables, new high-efficiency CCGTs can fill this gap, delivering reliable baseload and mid-merit power with high fuel efficiency and lower emissions. And that is exactly the space within which our under construction CCGT in Alexandroupoli will operate on one hand. And additionally, we are also exploring the possibility of a CCGT in Bulgaria. Moreover, gas is also a valuable source of flexibility. As mentioned earlier, as renewable surge and volatility grows, fast ramping gas units become essential, offering long duration unconstrained flexibility. And this flexibility is becoming a premium commodity in the region in Southeast Europe. The conversion of Ptolemaida V lignite unit into the open cycle gas turbine, we said, is such an example, alongside with an opportunity of a peaker gas plant in Romania. These 2 roles, the bulk power and the high-value flexibility, create a compelling opportunity for our integrated portfolio. We already have a substantial flexible generation capacity of 6 gigawatts, which generates close to 10 terawatt hours on an annual basis from a series of technologies. And we will continue to invest in flexible technologies for generation since we see high value as explained previously. In this slide, we try to illustrate the growth of our flexible generation assets to 2028 in such technologies as we described in the previous slides. Just to note that apart from batteries and gas, we are also investing in hydro with 29 megawatts coming in operation until 2028 and being added to the existing 3.2 gigawatts that we have in operation, out of which 700 gigawatt has already pump hydro capability. And of course, we are also developing significant pump hydro capacity in our former lignite areas in the quarries of these lignite areas, which will become operational beyond 2030. As a result, we are modernizing and increasing our flexible generation capacity at 7.5 gigawatt by 2028, generating 11.4 terawatt hours on an annual basis. Let's take a look now at how we are strengthening our position across the region. I talked about our regional play before, and this is the slide which illustrates this better. Over the past few years, we have built a solid presence in Greece and Romania, also expanding in the broader Southeast European market. And these markets where we see significant growth potential driven by increasing demand. These are countries which are lagging behind renewables penetration versus the rest of Europe, countries that have not proceeded with the decarbonization of coal-fired assets in the same pace as the rest of Europe. And on this, we see additional benefits from the existing interconnections between these countries. The vertical corridor; Greece, Bulgaria, Romania, including also Italy, enables PPC to optimize our integrated portfolio, achieve economies of scale, diversify risk and assess opportunities in less congested renewable markets such as Croatia. Energy management orchestrates the total commercial performance of our entire portfolio. Every megawatt, whether produced by our conversion plants, generated from renewables, stored in batteries, traded cross-border or contracted through PPAs, every megawatt is optimized across day ahead, intraday and balancing markets. And this ensures that we monetize flexibility, not just the energy produced. Overall, our regional footprint provides a unique competitive advantage as PPC remains the only vertical integrated utility with a strong operational presence across the Southeast European region, a region characterized by significant energy flows and growing interconnectivity. We have already seen the strong progress we are making in our generation portfolio. But what is also really important is how we grow in renewables and flexible generation, how this growth strengthens the other side of our integrated business model. I'm talking about the retail across both Greece and Romania. Starting with Greece. We continue to hold a long position in retail, and that remains practically unchanged even by 2028. That is despite the major build-out in renewables since we are also retiring older, less efficient thermal plants during the period. So what you see in this slide, our growth is not just about adding capacity. It is making the system cleaner and more efficient. The same story applies in Romania. As we deliver on our pipeline there, we will be able to significantly narrow the gap between generation and retail, reinforcing the balance of our integrated model. And even beyond 2028, PPC remains long in retail, and this is something we like since it is giving us the flexibility and the headroom to keep growing across both markets and in the region in whole. Given the importance of our customers, we have been following all these years a customer-centric approach. During the last 3 years, we have been rationalizing our customer mix in Greece by reducing market share from low-value customers, which have no meaningful margin for us, while keeping market share in segments with high value for us. And this has helped us build a retail portfolio on a solid customer base with low switching behavior and increased profitability. In Romania, we have entered the market since the end of 2023, having a resilient position in terms of volumes sold, and this is something that we are expecting going forward. But we are not only a commodity provider to our clients, we are looking to expand our portfolio of value-added services to support our customers across all aspects of their energy transition journey such as heat pumps, solar panels or consulting services. In parallel, we are also introducing technology services that enhance the everyday living for consumer and businesses such as fiber-to-the-home, charging points for electric vehicles, AI-based tools and devices as a service. Our Retail business unit is strategically important, and we will pursue further growth opportunities also throughout our regional footprint if available. A very good example of our synergies in the retail activity is Kotsovolos, the Greek retailer of wider electronic appliances that we acquired in 2024, which is bringing valuable assets in PPC Group. First, procurement capabilities and strong logistics infrastructure, which allow us to manage products and equipment efficiently at competitive costs with reliable delivery performance. Second, a consolidated delivery and field force network providing nationwide execution capacity across installation, maintenance and aftersales services. Third, an integrated technology platform for product sales and supply chain management, enabling seamless customer journeys. Fourth, an upscale channel network with access to large and diverse customer base, including both physical and digital touch points. And finally, a broad portfolio of around the home products and services covering energy solutions and everyday home needs. Building on these assets, several synergy streams with PPC as well, we are already up and running and ongoing in this process. We have launched a joint heat pump proposition, and we introduced products and service corners inside the PPC stores supported by Kotsovolos technology. In addition, we have built a new service of Kotsovolos field technician network that allow us to offer home energy network, safety certificates mandatory for all households in Greece and a huge market for PPC. We are also extending the reach of PPC's energy and fiber plants through Kotsovolos channels and enriching PPC's energy consulting tools with Kotsovolos marketplace offers. And all of these synergies are designed to accelerate commercial performance, enhance customer experience and demonstrate the value of Kotsovolos in our holistic approach towards our customers. It is this value that Kotsovolos is bringing to PPC, which makes it one of the best acquisitions we have ever made. Moving next to our telecom business, where we are building a leading position as a wholesale provider to a fiber-to-the-home network in Greece. During the last 2.5 years, we have been deploying our network all over Greece, taking advantage of our electricity distribution network. This existing infrastructure is mostly aerial, providing us a unique competitive advantage to quickly roll out our fiber network and at a lower cost compared to other telco players, having an average cost of EUR 160 per home passed. Our network has already exceeded 1.4 million homes passed, and we expect to reach 1.7 million at the end of the year. Given the high pace that we are having so far, we are targeting 3.8 million households by 2028. Currently, we are able to provide connection to the FTTH network to 600,000 ready-for-service homes and businesses. And at the same time, we have recently launched a retail telecom FTTH offering, providing ultrafast Internet services at very competitive prices given the very low development costs that we have in the FTTH network rollout. As we speak, we have reached a pace of 5,000 customers per month, although we almost just launched. I mean, we launched in the middle of the summer. And by the end of the year, we expect to reach 18,000 connections, and that is in an area of 600,000 ready-for-service neighborhoods. For this going forward, we are targeting at ramping up significantly our customer base, leveraging on our existing clientele on the electricity side as well as our unique retail proposition, which combines the most technologically advanced FTTH network in Greece at the lowest price. We have already invested around EUR 190 million, and we plan to invest another EUR 420 million until '28, targeting at a run rate EBITDA of more than EUR 100 million beyond 2030. Let's now take a look at our distribution business in Greece and Romania, where we plan to continue investing significantly to capitalize on the stable and favorable regulatory frameworks in both markets. Both countries operate under a regulated asset-based model with long-term regulatory periods and a weighted average cost of capital, the WACC, of around 7%, providing strong visibility and attractive returns to support the continuous growth of our asset base. In Greece, the WACC has been set at 7.05% for 2025 with a WACC being on average at the 7% area for the period '25 to '28. In Romania, the regulatory framework is broadly similar with a 5-year period extending to 2029 and a WACC of around 6.94%. Importantly, we have also secured RAB indexation for inflation, further supporting returns and value growth. We plan to invest an average of EUR 900 million per year until 2028, which will enable us to increase the share of regulated EBITDA and enhance our overall cash flow stability. By 2028, our target is to reach a total RAB of EUR 6.5 billion, split between EUR 5 billion in Greece and EUR 1.5 billion in Romania. Investments in distribution networks are essential to support the rapid electrification of the economy, the large-scale integration of renewables and the overall energy transition. And to this end, we are increasing the pace of our investments in order to enhance and digitalize our electricity distribution networks. As you can see in the left 2 graphs, we are increasing investments for the period '25 to '28 by 40% in Greece and by 36% in Romania compared to the previous 4 years. And even though this increase may seem as quite high, still it is not enough to fully address the challenges that the distribution networks are facing. However, we need to keep a balance between the modernization of the grids and the affordability of electricity tariffs for the end consumers. For the next 3-year period, we are focusing on grid enhancement and digitalization, placing emphasis on smart meter rollout, especially in Greece. Over the past few years, PPC has undergone one of the most ambitious transformation journeys in our industry. We began by building the digital foundations of the group, modernizing our core systems, migrating 100% of our applications to the cloud and digitalizing customer and operational touch points across the portfolio. This work has already delivered significant performance improvement with our digital performance index increasing nearly twofold since 2021. We are today one of the very few utilities that we are 100% cloudified. And this is very important because only in that position, you can now have all data available in the cloud for AI engines to begin work and operations and applications in our way of working. Unless the digital transformation work was not performed in the past years, this benefit would not have been in front of us. And moreover, this year, PPC has entered our next AI-driven this time chapter. Our strategy is clear. On one hand, to reinvent PPC as an AI-powered utility so to let AI guide us in the changes we need to do internally, while on the other hand, to benefit from the AI infrastructure needs as a utility servicing others, and we'll talk about that later on. But first, becoming AI reinvented utility. This means embedding artificial intelligence across every part of our business, reimagining the customer experience, optimizing our core operations, accelerating new business growth, transforming corporate functions and empowering every employee with AI capabilities. We see AI not as an add-on, but as a fundamental competitive advantage that will allow us to operate smarter, faster and more efficiently. And we have a disciplined plan to deliver this. At first, we have activated AI across the group, launching priority AI use cases and upskilling our people. Then we scale adoption and accelerate value creation across business units. And from year 3 onwards, we reinvent key processes end-to-end, embedding AI at the heart of how PPC operates. The result will be a PPC that is more agile, more customer-centric, more operationally efficient and better positioned to lead the energy transition across the region. Our commitment is simple: To execute with certainty and to continue creating sustainable, measurable value for our shareholders. And as I said, this is the one side of the coin is how AI is impacting the way we operate internally, while the other side is how we, as a utility, impact and help the AI evolution through our infrastructure. Around the world, data centers have become one of the fastest-growing sources of electricity demand, driven by cloud expansion, AI adoption and digitalization of every sector. Global capacity continues to increase at a fast pace. Europe is a dynamic market in transformation, driven by sovereignty mandates and enterprise adoption. Historically, development has been concentrated in the primarily European Union markets, the so-called FLAP-D, where connectivity and hyperscaler presence created powerful network effects. But today, those core markets are increasingly limited by land, scarcity, grid constraints and long connection queues. As demand accelerates, the industry is expanding outward, creating new growth corridors across Europe where power and land can be secured at scale. This shift opens a strategic window for energy players like us. As a vertically integrated utility with access to land, infrastructure and reliable diversified power, we are uniquely positioned to step into this emerging market. Our entry into data centers builds on our core strengths and supports regional digitalization. Our role is evolving from a traditional energy supplier to infrastructure provider for AI-driven growth. With our generation portfolio expanding renewables, flexibility assets, grid capabilities and fiber connectivity, we can offer the reliable diversified energy ecosystem that AI consumers need. And for this reason, we have announced the development of a mega data center in the region of Kozani, where our former lignite mines were located. Initially, the mega data center will have a capacity of 300 megawatts with a potential of expansion to 1 gigawatt. The data center will be powered by a diverse mix of power capacity, including both clean and flexible technologies that are already under development. Leveraging the existing grid infrastructure, the availability of land and the new power capacity; the biggest advantage of this project is scale and time to market. However, I want to highlight that this project is not included in the business plan that we are presenting today since we do not have a fair commitment yet from a hyperscaler. This is an optionality that we are developing, but we will only invest when the commitment is in place. Our mega data center development in Kozani location is unique. It brings together grid connection, water for cooling, gas infrastructure, land ownership and soon international fiber connectivity. Very, very few places in Europe can offer this full package. The site can host 300 megawatts within 2 years of signing and is fully scalable up to 1,000 megawatts. Behind-the-meter supply ensures no impact on the National Electricity System, neither on prices nor on grid stability. And to support the 300-megawatt phase, we would upgrade Ptolemaida V to a 440-megawatt CCGT and add an additional 100-megawatt OCGT next to the data center, giving us 540 megawatts of flexible capacity dedicated for this ecosystem. We are already in discussions with several hyperscalers and global DC developers, and the feedback has been very positive. Demand today is centered in the U.S., but Europe will follow. And when it does, we want to be ready with what we believe is one of the best sites in Europe. Such a project derisks totally the output of the 2.7 gigawatts we are developing in Kozani, secures long-term PPAs with top-tier offtakers and creates additional value from land and infrastructure. All in all, Kozani site provides everything a data center needs in one place; power assets, cooling facilities, fiber connectivity and land, positioning PPC with a site that very few locations in Europe can match. Again, I want to be very clear. What we are presenting here is an optionality. We are investing 0 equity today, and we will move only once we have an agreement with a hyperscaler. Let me now pass the floor to Konstantinos, who will present you our group financial targets for the following years. Konstantinos Alexandridis: Thank you, George. Hello to everyone, and thank you for being here today with us and also for the webcast. So before deep diving into the financials, let's see how the drivers, the key drivers of our operations are expected to evolve during the years compared also to our view in last year's Capital Markets Day. Power prices are driven mainly by the marginal cost of the generation, heavily influenced by gas prices and CO2 prices. The evolution is further shaped by the growing share of renewables and the region's capacity tightness. We expect a steady deescalation of gas prices from the current level of EUR 40 per megawatt hour down to EUR 27 in 2028 as the gas market becomes oversupplied due to new LNG production coming online from Qatar field and the U.S. On the other hand, we continue to believe that CO2 prices will escalate as we move towards 2030, surpassing the EUR 100 per million ton threshold as allowances withdrawal creates a tight market. At the same time, rising demand and aging and inefficient thermal fleet in the region as well as Romania's major nuclear refurbishment strain the regional capacity balance, adding upward pressure on power prices. As a result, we foresee that prices will hover around EUR 100 per megawatt hour area. The financial targets I'll be discussing about have been thoroughly stress tested for various ranges of all these assumptions. But the most crucial element, as I mentioned before, is the gas price. Although we consider that further decrease of the gas price versus what you see in this chart should be treated as a tailored scenario, we have assessed the impact of a 10% reduction in the gas price that results to less than 1% negative profitability in our numbers, and this is due to our vertical position. Nonetheless, the level of prices we have used in our models are in the right direction since they have been verified during our discussions with hyperscalers for the data center. The realization of which we fully derisk our profitability from generation. Having seen the market dynamics, let's now see the targets that we have set in this year's strategic plan. We continue our transformation journey while at the same time, we keep improving our profitability. In terms of adjusted EBITDA, PPC reached EUR 1.8 billion in 2024 full year results, and we are confident we will reach a EUR 2 billion performance for 2025. Our next year's adjusted EBITDA will reach EUR 2.4 billion. And for 2028, we expect the performance to climb to EUR 2.9 billion. That is an 18% compound annual growth rate between '23 and 2028. Key drivers of this growth are the resilience provided by our integrated model irrespective of the persistent volatility within the years. We have demonstrated this resilience with our solid performance throughout 2020 to 2025 during COVID and also during the energy crisis. Another key driver is the additional capacity in renewables, but also flexible generation. As George mentioned before, we want to be present in all technologies and in all geographies, leveraging on the interconnections between the countries. Adding to that, we have the regulated business of distribution that grows as we keep investing in the network. Lastly, let's not forget the loss-making lignite activity that we have committed to stop operations in 2026, and we expect to free up profitability. Greece is our home country and given our significant investments in the country, the majority of this growth is generated in Greece. Still, the contribution of our international activities are expected to gradually and steadily increase. To better understand these dynamics, let me give you some data. I said before that 2028 will be a EUR 2.9 billion EBITDA. This is additional EUR 0.9 billion from 2025. Let's break this down. The integrated business, meaning the generation, energy management and customers is expected to contribute approximately EUR 0.7 billion, and this is mainly driven by the new capacity additions in renewables, but also flexible generation. If we also add the benefit from shutting down the lignite, the fully integrated business delivers a EUR 0.8 billion increase in profitability. And within this number, we do not take into account the capacity that's still under construction, we expect to see this additional profitability of approximately EUR 100 million to EUR 150 million in the next year's profitability, and that is after 2029. For these amounts I just mentioned, we feel very confident as they are directly correlated with the new additions in renewables and flexible generation, where we have a solid set of projects under construction already to build as well as in the licensing and permitting process. All these are backed by a strong pipeline of projects totaling more than 20 gigawatts in various maturity stages. Distribution will add another EUR 0.2 billion, given that the regulated asset base is expected to reach EUR 6.5 billion. This operational profitability drives the bottom line. We expect that the adjusted net income will grow to EUR 0.7 billion in 2026 and reach EUR 0.9 billion in 2028. This is a 50% increase from '25 to '26 and a 100% increase from '25 to '28. Main drivers remain the additional capacity in renewables and flexible generation, the lignite phaseout and the distribution. With the planned full decommissioning of the lignite assets by the end of 2026, we will eliminate the high depreciation charges that are associated with these assets, resulting in a net income improvement of EUR 0.2 billion from '25 to '28. This also explains the faster pace at which the net income is growing versus EBITDA. Consequently, earnings per share will increase from EUR 0.7 in 2023 to EUR 2.5 in 2028, reflecting a compound growth rate of nearly 30%. This EPS growth is translated to a dividend per share of EUR 1.2 in 2028, indicating a compound annual growth rate of 37% versus the EUR 0.25 DPS of 2023. This is the fastest DPS growth in the European utilities industry. In fact, by 2028, our shareholders will be receiving nearly 5x the dividend of 2023, reinforcing our commitment to delivering consistent tangible value and making our equity story stand out in a traditionally low growth sector. To reach this growth in our financial performance, we continue our investing efforts in the Southeast Europe region. Over the next 3 years, we will plan to invest EUR 10 billion in CapEx, being selective on the projects we prioritize. Our top priority remains our renewables expansion, along with the opportunities we have identified in the flexible generation. The combination of the 2 will consume 58% of our EUR 10 billion investments. That is approximately EUR 6 billion. If we compare this amount against the incremental profitability I told you before on the integrated business, this is an implied EBITDA yield of 13%. And this is without accounting for the CapEx that is not delivering EBITDA yet. Adjusting for the net effect of this, the EBITDA yield grows to 14%. Remaining areas where we will be focusing are networks, telecoms, digitalization and, of course, retail. Specifically for networks, we will continue building on enhancing the grids, increasing the smart meters footprint and of course, digitalization to support the national energy and climate plan in the countries we operate. Excluding the maintenance CapEx of around EUR 200 million to EUR 250 million per year, the growth CapEx is at the level of EUR 9.5 billion. Out of this, approximately 50% is not yet committed, and therefore, it is at PPC's discretion to deploy. Our disciplined capital allocation policy allows for a spread between IRR and WACC of more than 150 basis points. PPC will continue to generate a strong annual FFO totaling to EUR 7 billion for '26-'28. These operational cash flows will serve as the primary funding source for our ambitious CapEx plan and our dividend policy in the coming years. The remaining needs will be covered by new debt of approximately EUR 3 billion that will be raised mainly at parent level, being mindful of structural subordination. Part of this debt is already secured, utilizing our RF funds with the participation of commercial banks. We have well-diversified funding sources, but one of our primary channels will remain the debt capital markets as we intend to be repeated shares. Thus, it is evident that we have no need for any equity increase to achieve our growth targets. We are maintaining our financial policy targets unchanged to previously communicated guidance. Our leverage target remains at 3x to 3.5x by 2028. And as you can see in the chart, we allow headroom to absorb volatility in the markets. This leverage ratio supports sustainable growth, balancing ambitious investments in all our business lines with sound financial discipline. This balance positions us to create value for our stakeholders while preserving financial health, clearly reflecting our intention to achieve investment-grade rating metrics in the medium term. And with that, I'd like to pass it back to Georgios for his concluding remarks. Thank you. Georgios Stassis: So thank you very much, Konstantinos. We have tried to illustrate to you our key strategy on the basis of which we are growing the last years and how we will keep on growing in a remarkable manner the following years, navigating the energy transition and the associated volatility. We have presented our vertical integration, our regional growth strategy, our technology diversification, our natural hedging possibilities and the analytical way, we will keep on growing the coming years. This strategy has enabled us to meet the targets we have promised so far and provide us comfort for the ones that follow. As you can see in this slide, we are targeting for a significant step up to an EBITDA level of EUR 2.4 billion in the next year and an EBITDA level of EUR 2.9 billion in 2028. Accordingly, we are targeting for a net income of EUR 700 million in 2026 next year and EUR 900 million in 2028. Increasing substantially EPS initially at EUR 2.1 next year and EUR 2.5 in 2028. With regards to dividend per share, DPS, follows a similar trajectory, increasing at [ EUR 0.8 ] in 2026 and growing up to EUR 1.2 in 2028. And all of that, following a prudent financial policy, keeping the net debt to EBITDA -- the net debt-to-EBITDA ratio below 3.5x. In the previous slides, I have been referring a lot to the volatility we see in the energy markets, how our integrated business model has helped us navigate in such conditions, and how we prepare ourselves to face this market volatility. Such volatility is also evident from the increase of average spreads of power prices in the day-ahead market that has been recorded in the rest of the years. And of course, we do acknowledge that all of 0 negative power prices that we have started experiencing within the last 2, 3 years which have been embedded in our assumptions since it has become part of the environment we operate in. And that is why, on top of the significant renewables build up, but we are implementing. We are also investing in flexible generating assets in order to be -- to balance -- to be balanced in times of low renewable generation or profitability that may be driven by 0 or even negative power prices. We have a large portfolio, pumped hydro and gas assets, and we are also developing batteries and such flexible generation technologies can capture significant upsides in times of volatile power prices. In essence, we are trying to be present in different technologies to be able not only to address the volatility in the markets, but maximize our profitability as well through overall portfolio management. And it is equally important that we are not a pure generation company, but a utility with retail exposure as well. And this has helped us secure our overall profitability in times of lower power prices, offsetting the losses that we have experienced on the generation side. Therefore, we do have all the needed tools and instruments to navigate high priced periods as well as low priced periods and volatility between the 2 of them, between long-term periods and short-term periods or even in intraday. On top of this, we are also investing on our regulated and visible distribution activity, which is not affected by market volatility and provides stable and visible cash flows. Therefore, our overall integrated business model is predictable in terms of performance, which we target to further increase in the years to come as we implement our growth investments. Let me also make a special reference to the management team of PPC that has been implementing our strategy. This is a very strong team that consists of individuals with a wealth of experience from many industries and various countries. We bring in the team experience from energy, telecommunications, FMCG, construction, industrial processes, strategic advisory and others in several countries and several continents. Many of them repatriated in Greece in the last years for PPC. Each one of them, top on their field, all of us together absolutely capable to deliver the targets we've set and bring PPC to even greater heights. But before I conclude today's presentation, let me summarize the key goals of our plan for the next 3 years. In terms of financials, we are investing EUR 10.1 billion focusing on renewables, flexible generation and distribution networks. And this is fully self-funded, mainly through our operating cash flows and to a lesser extent, by debt, keeping our leverage ratio below 3.5x. Consider that around EUR 5 billion of those investments are discretionary. Please note that if needed, we might prioritize share buybacks versus CapEx. We are targeting EUR 2.9 billion EBITDA in 2028, a 45% increase compared to the EUR 2 billion area EBITDA, we target for this year. And by 2030, it will exceed EUR 3.2 billion. Our bottom line performance is also expected to record a material improvement with net income doubling by 2028, climbing to EUR 900 million. Dividend distribution further improves with DPS reaching EUR 1.2 in 2028. On the operational level, we are building our successful renewables rollout so far further increasing our capacity by another 6.3 gigawatts by 2028, increasing, at the same time, our focus on flexible generation assets to capture high value from the market. We are approaching towards the end of our decarbonization journey with our generation portfolio becoming coal-free by the end of 2026. And we are growing our regulated business as well with RAB increasing to EUR 6.5 billion. And we are doing all that, having as a basis of our strategy, our vertically integrated business model, which has been a source of resilience but also fueling our growth in Southeast Europe region. Through our announced strategy and investment plan, we are becoming one of the European leaders in the energy transition. Thank you all, and now look forward to get your feedback and your questions. Thank you very much. Ioannis Stefos: Okay. So we may now proceed to the Q&A session. As mentioned earlier, we will take -- we will start by taking questions here from the room. And then we will also answer any questions, that have not been covered, from the webcast. From those that -- from you that you are here in the room, please, if you want to make a question, please raise your hand, and we will bring a microphone to you. Okay. So we have the first question from Alessandro. Unknown Analyst: I have 3. First one is related to the Greek power market in the sense that your business plan has a significant amount of renewable capacity additions. I understand that the company is focusing on flexible capacity investments, but still the 1.5 gigawatts of batteries are covering only a portion of the output. So I wanted to understand how do you see in the medium term, the evolution of the Greek power market, if you see any risk? And I wanted to understand the extent of CapEx flexibility that you have on renewables, especially in light of the EUR 5 billion investments that you mentioned at the end of the presentation, does that -- could be done or not? Georgios Stassis: You may repeat the last part, I cannot hear you very well. Unknown Analyst: I was telling. I wanted to understand the extent of CapEx flexibility on renewables, especially on the EUR 5 billion opportunistic investments that you mentioned at the last part of the presentation. Second question is linked to the first one, and it's on the distribution business because I wanted to understand, well, the company has already increased distribution investments quite a lot in the last years. I wanted to understand if we can consider this as the upper threshold of investments in distribution because I understand that you also want to balance the tariff increase for customers. And the third question is on batteries. I wanted to ask if you could share some color on the types of returns that you see on this type of projects. We understand that you want to implement mainly standalone batteries. Yes, if you could provide some data on maybe the IRRs that you see in the Greek market nowadays. Georgios Stassis: Okay. Thank you very much. I mean, with regards to the Greek market and what we try to illustrate here is that you don't have on a stand-alone, the Greek market or the Bulgarian market or the Romanian market nowadays. These are markets which are coupled, interconnected and they work together. So when we do our analysis, we model the Greek market, but we also model Bulgaria and Romania and so on and so forth. We go to Hungarian and other markets, and we understand the interconnections, and we are resolving, let me say, the model in assuming the demand versus the trends we see and the different pace the countries are moving. For instance, in Greece, we moved very fast in the last years, and we did a lot of investments in clean technologies and the result of that is already visible, not only in our company, but in the market because Greece used be, for more than 20 years, if I don't mistake, a net importer and now has started switching becoming a net exporter. Why is this happening? It's happening because the internal generation mix is a little bit cheaper versus the rest of the countries, and therefore, somebody is asking this energy outside the country. What I'm trying to say is that in order to understand the Greek market or the Bulgarian, the Romanian, you need to think the whole. This is the first point, and this is how we work. Then considering that there will be a need for very big interconnections in the overall area, also in Europe, but interconnections take time. The bottlenecks that today exists between Austria and Hungary are reaching a limit right now on the capabilities of that region. And therefore, as demand is growing, we don't see the region following on the lower price trend of the rest of Europe, especially taking into account the Russia-Ukraine situation. God will, the war, we hope will finish soon rather than later. And then you will have the reconstruction of this wonderful country. And this will increase the demand of this country for quite a few years until they reach their own capacity internally. So this is draining up, it's juicing up all the energy on the north. Therefore, this is another important element. And the third important element is the energy transition that every country is doing and is doing it in different pace. There will be a lot of -- if I'm not mistaken, around 13 gigawatt of capacity, which will removing -- which will be removed from the system in the following years, especially in Bulgaria and Romania. Greece has already started earlier, we are close to the end of that. But also in Greece, we will start removing oil generation, we will start in the islands or we will start removing the older gas units. So taking all the situation together, you see today -- you start to think of the maximum penetration of renewables that you can have. And then you add batteries and as batteries are added, then the possibility of renewables can increase further and then you add more batteries and then renewables go back -- it takes an example of California, what's happening in California is a typical example. So we see -- we think that all our investments in our system analysis but also cross check with a lot of the researchers, Bloomberg Energy Finance and many others, let me just make a name, seem to more or less agree with us. But in this region, there will be a need for a lot of capacity, a lot of buildup of capacity and of course, the capacity that nowadays means renewables and flexibility. And this is what we do. On the other hand, I've said that around EUR 5 billion of investments are investments that are discretionary. What do I mean? We are in a constant check of every park, every investment we do before we started. We double check, even the very fact that we have a Capital Market Day on an annual basis. Why is this happening? Because we fine-tune every third year that we announce every time that we meet. And this is a system we will keep on doing. So we are checking every time. We will have the proper returns on the projects that we invest, and this is how we invest. I've said before, we will not hesitate to prioritize share buybacks versus CapEx. What I meant is that as the market is understanding PPC day by day and year by year, it should, in my opinion, upgraded significantly. And if not, we will be prioritizing more our buybacks because it's the best investment we can do for us. So this is a combination of how we will move in the coming years. Then on the DSO, very correctly, you said that we have increased our investments. We will keep investing. Of course, this is -- you need to be -- to fine-tuning what is the end tariff for the customers. There is no question that in Europe, all over the world actually, but in Europe as well now, my capacity as a Vice Chair of Eurelectric, we have done a study last year, showcasing the huge investments that need to happen in the European networks. They need to quadruple in the coming years. But if you quadruple the grid investments, it's impossible to be paid by the European citizens. So what we do, we increase so much as we think it's doable by the citizens. And the pace we have, we think we are in a correct way. This is the third point. The fourth, I don't remember what you asked at the end. Unknown Analyst: On BES. IRRs on BES what you're seeing. Georgios Stassis: On BES, we see returns around 8%, 9%, closer to 10%, let's say, 9% to 10% on BES right now. Unknown Analyst: A few questions from my side. You talked about Southeastern Europe. Do I understand correctly that your business plan incorporates investments in -- beyond Greece and Romania in the other countries that you have presence like Italy, Bulgaria and Croatia. Do you -- will you consider investing in other countries in Southeastern Europe as well? This is one question. If you -- if there are opportunities in -- if you find opportunities, could you consider acquiring retail in the countries that you have presence beyond Greece and Romania? And regarding batteries, you talked about 1.5 giga, if I'm not mistaken. What could cause delays in your business plans in developing batteries, especially in Greece since you start from 0, as I understand? Georgios Stassis: Well, I'm starting from the last one, not from 0 because we have a very strong pipeline of batteries projects actually from 1.5 gigawatt of batteries projects. 1 gigawatt is fully secured. We have everything we need and we are in execution. It's a matter of construction, so we will build them. I would say 2/3 are fully secured on our battery ambition and 1/3, we will work in the coming years to secure them. So we are very relaxed with our batteries. We -- actually, we're even more relaxed because we have our customers, we have our demand and the tons of developers are knocking our door every day, asking to find an agreement to develop batteries. We see a very big enthusiasm. We are very selective on the projects with you. Already 2/3, as I said, is secured, and we will find the best of those for the last 1/3. Now about other countries, of course, we will keep investing in all the countries that we have opened. We are investing as we speak in Italy. We do solar. I think Italy will be a good market for batteries, but it's not a must, we will see. We will be investing in Bulgaria. We'll be investing in Croatia. Of course, about majority of our investments is in Greece and secondary in Romania and then the rest. But all of them have the characteristics that we like these countries. They are interconnected to the same system, which is linked to the periphery of the Southeast Europe with the energy perspective that I described earlier before. So we will not invest in countries which are not interconnected or are not part of the European energy system. Having the strategy of the regional play, the strategy of the vertical diversification means that you need to go in countries which are touching each other with fiscal interconnections, but also setting the same rules of the game, the same European trends. So we will not grow in other countries. We might do spontaneous, for instance, little things here and there, but very insignificant. Now about retail. I think when you are looking at PPC, given the vertical integration that I've talked many times, we have delivered in low commodity prices, very high commodity price and what is our strength at the end is our customers. We say the customers is the anchor of our growth. It is truly like that. I mean having the demand of the customers, we are able to build behind all we need. PPC has no merchant risk in reality, 0 because we sell to the market, we buy from the market, but all we do goes to our customers at the end. And still, we are long on customers. And therefore, we pay a lot of attention on the customer-centric model to keep the customer base, not necessarily to keep it -- to keep the best part of the customer base, let me rephrase. And that's why you see us talking a lot about retail, talking about Kotsovolos, I have the slide for that because we see a lot of synergies there. You see the value of control is not directly the value of Kotsovolos, indirectly what it gives you. That's why we entered the retail service of telecom because it's another way to approach a customer. We want to -- we are approaching the customer in a holistic way, and we want to preserve that in many different ways in order to keep the demand and having the demand to do all the play behind it. Therefore, we don't need a bigger share in Greece, of course. Actually, in Greece, we will keep on losing. Actually, we are losing in a far lower pace from what we thought initially. So we're doing something very good in Greece. In Romania, we are in a stabilization period right now because Romania moved from the regulated base back to the free market in the last year. So we need to stabilize there in the coming years. May be in the longer term to increase a little bit, but always through our own organic operation. In other countries like Bulgaria or Italy, Italy, particularly could be an opportunity of growing inorganically in the supply sector. But only we find something attractive, it's not a must. In general, talking about M&A, we are not looking any segment in a big way. We will be looking M&A only opportunistic in whatever we find valuable to fit our strategy. We don't need M&A to deliver our targets. That's it. Ioannis Stefos: Again, if there is any other question from the room, you may raise your hand and we will bring the microphone to you. Ella Walker-Hunt: Ella from Citi. I was wondering, given that -- in the first 9 months, you've already achieved more than 80% of your full year guidance. I'm wondering why there wasn't a sort of guidance upgrade there for the full year? That's my first question. My second question is to do with the distribution CapEx actually. Does that include any subsidies that wouldn't enter the RAB? And if so, can you just give us some -- does the distribution CapEx include any subsidies that wouldn't enter the RAB? Or does it 100% of the -- of the CapEx going to the RAB? Georgios Stassis: Okay. So about our net result. We started the year saying that it's not a good year from the hydro perspective, for those who are following us, they know very well but unfortunately, this year is not a good year from a hydro point of view. We managed to have -- already a result that we wanted to have. We think we will keep it. Actually, our target was to do above EUR 400 million, and we think we will do above EUR 400 million. But we still have reduced hydro reserves when we enter the last couple of months. Of course, rain is coming, and this is very good. But we think right now, given the seasonality of our market from quarter-to-quarter, it's more prudent to stay on our initial projection. Although we might also overpass it a little bit by the end of the year. This is how we feel. Then on subsidies, in Greece, no, in Romania, there are part... Konstantinos Alexandridis: Yes, there are some subsidies included. That's why we do not include those in the RAB. So that's why you do not see a significant ramp up in line the distribution of Romania. Georgios Stassis: Because in Romania is a part of a period there are a lot of additional investments, which are fully subsidized by EU and they don't accept inside the RAB. This will be something for 1 or 2 or 1.5 years. Ioannis Stefos: Okay. Thank you, Ella. We have another question on the back. Richard Alderman: Richard Alderman, BTIG. Just a couple of clarification questions, if I may, please. You said you have absolutely no merchant risk exposure. Does that mean then you have absolutely no trading profitability contribution within the plan. And then also just to clarify your thoughts on -- you talked about the risk of weaker gas prices from the middle of '26 onwards. How long do you think that weakness could last? What's your worst-case scenario? Georgios Stassis: Sorry, can you repeat the second part because I can't hear you very well. Sorry for that. Richard Alderman: I changed microphone. Is that any better? I think I'm feeding back from the speaker. The first question is, do you have any trading profitability within your generation mix? You say you have 0 merchant exposure. So I'm just clarifying whether you have any trading profits inside FlexGen as per other utilities? And then the second question is, you talked about the prospect of weaker gas prices. I'm just wondering what your worst-case scenario is for those weaker gas prices from, say, mid-'26 onwards? How long does that last? What could that do to regional power prices? Georgios Stassis: Yes. Okay. Thank you very much. We don't do significant prop trading. So we don't have, in our numbers, big profitability from trading, it's insignificant. Our energy management is focused primarily on managing our own internal portfolio. We do some trading, but it is insignificant in terms of margins. Then on the gas prices that I've told -- I've said, do you want to take that? Konstantinos Alexandridis: Yes, of course. So what we have said is that according to the plans that we have, we expect that the gas price will be moving down to '27 when looking beyond the '26 period, '26, '27 and as I said, we have tested our numbers even versus a further decrease, but this -- we consider this to be a remote scenario given that the pressure that will exist in terms of the LNG needed for Europe will not allow for further decrease below the '27 area that we have forecasted. Ioannis Stefos: Okay. So we can switch to the webcast. And in the meantime, if you think of something at this moment from the room, we can come again back. We have a question about the 9-month performance and the working capital. We have seen a negative working capital in Q3. If we expect this dynamic to reverse and why, in the fourth quarter? Konstantinos Alexandridis: Yes. This is based on the seasonality that we experienced all these years within the group. We expect that by the end of the year, we will be positive in terms of working capital usually, the 9 months results include some sort of pressure on our working capital. And therefore, we do not foresee any problem for the year-end. Ioannis Stefos: Okay. We also have a question that relates to our plans to explore any opportunities in Romania for gas capacity. If we can provide more color on this. Georgios Stassis: Yes. We think that we can do some gas in Romania, and this will be mostly acting as a picker. I cannot disclose exactly which locations we think we have -- we are very close in finalizing 1 or 2 locations. But this will be a total not exceeding, let's say, 100, 150 megawatt more or less. But because we are still negotiating. I wouldn't like to expose the exact locations. That's it. Ioannis Stefos: Okay. So another question from the webcast relates to our telco business activity. Three questions about that. The first one, if and when we are planning to launch a voice service as well? Georgios Stassis: Very shortly. Ioannis Stefos: Okay. The second, if we would consider starting bundling telecom with energy in the retail market? Georgios Stassis: Quite shortly. Ioannis Stefos: Okay. And the third one is, apart from the EUR 420 million that we have already deployed as capital, how much likely is it to invest in connecting customers, what is the additional amount, both for connecting customers, but also for the retail part of the business? Georgios Stassis: That's the beauty because we already are very, very, very big in retail in general. We are not building new stuff for our retail. We are servicing our customers with the existing retail engine we have for energy. So we don't have additional billing or whatever you need to do in order to serve the customers. We have everything in place already. We have huge synergies with our current activities. So I would say almost 0 is the additional investments we do internally to serve the retail. On the other hand, of course, you have customer-related vertical costs when you do the connection, and this is passed through to the customer. Ioannis Stefos: Okay. Clear enough. So another question about the data center that we discussed in the presentation, how close we are at securing commitment from a hyperscaler? And if we could -- let's say, at what point in time, we believe that this would cease to be an optionality and become part of our business plan? Georgios Stassis: Well, that's, of course, a very important question and very difficult to answer because you see there's a huge investments happening in the United States, and people are struggling sometimes to raise the debt needed to perform these investments. So everybody is focused right now there. As I said, this is an optionality for us but a very important optionality, it is -- and it will be transformational if and when it will be happening. I don't -- we have very good discussions with several of them. And the way I understand them, I believe that probably -- and I said this as well in March when we first discussed about that. I would think that somewhere next year, end of next year, we will have a clear picture on this project. And by the way, anyhow for us, this time is needed because we are doing all the analytical engineering and permitting. So I think we will end the next year with a fully permitted project, which is not yet done, fully permitted project and with a clear answer. Ioannis Stefos: Okay. Thank you. Another question about the CapEx. Given the fact that we have already announced a EUR 10 billion CapEx plan for the next 3 years, and our leverage is at 3x, net debt to EBITDA. And at the same time, we are also distributing dividend. If we would see any risk of ourselves at a point in time to need additional capital in order to preserve this headroom that we have -- this threshold of 3.5x. Georgios Stassis: There is no need for any said capital increase in PPC at all. So we will not pursue them at all. I'm very firm and clear. Ioannis Stefos: Okay. So another question about -- if we can provide an update about a possibility of waste-to-energy project in Kalamia, Northern Greece. Georgios Stassis: The waste-to-energy regulatory regime is in discussion in Greece. There are consultations going on. The Hellenic Republic has opened the dialogue. We are not very interested into entering in this business other than in Kozani, where we are -- we have a specific area where we have a district heating. So our interesting angle is coming from that fact. We are waiting for the regime to finish in order to take our final decision in order to see if we will add to the district heating service we give to the nearby city, also a waste-to-energy part or not. Ioannis Stefos: Okay. So there is also a clarification to provide about the CapEx plan. We mentioned that EUR 5 billion is discretionary CapEx. If we can, let's say, provide a clarification what exactly we mean by that? Georgios Stassis: I think I just explained. Ioannis Stefos: You just explained, okay. Okay, I missed that. I missed that. Okay. Okay. So there are no other questions from the webcast. Richard Alderman: Richard Alderman, BTIG again. Just coming back to the data center point and your applications going through the next 12 months for more planning to get the whole project ready for a customer for a data center hyperscaler. When you think about all of the changes you're making in your FlexGen portfolio, so you're closing gas, you are building gas, you're closing lignite, you're building a lot of renewables. In your plan, how much of your existing grid connection that you already own are you utilizing for yourself? And how much might be available for more than one data center customer to utilize with you, be it with or without new renewable CapEx or with or without a PPA? I asked the question because the trend at the moment amongst utilities is just to discuss the amount of powered land, as they call it, RWE is example of selling a project where you have land, grid connection guaranteed and energy services. Obviously, in your model, that's a similar sort of strategy, but I'm wondering how much space you have over, say, the next 5 years to utilize that grid connection. Georgios Stassis: This is a very valid question. You're right. And the way we are doing it, designing it behind the meter, injecting it directly to our capacity is -- we'll be releasing also capacity from the system. So it's the same question from another angle. Let me say that in that particular area, we have availability of around 4 gigawatt that one could build, let's say, and we are building, we are using it. But when we will put the data center, we will use it through the data center to interconnect and therefore, we will land probably if we were and we will reach this point. When we will reach this point, we will add additional capacity to serve the market. It depends how you see it. Ioannis Stefos: Any other questions from the room? Okay. We also have some additional questions from the webcast that we can cover. The first one relates to the distribution CapEx that we are doing. If we can elaborate on the benefit of having EUR 900 million, more or less CapEx per year in the distribution business, given the fact that -- as the question says that we expect a low increased uplift in the distribution profitability and whether specifically the smart meters investments can benefit us on overall profitability? Georgios Stassis: First of all, the smart meters, they get an additional percentage of premium on the investing in -- you have 1% more. And any digital investments in Romania, they get 1.5% more. So all these investments, they get a bonus. That's why this is one -- it's very correct for the regulator to drive investments in that direction. So I think we need to always to have this in our mind. Ioannis Stefos: Okay. Another question about the AI initiatives that we touched in the presentation, and we have made a calculation or quantify what could be the return until 2028 from these initiatives? Georgios Stassis: Well, we have assumed -- we were quite conservative, I have to say, because all the world is just entering this story. In our worst conservative calculations, we have assumed in our plan EUR 50 million saving because of this, which I think is very modest. And we will be able to forecast and project better next year as this plan will develop. Ioannis Stefos: Okay. Another question about the telco business, whether we would consider to do something similar as we are doing in Greece in another country. Georgios Stassis: No. No, because that was a very specific case in Greece. Greece has 75% of its distribution network, aerial. There's no other country in such a high proportion of aerial network. So for us, doing this infra play in Greece, makes absolute sense. We are very cheap by rolling out this network. We have a rollout cost of EUR 160, somebody was telling me that the FTTH association was looking at an average of EUR 350 in Europe. So we have an average of EUR 160 just to give you an order of magnitude. So this is a very specific project for Greece that we found the opportunity and we entered. Ioannis Stefos: Okay. Also, if we can provide sensitivity for the power prices in terms of our profitability, I think [indiscernible] that you made a reference in your presentation, if you can again, repeat it because maybe it was... Konstantinos Alexandridis: Yes. So what we have said is that we have tested a downward movement of gas, gas price that, of course, affects the day-ahead market price and therefore affects both sides of the equation, both the generation, lower profitability and generation so what we are saying is that this 10% move on the gas price is sort of something like less than 1% in our profitability which means we will be losing something like EUR 20 million out of the EUR 2.4 billion in 2026, if we were just to see a huge jump by 10% further than what we have assumed. Ioannis Stefos: Also another question about the net profit estimate that we have, what is the average cost of funding that we have assumed for 2028? Konstantinos Alexandridis: Yes. Well, we have -- the blended cost of funding is close to EUR 4.2 billion as this is comprised of various elements that we have within our existing portfolio of debt, but also new ones coming in. Ioannis Stefos: Okay. Okay. If there is no other question as we speak from the webcast. The rest of them have been already covered. Not sure if there is any additional questions from the room? If not, I mean, we're close to 2 hours now. So we can conclude the event. Georgios Stassis: Thank you very much for being here and for also participating through the web. Thank you very much.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim Third Quarter of 2025 Results Conference Call. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com by clicking on Financial Information on the homepage and then click on the Third Quarter 2025 Report Presentation. [Operator Instructions] As a reminder, this conference is being recorded, November 20, 2025. With us on the line today are Mr. Ram Gev, CFO; Mr. Victor Bahar, Chief Economist; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respected company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risk and product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. Mr. Gev, would you like to begin? Ram Gev: Good afternoon to you all, and thank you for joining us today. I'm happy to review the bank's 2025 third quarter results with the highest in the sector quarterly and cumulative net profit. Let's start with Slide 3. This morning, we reported a 16.1% return on equity for the 9 months with net profit of ILS 7.3 billion, both excluding ILS 380 million income from the insurance reimbursement, 8.1% credit growth year-to-date and a profit distribution of 50% of third quarter net profit through cash dividends and share buybacks. These metrics demonstrate that we continue to be well on track to meet our 2025 financial targets. In fact, we are currently exceeding the targets, resulted from higher-than-expected growth and a more favorable macro environment than the market forecasted at the time of the target publication. Not less important is the fact that these results were achieved while we continue to strengthen our balance sheet, build buffers and maintain the high quality of the credit book. The CET1 capital ratio is 12.05%. The allowance ratio is 1.74%. LCR is comfortably above target at 124% and the NPL ratio has declined further to 0.49%. On Slide 4, we see the development of profitability over time. On a quarterly basis, net profit was ILS 2.8 billion and return on equity is 17.6%. Excluding the aforementioned income from insurance, net profit was ILS 2.4 billion and return on equity is 15.2%. EPS came in at ILS 2.1 or ILS 1.81 on an adjusted basis. Next, let's talk about our credit book. Our credit portfolio increased 11.4% in the last 12 months, of which 8.1% since the beginning of the year and 2.2% in the last quarter. Growth was recorded across all segments and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strength of the Israeli economy into growth in the bank's activity. Slide 7 presents our financing income. Income from regular financing activity grew moderately this quarter compared to the previous quarter due to the growth in activity, which was mitigated by the slightly lower CPI. Non-regular financing activities saw a decrease due to, among other things, to customer benefits granted in line with the Bank of Israel voluntary program, which took effect on April 1. In the third quarter, the expense for benefits recorded in financing income was higher than in the previous quarter due to the bank's initiative to grant its customers 2 shares of the bank as part of the benefit program. Our margins stayed strong and grew year-on-year. The financial margin for the first 9 months of 2025 increased to 2.77% versus 2.71% last year. In fact, Bank Hapoalim has the highest financial margin in the sector and is the only one to present growth in margins in 2025. On fees, the positive trend continues across all types of fees as our business activity continues to expand. The slight reduction in fees versus last quarter is attributed to onetime income from international credit card organizations booked in the second quarter. The significant growth in fees is well demonstrated in the 11.4% increase during the 9 months period. Moving to present our disciplined cost management. Operating and other expenses are lower versus all comparable periods. The growth in income, coupled with the decline in costs as a result of cost restrained efforts brought the cost/income ratio to a very low level of 30.6% for the quarter and 32.7% excluding the onetime income. The cost/income ratio for the 9 months period is impressive as well, 32.7% as reported and 33.4% adjusted. Moving on to discuss provision for credit losses and the quality of our book on Slide 10 and 11. Provision for credit losses amounted to ILS 347 million or 0.29% of our credit book, driven completely by the collective allowance and net automatic charge-offs. The increase in the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. On credit quality metrics, on the left-hand side, we see the NPLs continue to grow, now at 0.49%, while the NPL coverage ratio continues to rise, now more than triple the NPLs as we continue to increase the collective allowance. On the right-hand side, the allowance to loan ratio remained high at 1.74%. Over 95% of the total allowance is collective. Our deposit base continued to grow 3.6% in the last 12 months. Retail deposits decreased in the last year, but still represent 54% of total deposits. Liquidity ratios, LCR and NSFR continue to be well above the minimum requirement. Now let's move to present our capital position, which continues to benefit from strong organic generation capabilities, 11.5% in the last 12 months and the CET1 capital ratio rose to 12.05%. I'm moving to Slide 14. Total distribution in the quarter continues to be 50% of net profit, 40% as dividend and 10% in share buybacks. Total profit distributed and declared is ILS 1.38 billion in respect of the third quarter, of which ILS 1.1 billion of cash dividend or ILS 0.84 per share. After successfully completing our previous ILS 1 billion share buyback, the Board approved a new plan for a similar amount starting today. Moving to Slide 15 for a brief update on Bit, our unique innovative asset. The number of active customers continues to rise, now reaching 3.45 million users with an average monthly P2P transactions volume of ILS 2.4 billion. Recently, we introduced an exciting new offering, the ability to create savings pockets within the app, allowing customers to deposit up to ILS 20,000 and benefit from 4% interest. Before we review the macroeconomic slides and sum up the call, the important reminder on our financial targets for 2025 and 2026 is on Slide 16. The key assumptions for these targets are detailed in the 2024 financial report. I'm moving to Slide 17 on the macroeconomic environment. We have seen a substantial increase in economic activity in the third quarter with GDP growing at an annualized rate of 12.4%. Private consumption, exports and investments all grew at a rapid pace, more than compensating for the trough caused by the war with Iran in the second quarter. Looking ahead, we still believe that growth will remain high in the coming year, driven primarily by an increase in investments in housing, the rehabilitation of frontier villages and infrastructure. As the war ended, the risk premium declined to levels that prevailed in the first half of 2023 and the shekel appreciated sharply. Inflation has decreased to a year-on-year rate of 2.5% and markets are now pricing less than 2% inflation over the next 12 months. Under these circumstances, we believe that interest rate cuts are imminent, even though medium- and long-term inflation concerns persist as the labor market remains tight and wage inflation is high. I'm moving to Slide 18 to summarize. We delivered strong 9 months results, well on track to meeting our financial targets. ROE of 17.6% in the third quarter or 15.2% adjusted for the income from insurance, cost/income ratio of 30.6% and 32.7% adjusted. Financing income and margins continue to be strong, driven by the growth in activity and assets rollover. The strong growth in credit was broad-based across segments and economic sectors. Credit quality continues to be strong with NPL ratio of only 0.49% and allowance to NPL ratio of 313%. Our capital is organically and substantially growing. This quarter, we declared a 50% profit distribution, including the first tranche of a new share buyback plan. With that said, let's open the call for your questions. Back to you, operator. Operator: [Operator Instructions] The first question is from Chris Reimer. Chris Reimer: Can you hear me okay? Operator: Yes, we can hear you. Chris Reimer: One on regulatory risk. There has been some headlines about increasing tax rate on banks and separately by the Finance Minister to add a potential tax for mortgages subsidation. Does the bank have any take on these ideas? Ram Gev: Yes. Chris, thank you for the question. We see from time to time some regulatory initiatives. Some of them are continuing to further legislation, but a lot of them are not continuing. We look and when we analyze them, part of them are pretty populistic. You mentioned the one about subsidizing mortgages, et cetera. Those are initiatives in fairly early stages. We are reviewing and monitoring it. But I think what's most important is the position of the Bank of Israel that post these suggestions. So I think the track record that show that populistic initiative didn't go further to actual laws, that's the important element. And we think it will be reasonable to assume it will be the same with that. Obviously, there are some other legislation that may continue and be in the form of law, but that's the reason why we are reviewing every, let's say, initiative. Chris Reimer: Got it. Got it. That's helpful to know. Considering -- just looking at operating expenses, considering your upcoming move of the headquarters, how should we be looking at expenses going into next year? Ram Gev: Okay. You mentioned our project on centralizing our headquarters. The project continues well. And actually, we are about to finalize the project and start moving about a year from now. So it mainly affect operating costs from 2027 and on. Another major effect that it will have is the ability to sell our current buildings, some of them in major central location and create some material capital gains. But that will be in 2027 and on as well. Operator: The next question is from Priya Rathod. Priya Rathod: Just 2 from me. So the first is on capital. I saw that you increased your internal capital target to 11%. Could you just give a bit more color on the reasoning behind increasing this? And did this have any influence on your decision to stick with the 50% payout ratio? Because obviously, we've seen this quarter that a couple of your peers have raised the payout ratio to 75%. So any color on that would be really useful. Secondly is on your coverage ratio. You're like in excess of 300%. What would you need to see or what hurdles would you need to overcome to potentially release some of those provisions going forward? Ram Gev: Priya, thank you for the questions. As you have seen, the entire banking sector actually has updated its internal capital targets upon approval of the third quarter financial statements. This follows a periodic dialogue that the supervisor of banks conduct with each of the banks. And this year, in addition to the usual consideration and an element of the current economic and geopolitical environment, which in the view of the Bank of Israel still contains a degree of uncertainty, this element was also taken into account. And in light of these factors as well as the surplus capital within the system, the banks have revised their internal targets. Bank Hapoalim's Board of Directors has decided, like you mentioned, to set the minimum internal capital target at 11%. This is the outcome of the ongoing dialogue with each bank, taking into consideration the specific characteristics and what I mentioned about the geopolitical uncertainty. Obviously, the Board of Directors, while deciding about the distribution took into account the internal target. And the Board of Directors decided that given the current surpluses, the desired capital buffers and our significant growth targets, maintaining a 50% distribution rate is the right approach going forward. So that's about capital distribution. About collective allowance, and you mentioned right, we have very high-quality loan portfolio. And it's reflected in all aspects, very low NPLs, very low write-offs level and nearly 0 for the quarter, for example, individual provision. And indeed, we have conservative approach, and we accumulated buffers during the war. And actually, this quarter as well, we continued building the buffers. So we have the highest buffers in the industry. You mentioned allowance to credit ratio, we have 1.74% ratio. It's 20 basis points above the second one in the industry. And the reason is very simple behind our approach. We are indeed in a ceasefire situation, and we are optimistic, very optimistic about the Israeli economy, but uncertainty is still there. And we think that it's too early to release or reverse the buffers like other banks did. And having those buffers allowing us to be best prepared in the sector for 2026 in each scenario. If the pessimistic scenario will happen, we are best immunized for that. And if the optimistic scenario will happen, then we are prepared for 2026 better than others as well. I think that the entry to 2026, everyone will have more information and more certainty about the stability of the ceasefire, about the stability of the lower level of risk in other fronts and the growth of the Israel economy. So we think that we will benefit from our approach. Operator: The next question, can you please give us some color on your call decision approach to the Tier seconds callable next year and how you plan to approach the refinancing local versus international markets? Ram Gev: Yes. Thank you for the question. As for the Tier 2 CoCo bonds dollar, obviously, we can't say now what we will do. But I think we can learn -- you can learn from our track record. Usually, we use this call option, and we understand the investor expectations and that you need very unique circumstances in order not to use this call option. But the best evidence for how we look at that is our track record. Operator: [Operator Instructions] The next question is a follow-up a question from Priya Rathod. Priya Rathod: Just a quick on your deposits. I saw this quarter that the deposits from private individuals fell year-on-year and also on a quarterly basis. What are the drivers behind that fall this quarter, please? Ram Gev: Okay. Thank you, Priya. You're talking about money market funds and change in deposits. This reflects customer awareness to different alternative to investments and to deposits. We are happy with the awareness of the customers, and this reflects the -- what they choose how to manage their funds. From our perspective, we have very good levels of liquidity, and we are balancing growth in that area with profitability. So the very high flexibility we have, for example, you can look at the funding rate from capital markets is relatively low for Bank Hapoalim. So we rely on deposits, and that's enabled us to be flexible, keep disciplined pricing and manage the growth. Operator: There are no further questions at this time. This concludes the Bank Hapoalim Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Welcome to Evogene's Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded in November 20, 2025. Before we begin, we'd like to caution that certain statements made during this earnings conference call by Evogene's management will constitute forward-looking statements that relate to future events. This presentation contains forward-looking statements relating to future events and Evogene Ltd, the company may from time to time make other statements regarding our outlook or expectation for future financial or operating results and/or other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, the PSLRA, and other securities laws as demand. Statements that are not statements or historical fact may be deemed to be forward-looking statements. Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimate, intend and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers, commercializations, efforts and timing, product development and launches, estimate market sizes and milestones pipeline as well as our capabilities and technology. Such statements are based on current expectations, estimates, projections and assumptions described opinions about future events, involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance. Readers are cautioned that certain important factors may affect the company's actual results and could cause such results to differ materially from any forward-looking statement that may be made in this presentation. Therefore, actual future results, performance or achievements, and trends in the future may differ materially from what is expressed or implied by such forward-looking statements, due to a variety of factors, many of which are beyond our control, including without limitation, the current war between Israel and Hamas and any other adverse impact that it may have on economic activity in Israel, due to the calling up of a large number of reserve soldiers or the incurrence of debt to pay for the high cost of the war and any accompanying future uncertainties for the security of the company's operations in Southern Israel, as well as those additional factors described in greater detail in Evogene's annual report on Form 20-F and in other reports Evogene files with and furnishes to the Israel Securities Authorities and the U.S. Securities and Exchange Commission, including those factors under the heading, Risk Factors. Expect as required by applicable securities law, we disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statement that may be made to reflect future events and developments or changes in expectations, estimates, projections and assumptions. The information contained herein does not constitute a prospectus or other offering documents, nor does it constitute or form part of any invitation or offer to sell, or any solicitation of any invitation or offer to purchase or subscribe for, any securities of the company, nor shall the information or any part of it or the fact of its distribution from the basis of, or be relied on in connection with, any action, contract or commitment relating thereto or to securities of the company. The trademarks include herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of our product or services. With us on the line will be Ofer Haviv, President and CEO of Evogene; and Yaron Eldad, CFO of Evogene. Now I will turn the call over to Ofer Haviv. Mr. Haviv, please go ahead. Ofer Haviv: Thank you for joining Evogene's Third Quarter 2025 Analyst Call. In today's call, I'd like to focus on the company's new strategy. which I partly shared at our previous quarterly calls and its current implementation. I will also provide an update on our expectation to start breaking the business benefits of the strategic shift over the coming year. Following my remarks, our CFO, Yaron Eldad will present the financial results, and we will then open the call for questions. But as usual, I will start with the financial highlights. During the first 9 months ending September 30, 2025, Evogene advanced its strategic transition towards establishing itself as a leader in computational chemistry, with a focus on the generative design of small molecules for the pharmaceutical and agriculture industries. As part of this new strategy, the company executed an organizational change and cost reduction plan, most of which was completed by the end of the second quarter. The impact of these measures is reflected in the third quarter results, with total operating expenses, net, of approximately $2.9 million compared to $6.6 million in the same period of 2024. This new expense level is expected to be maintained going forward. The financial results of Lavie Bio, Evogene's subsidiary, for the 9- and 3-month ending September 30, 2025, are presented as a single-line item in Evogene's consolidated P&L statement for 2025. Its results are including under the line titled: income or loss from discontinued operations net, this accounting presentation includes the sale of the majority of Lavie Bio's activities to ICL, which was completed in July 2025, and together with the sale of MicroBoost for Ag, generated income of approximately $7.9 million in the third quarter of 2025. In the 9 months ending September 30, 2025, revenues amounted to approximately $3.5 million, compared to $4 million in the same period last year. The decrease was primarily driven by lower revenue from AgPlenus' activity, which included a onetime payment from Bayer during the first quarter of 2024, partially offset by an increase in seed sales generated by Casterra. Total research and development expenses in the 9 months ending September 30, 2025, were approximately $5.9 million, compared to approximately $9.8 million in the same period of 2024. The decrease is primarily attributed to a reduction in Biomica's and Evogene R&D activities and the discontinuation of Canonic's operations. Sales and marketing expenses in the 9 months ending September 30, 2025, totaled approximately $1.1 million, compared to approximately $1.6 million in the same period of 2024. The decrease is mainly due to reduction in headcount across the subsidiaries. In the 9 months ending September 30, 2025, total operating loss was approximately $8.8 million, compared to approximately $15.3 million in the same period of 2024. This decrease is mainly due to the decrease in the subsidiaries' and Evogene's activity. As of the end of the third quarter of 2025, the company's cash and short-term bank deposit balance was approximately $16 million. This cash balance reflects the proceeds from the sale of Lavie Bio's assets and the MicroBoost AI for Ag tech-engine to ICL. The following are the business highlights of our subsidiary and related parties in the past quarter. Lavie Bio completed the transfer of its team and the majority of its activity to ICL. Its collaboration agreement with an existing partner continues with positive results. The distribution of funds to its shareholders with Evogene as the majority holder is advancing. No additional activities are expected. Biomica's clinical trial continues according to plan and is expected to be completed in early 2026. Currently, only one patient is in the trial and the efforts to secure partners to lead Biomica's current development program continue. No additional activity are expected. Last week, Casterra partnered with Fantini to advance agricultural mechanization for scalable commercial castor farming. The collaboration focus on integrating high-yield castor varieties with advanced mechanized solutions, including harvesting and threshing technologies. In addition, the company is investing efforts in strengthening its position in Brazil's castor farming ecosystem. AgPlenus underwent organizational restructuring, including the completion of workforce reductions. Evogene's related party, Finally Food, which drove the casein in protein in potatoes, announced raising $1.2 million led by CBC Group and signed a commercial agreement with it. Now I would like to continue with Evogene new strategy and its implementation, which includes AgPlenus' activity for the agriculture industry. The following slides reflect Evogene's new messaging and appearance supporting its new strategy. At Evogene, we are on an ongoing mission to redefine the future of science and business. By harnessing the power of our proprietary generative AI tech-engine, ChemPass AI, we designed novel groundbreaking small molecules, highly potent and precisely optimized across multiple parameters to transform the pharmaceutical and ag-chemical industries. Our goal is not just innovation, but meaningful beneficial impact for our world. Headlining this slide is the phrase real-world innovation. What do we mean by it? One of the greatest challenges in developing product in life sciences, from pharmaceuticals to ag-chemicals is the gap between real-word challenges and innovative scientific discovery. Anyone involved in life science product development knows this challenge well. It's reflected in the high failure rate of product that start full of innovative promise, but ultimately fall short of one or more critical criteria that often emerge only in later stages of development. We believe now is the time for change, for bridging the gap between innovation and real-world impact. The key lies in harnessing the possibilities of the computational revolution, transforming our word and above all, in unlocking the power of AI. Today's computational capabilities allows for simultaneous analysis of countless parameters, achieving a level of scientific depth that was once behind reach. They empower us to design solutions that integrate scientific innovation with commercial viabilities, pushing beyond the limits of traditional trial-and-error product development. Computational technology serve as the bridge connecting scientific discovery to commercial success. And this is exactly what we focus on. We call our approach real-world innovation. Evogene is structured on three interconnected pillars: our groundbreaking Gen AI best technology, ChemPass AI, which serve as the competitive advantage for our offering in the pharmaceutical and agriculture industries; second, our established activity in agriculture through our subsidiary, AgPlenus, where we have already achieved results in collaboration with leading global companies in the development of ag-chemical product; and our recent expansion into the pharma industry where ChemPass AI significantly increased the likelihood of the discovery of novel molecules with the highest potential to become breakthrough commercial drugs. I will begin with brief introduction to ChemPass AI, which is at the core of our operations. To understand the unique value of ChemPass AI, it is essential to consider the background of the product development process and its inherent challenges. Here is a simplified overview of how a small molecule product such as drug or pesticides is developed. It started with identifying the target protein we aim to inhibit, followed by searching for a chemical molecules capable of binding to it from an almost infinite number of possibilities. During the discovery and optimization phase, the objective is to design the most promising candidate for advancement into the next stage of development. These later stages are time consuming and costly, so choosing wisely early on is crucial. It's also worth noting that once these advanced stages are reached, the chemical structure of the molecules is basically set. This is the version that hopefully will eventually make it all the way to market. Therefore, very early in the process right after optimization, we commit to the molecule, we believe has the highest probability of becoming the final product. The outcome of this process is often frustrating. Statistically, only a small fraction of promising molecules that make it into advanced development actually reach the market. Success rates are usually somewhere between 3% and 10%, depending on the industry. This naturally raised the question what caused the success rate to be so low? And major reasons for low success rate is that a product must meet many often conflicting parameters to reach commercialization. Traditional methods for selecting molecules and addressing multiple parameters are very limited as a result early development usually optimize only a few parameters, one parameter at a time, creating a major bottleneck to commercial success. Overcoming this challenge present a significant strategic opportunity. Today, advancing computational technologies allowed for the simultaneous optimization of multiple parameters with the potential to greatly improve development efficiency and success rate. That brings us to ChemPass AI, the cutting-edge tech-engine developed here at Evogene, built to transform the way we design small molecules that are precisely tailored to specific target proteins. What makes our approach truly unique is not just the molecules we design, but the intelligence behind them, each molecule must overcome a complex web of scientific, regulatory and commercial challenges. To become real product, a molecule has to do more than just work, it must excel across multiple dimensions simultaneously. And that's exactly what ChemPass AI was built to achieve. Our engine designed molecules that meet three critical requirements: high potency, molecules that strongly and effectively modulate their target protein; novelty, expanding into novel chemical space, ensuring the creation of strong, defensible intellectual property; and multiparameter excellence, molecules that perform across the many requirements needed for the real-world commercial success. With ChemPass AI, we are not just designing molecules, we are designing the next generation of breakthrough products, closing the gap between innovation and market impact. That's the power and the promise of ChemPass AI. We are advancing a multiyear development program continuously adding new capabilities to our generative AI tech-engine. As a result, the number of parameters we can address keeps growing and the precision of the molecules designed to meet the required criteria continues to improve. The more the system is used, the smarter and more accurate it becomes. To accelerate ChemPass AI development process, we are collaborating with major technology companies such as Google Cloud as disclosed in May this year, and we intend to continue doing so. Additionally, we intend to explore the possibility of making certain parts of our technology accessible to researchers through such companies, which have a broad market reach. Of course, we will be happy to update you on these developments in the future. Our vision comes to life through the technology we have developed. Now I'd like to present the implementation of our technology through our agriculture and pharma activities. Starting with agriculture, a field we entered back in 2018 through the establishment of our subsidiary, AgPlenus. Since then, AgPlenus has achieved significant milestones, including strategic collaborations with leading industry players such as Bayer and Corteva. Agriculture is a huge global market valued in 2024 at $79 billion, including three main segments: herbicides, insecticides and fungicides. A single product in this space can generate anywhere from hundreds of millions to billions of dollars in sales annually. The industry is in great need of new products, yet developing them comes with significant challenges, an increase in pest resistance and regulatory requirements, an urgent need for new mode of action and the decreased rate in discovery of new pesticides due to lack of innovation. To address the challenges of developing new products in ag-chemistry, revolutionary technologies are needed. Computational chemistry can drive real-world impact in agriculture. And this is the mission of AgPlenus, Evogene's wholly owned subsidiary. AgPlenus discovered and optimized candidate for crop-protection products and has a robust product development pipeline through collaborations with leading global agriculture companies as well as internally founded programs. We are very proud of AgPlenus' achievements reflected in its strategic collaboration with two world-leading companies, Bayer and Corteva. Both collaborations focused on developing new herbicides, each targeting a different protein that represent a novel mode of action. This innovation is essential to addressing the growing resistance of pest to existing solutions. The plant images shown in this slide clearly demonstrates the effect of the small molecules being advanced through those collaborations. AgPlenus is also advancing independent projects within its internal pipeline. Its main focus today is on developing fungicide candidates against Septoria, a fungus causing major damage to field crops, especially wheat. AgPlenus already has several small molecules showing very promising results in lab test, which are now moving to greenhouse trials to test their performance on plants. Looking ahead, AgPlenus plans to further strengthen and expand its collaboration with existing partners, establish new partnerships, leveraging AgPlenus' pipeline innovations and broaden the scope of programs within its internal development portfolio. These initiatives are expected to generate cash inflows for the company through upfront payment, R&D reimbursement and as our products advance through development, milestone payment and potential royalties. We look forward to providing further update on both collaborative efforts and internal pipeline progress. Now I will continue with our efforts to capture the value of our tech engine, ChemPass AI, in the pharma industry, focusing on the market segment of drugs based on small molecules. While small molecules-based drugs such a lucrative opportunity, and why do we believe now is the right time to leverage our technology for it. Small molecule-based drugs represent nearly 60% of the global pharmaceutical market, valued at approximately $780 billion. Even more exciting is the current momentum of AI designed small molecules that are advancing through various companies' pipelines. More than 60 new candidates with an expected annual growth rate exceeding 150%. This rapid expansion is expected to drive the AI drug discovery market to nearly $190 billion by 2034. As I previously mentioned, the traditional process of developing drug based on a small molecule is expensive, lengthy and has a low success rate. This slide illustrates the high numbers of failure that occur during the transition from one stage of clinical trial to the next. We expect that the smart use of our tech engines, ChemPass AI, will lead to the initiation of clinical trials for a highly active, innovative small molecules, which most importantly, meet the maximum number of the defined drugs key parameters. As a result, we expect the probability of successfully progressing from one development stage to the next to improve, and the number of candidates that complete the development process and became successful commercial product will increase significantly. To capture the value of ChemPass AI offering in pharma, our business strategy is designed to maximize potential while minimizing risk. We hope to partner with leaders in pharma, biotech companies and academia that bring domain-specific knowledge, forming collaboration agreements. Through this strategic alliance, we aim to co-develop innovative products. The expected upside for Evogene stems from R&D fees, milestone payment and revenue sharing mechanism of the end product. In August, our Pharma division announced a collaboration with Professor Ehud Gazit of Tel Aviv University to develop new therapeutics for metabolic disease linked to the self-assembly of small metabolites such as tyrosinemia and gout. The partnership combines Evogene's ChemPass AI generative design platform with Professor Gazit expertise in molecular self-assembly to discover and optimize novel small molecules that can inhibit harmful metabolite aggregation. This collaboration aims to accelerate the development of first-in-class therapies that addresses the underlying molecular causes of accumulated metabolic disease offering new hope to patients worldwide. This collaboration exemplifies the type of strategic partnership we are pursuing, leveraging Evogene's advanced computational capabilities alongside existing scientific knowledge to create meaningful synergies that can drive breakthrough discoveries in drug development. Over the coming year, we expect to announce additional collaborations of this nature, further strengthening Evogene's position in this field and enhancing recognition of our unique technological edge. We believe such partnership will provide the validation and visibility needed to enable broader and more complex collaboration with leading biotech and pharmaceutical companies, opening new growth opportunities for Evogene. We look forward to providing future updates on our collaborative efforts. To summarize Evogene's strategy, we are using ChemPass AI, which is at the core of our offering and our main competitive advantage to drive real-world innovation for two strategic markets. Pharma for the development of small molecule-based drugs, agriculture for the development of crop protection chemicals. To realize this vision, we operate through Pharma division focused on pharmaceutical applications and through our wholly owned subsidiaries, AgPlenus, focused on ag-chemical solutions. Each develops its product either in collaboration with leading global companies or independently. In the near future, we expect the following: Continuing to strengthen and expand ChemPass AI and maintaining our technological edge, signing additional collaboration agreement with biotech and later on with pharma partners for small molecule drug development, and expanding collaboration with existing and new leading ag-chem companies while growing AgPlenus' internal crop protection pipeline. With this, I conclude my part, and I will now hand the call to our CFO, Yaron Eldad, to present the financial results. Yaron Eldad: Thank you, Ofer. The financial results for the first 9 months of 2025 and the capital gain of Lavie Bio, a subsidiary of Evogene, are presented as a single line item in Evogene's consolidated P&L statement for the first 9 months of 2025. Its results are included under the line titled: income or loss from discontinued operations. This accounting treatment reflects the classification of Lavie Bio's operations and its capital gain as discontinued following the sale of the majority of its activities to ICL which was completed in July 2025. During the first half of 2025, Evogene implemented a cost reduction plan, most of which was completed by the end of the second quarter. The impact of these reductions is reflected in the first 9 months results. As of September 30, 2025, Evogene held cash, cash equivalents and short-term bank deposits of approximately $16 million. The consolidated cash usage during the third quarter of 2025, excluding the cash generated from the sale of the majority of Lavie Bio's assets and the sale of MicroBoost AI for Ag to ICL was approximately $3.5 million. Excluding Lavie Bio and Biomica, Evogene and its other subsidiaries used approximately $2.3 million in cash during the third quarter of 2025. Revenues for the 9 months of 2025 were approximately $3.5 million, compared to approximately $4 million on the same period the previous year, reflecting a decrease of approximately $0.5 million. The decrease was primarily driven by lower revenue recognized from AgPlenus' activity, which included onetime payment from Bayer during the first quarter of 2024. And revenues recognized from the collaboration agreement with Corteva, partially offset by an increase in seed sales generated by Casterra during the first quarter of 2025. Revenues for the third quarter of 2025 were approximately $300,000, a decrease compared to approximately $1.7 million in the same period last year. The decrease was mainly due to reduced seed sales generated by Casterra during the third quarter of 2025. Research and development expenses, net of non-refundable grants, for the 9 months of 2025 were approximately $6.2 million, a decrease of approximately $3.6 million compared to $9.8 million in the 9 months of 2024. The decrease was primarily due to reduced R&D expenses in Biomica, and the cessation of Canonic's operation at the beginning of 2024. In the third quarter of 2025, R&D expenses were approximately $1.4 million, down from approximately $3.3 million in the same period of 2024. This decrease is mainly attributed to decreased expenses in Biomica. Sales and marketing expenses for the 9 months of 2025 were approximately $1.2 million, a decrease of approximately $400,000 compared to approximately $1.6 million in the same period last year. The decrease was mainly due to reduction in Evogene, AgPlenus and Biomica personnel costs. Sales and marketing expenses for the third quarter of 2025 were approximately $400,000, reflecting a slight decrease of approximately $100,000 compared to approximately $500,000 in the third quarter of 2024. General and administrative expenses for the 9 months of 2025, decreased to approximately $3.4 million from approximately $5.7 million in the same period last year. This decrease is mainly attributable to expenses recorded during the 9 months period of 2024, and related to a provision for doubtful debt for one of Casterra's seed suppliers as well as transaction costs associated with Evogene's fundraising in August 2024. General and administrative expenses for the third quarter of 2025 decreased to approximately $1.1 million compared to approximately $2.8 million in the same period of the previous year, primarily due to decreased expenses in Casterra and Evogene as mentioned above. Other income of approximately $200,000 was recorded in the first quarter of 2025 as part of the accounting treatment related to a sublease agreement. The decision to cease Canonic's operation in the first half of 2024 resulted in other expenses of approximately $500,000, primarily due to impairment of fixed assets recorded in the first quarter of 2024. The operating loss for the 9 months of 2025 was approximately $8.8 million, a significant decrease from approximately $15.3 million in the same period of the previous year, mainly due to the decreased operating expenses, partially offset by the decreased revenues as mentioned above. The operating loss for the third quarter of 2025 was approximately $2.7 million, a decrease from approximately $5.9 million in the same period of the previous year, primarily due to the decreased operating expenses, partially offset by decreased revenues as mentioned above. Financing income net for the 9 months of 2025 was approximately $744,000 compared to financing expenses net, of $448,000 in the same period of the previous year. The increase in financing income is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August 2024 fundraising. As a result, during the 9 months of 2025, the company recorded financial income, net, related to pre-funded warrants and warrants of approximately $674,000, as compared to financing expenses, net, of approximately $881,000 in the same period of 2024. Financing income net, for the third quarter of 2025 was approximately $12,000, compared to financing expenses net of approximately $821,000 in the same period of the previous year. The increase in financing income is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August '24, fundraising as mentioned above. Income from discontinued operations net, for the 9 months of 2025, was approximately $5.7 million, compared to a loss of approximately $2.2 million in the same period of 2024. For the third quarter of 2025, income from discontinued operations net, was approximately $7.9 million, compared to a loss of approximately $1.5 million in the quarter of the previous year. This amount primarily reflect the financial results of Lavie Bio and expenses related to the development and maintenance of MicroBoost AI for Ag, which are presented as a single-line item in the consolidated statement of profit and loss. Following the sale of the majority of Lavie Bio's assets as well as Evogene's MicroBoost AI for Ag to ICL, the company recognized a gain on sale of approximately $6.4 million which is also included in the income or loss from discontinued operations net, for the 9 months and 3 months period ended September 2025. All prior period amounts have been reclassified to conform to this presentation. The net loss for the 9 months of 2025 was approximately $2.5 million, compared to approximately $18 million in the same period last year. The $15.5 million decrease in net loss was primarily due to decreased operating expenses, income derived from discontinued operations due to the asset sale to ICL net, and increased financial income net, partially offset by reduced revenues. The net income for the third quarter of 2025 was approximately $5.2 million, compared to a net loss of approximately $8.2 million in the same period last year. This improvement was primarily due to income derived from discontinued operations net, due to the asset sale to ICL, decreased operating expenses and increased financing income net, partially offset by reduced revenues net, as mentioned above. Operator? Operator: [Operator Instructions] The first question, has the levels of interest in AI ChemPass increased post the recent NVIDIA and Eli Lilly AI drug discovery partnership. Also, could you please elaborate why Evogene's proprietary database should garner similar interest from others in pharma and technology industries? Ofer Haviv: Thank you for this question. This is Ofer. So I think that the announcement coming from NVIDIA and Eli Lilly definitely increase the interest and the traffic in shares in companies that are related to AI activity for the pharma industry. But I have to say that, I think that we didn't need even this announcement to generate interest. I think this is one of the hottest areas these days in the pharma world. And I think that this is really just the beginning of this new area of activity, and it's here to stay. With respect to Evogene, and I think that we are operating something very unique. I can share with you that we participate in a conference in Europe last month, and we see increased interest in what we are presenting to potential partners. It's -- I think we are already 1 year in this area of presenting our ChemPass technology for the pharma industry, and we see increasing interest in what we are doing. And we shouldn't forget that in the ag industry, we already have a significant collaboration agreement with Bio and Corteva, which you can imagine that they validate our technology before they engage in this collaboration agreement. What is unique about Evogene, from my perspective, this multiparameter approach, it's one. Then the second is that in Evogene, the people that are working in the computational -- ag part -- in computational division, they have a PhD degree in genomics. And this is the type of people that can design for scratch an AI tech-engine, and this is what is called foundation model. And we did it together with the Google team and we succeed to create a very unique dedicated AI engine that from the beginning, it was designed for a small molecule discovery and optimization. This is something that is not existing in other places. And in addition, the way that we are utilizing our technology, while we integrate every piece of information coming from our partners, it also puts us in a very different position compared to other companies because we don't believe in a one-size-fit-all approach, where you're developing the specific technology and you are using it for all the company, the same way. In our case, we modified the technology for each partner according to the specific need of the specific -in a program we are engaged. So yes, it might take a little bit longer, but the performance of what we deliver is expected to be much higher than the approach of one-size-fit-all. So I think that our technology is offering something different. And as time is going by, and we have more and more meetings with potential partners, our belief is getting stronger and stronger that we are coming with something which other company is not offering these days. Operator: The next question, how close are you to unlocking partners with AI ChemPass? Ofer Haviv: So as I mentioned, we see an increase of interest in what we are offering. If the meetings that we participate -- in the conference, we participate in the early years and the beginning of the year, we returned with a small number of potential candidates. Now it's much -- the list of potential candidates has increased significantly. And based on this, I believe that we hopefully will start to announce on more additional collaboration agreement with biotech companies at beginning of next year. And we'll start to hear more and more on new collaborations. And hopefully, with -- starting with small biotech companies, maybe even some -- or maybe academic institution, but later on, it will be midsized biotech companies. And in our target at the end of the day is also to engage with pharma company with a significant collaboration agreement. But this will take a little bit more time. But as I said, small biotech companies will start to -- hopefully to be able to announce such collaboration at the beginning of next year. Operator: The next question. Last quarter, you spoke to doing more IR to drive awareness to the company, but very little seems to be done. What's the IR strategy going forward? And can we rely on it being implemented in short order? Ofer Haviv: It's an interesting question because we just now discuss here this -- our approach in presenting the company strategy in this analyst call was the right one because it's taken a little bit longer than what we expected. But I think that -- but we all agree that the answer to this question is yes. And how is connected to the question that was just now raised. I think from this analyst call, now we present the first time, our -- the new presentation in an analyst call, where we are describing Evogene in the new structure, focusing on ChemPass AI, the utilization of this technology in the ag and in the pharma and the collaboration that we engaged. And from here on, this will be the main messaging the company would like to share with investors. Yes, we, of course, we will continue to talk about our subsidiary, Casterra, but the main focus will be on what I just now described. And we are now -- and we are planning to initiate roadshows and participate in conferences next year, not necessarily just IR meeting with investors, but also meeting with -- in professional event. And I think that starting from -- actually from -- even from December, we are planning that Evogene and the new story of Evogene will be out there. And hopefully, we'll start to see more and more events, IR events that we will be involved. Operator: The next question, could you highlight upcoming catalysts over the coming 6 to 12 months? Specifically, when could we expect the first partnership? Ofer Haviv: So I think, I partially addressed this question. From my perspective, we can envision three type of press releases related to the Evogene new strategy, new collaborations in the Pharma division, meaning that additional biotech companies will use our technology to discover and optimize small molecules for the specific targets. Then expansion of the existing collaboration or new collaboration in the Ag division. I'm talking here, of course, about AgPlenus. And third, and this is something that I think is quite important for us to mention, exactly as we engage with Google in building an important piece in our tech engine, I'm expecting and hoping that there will be additional announcements like this one with companies like Google, the same size of Google or also maybe with Google. And I think that our belief is that we definitely should accelerate the development of ChemPass AI through collaboration with company like Google, in order to keep our competitive advantage in the future as well. Operator: The next question. What type of revenue level can we expect for castor seeds in Q4 and for 2026? Ofer Haviv: We can't disclose this information. What I can say is that about Casterra, they are now talking with companies, strategic companies in the field of castor oil, companies that can really have a significant effect on the company revenue in the future. When this discussion will materialize, of course, we will share this information with our investors. But I think this is a good news that even in the past, we were talking about specifically one partner that we already disclosed its name, ENI. But I think that today, we believe that there is additional opportunity for companies that can have the same effect on Casterra that we are now talking with them. And there is more than one like this. So when this discussion will materialize into agreement, of course, we'll be more than happy to share this information with our investors. Operator: The next question. How excited are you about AI ChemPass compared to all your other times at Evogene? Ofer Haviv: I think that this is a very interesting question. I think that for many, many years, Evogene was focusing mainly on the ag sector. And I think that we succeed to go through some significant technology breakthrough. But from different reasons, and I don't want to get into it, the ag sector don't give you a financial trend to such an achievement from different reasons. I think the pharma, the situation is different, and I think that, first, the fact that we are focusing on the pharma industry, yes, we are still in the ag industry with respect to AgPlenus, but our main focus is going to be on the pharma industry. So I think this is the right decision for Evogene. In addition, the type of people that are working here in Evogene is people that hold a PhD degree. And this is very important, when you're talking about AI, because if you really want to be a player in AI, with all the respect to first degree or second degree, it's not enough. You need to have a much broader understanding in computational science in order to be -- to act as a player in AI industry. So I truly believe that we have the right people for the right challenge. And again, based on initial validation we conduct here in Evogene, based on the discussion we conduct now in the last bio conference. I would like to say the following, if we will succeed to mimic the same success Evogene demonstrate in the ag industry. If we succeed to do so in the pharma industry, our company will be something that everybody will be proud to participate in our journey. We have been there. We succeed to work with all the world -- all the big companies in the pharma industry -- in the Ag industry. I hope that we'll be able to do exactly the same, but this time, the financial rewards will come after the efforts that we are going to invest. Operator: There are no further questions at this time. Mr. Haviv, would you like to make a concluding statement? Ofer Haviv: Yes, I would like to thank everybody in participating in this analyst call. For me, it was a very unique presentation, where we present for the first time, the new Evogene story, with the new presentation. And I really hope that in the next analyst call, we will have much more to share with you, along the guidelines that I just now described. Operator: Thank you. This concludes Evogene's Second -- Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Lixi Yuan: Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Lixi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us. Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group; Ken Wong, President of Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. We will begin with earnings presentations. And after that, we'll open the call for questions. Now let me turn it over to Yuanqing. Yuanqing, please. Yang Yuanqing: Hello, everyone, and thank you for joining us. Today, I'm pleased to share that Lenovo has delivered another quarter of record performance, capitalizing on the AI democratization trend, we have made significant progress in both Personal AI and Enterprise AI, driven by our clear strategy, operational excellence and the relentless innovation. The results reflect not only our strong performance today, but also our strength to leading the AI era. First, let's start at the group level. Last quarter, our group revenue reached an all-time high of USD 20.5 billion, growing at almost 15% year-on-year. Our profit grew even faster with adjusted net income increasing more than 25% year-on-year. All business groups and all sales geographies, delivered a double-digit year-on-year revenue growth. While our AI-related revenues reached 30% of the group total increasing by 13 points year-on-year. While uncertainties remain in the external environment, we are seeing positive signs of stabilization. We will continue to leverage our unique Global/Local model to navigate uncertainties, lead the industry with operational resilience and capture the tremendous hybrid AI opportunities. We are seeing today's AI era unfold along a clear path. The first wave was marked by the emergence of large language models, which triggered a massive demand for AI infrastructure, and led to our explosion in cloud-based and training intensive computing power. Now as large language models become increasingly commoditized, user priorities are shifting towards personalization and the private domain. This is accompanied by growing emphasis on efficiency, response speed, security privacy and sustainability. This evolution is steering AI development towards a more human and enterprise-centric paradigm unlocking substantial opportunities in AI devices of diverse form factors, hybrid infrastructure of public cloud, private cloud, on-prem data center and edge computing as well as AI solutions and services tailored to diverse needs. This very trend, the democratization of AI is now accelerating rapidly across both Personal AI and Enterprise AI. In Personal AI, consumers are increasingly looking for AI outputs that are based on their own experiences, memories, behaviors and knowledge. At Lenovo, we are addressing this demand for hyper-personalization by landing our vision of One Personal AI, Multiple Devices. You will witness this firsthand at our upcoming Tech World on January 6, 2026, where we will launch our Personal AI super agent to the global market. It orchestrates across wearable and ambient devices to see what you see, hear what you hear, and memorize what you have experienced. Furthermore, it leverages portable devices and personal trusted computing hubs using personalized algorithms and models to continuously learn from your habits and anticipate your intentions, so that it can think as you would think and act as you would act, and ultimately becoming your Personal AI Twin. I invite you to join us for this spectacular event at Sphere in Las Vegas in person or via live stream. Our IDG or Intelligent Devices group acts as the core engine behind the Lenovo's Personal AI strategy as demonstrated by strong results from last quarter. Its revenue exceeded USD 15 billion with a 12% year-on-year growth. PC market share exceeded 25% for the first time in our history with a sustained industry-leading profitability. Our AI PC leads the Windows AI PC category as a global #1. We also achieved a record-high Motorola smartphone volumes last quarter. Our momentum in AI device is particularly encouraged with its revenue mix within IDG increasing by 17 points year-on-year to 36% now. In Enterprise AI, the infrastructure market is undergoing an important shift from AI training in public cloud to AI inferencing increasingly happening on-prem under the edge. It's significant because the scaling of infrastructure will potentially drive even higher growth of devices and applications, further expanding our total addressable market. At Lenovo, we are driving our Enterprise AI strategy by helping businesses, turn data and knowledge into insights and value. Specifically, we started with helping enterprises collect and process various types of data, organize it into knowledge, leveraging the computing power of our hybrid infrastructure. We then apply AI models and AI agents to turn data and knowledge into insights and outcomes or engage the business processes. These are consolidated into repeatable, scalable solutions for horizontal functions or vertical industries are supported by our full-cycle services. Ultimately, our goal is to create Enterprise AI Twin for our enterprise customers. ISG or Infrastructure Solutions Group is the key driver of Lenovo's hybrid infrastructure. Last quarter, its revenue grew 24% year-on-year to exceed USD 4 billion. We continue to execute our Cloud Service Provider, or CSP, and the enterprise SMB dual strategy. For CSP, the business not only delivered a record fiscal Q2 revenue, but also demonstrated a robust growth in AI infrastructure with a strong pipeline. For Enterprise SMB, we are optimizing and even rebuilding our business models to better serve the distinct needs of enterprise and SMB customers. We are confident our infrastructure business will return to profitable growth soon. SSG, our Solutions and Services group. By leveraging the Lenovo Hybrid AI Advantage framework, strives to provide the solutions and services for enterprises on their journey of intelligent transformation. Last quarter, SSG achieved 18% year-on-year revenue growth, its 18th consecutive quarter of double-digit expansion with our operating margin over 22%. Projects & Solutions and Managed Services revenue mix further advanced to almost 60% of SSG's total revenue. We are accelerating this business further by unleashing the power of Lenovo Hybrid AI Advantage, combining the AI factory, AI services and the AI library of repeatable, scalable AI solutions for selected vertical industries and horizontal functions. To conclude, we are proud of our record results, confident in our vision and strategy and determined to capture the enormous opportunities ahead. It's our firm belief that by rigorously executing our hybrid AI strategy, we will not only deliver sustainable long-term returns to our shareholders, but also make AI truly personalized for every individual and every enterprise and eventually bring smarter AI to all. Thank you. Now let me turn it over to our CFO, Winston. Winston, please? Shao-Min Cheng: Thank you, Yuanqing. I will now go through the Lenovo's Fiscal Year 2025, '26 Second Quarter financial and operational results. The group continued its strong performance into the second quarter, maintaining strong momentum across our business groups and sales geographies. We delivered record fiscal quarter revenue of $20.5 billion representing 14.6% year-on-year increase with balanced double-digit growth across all business groups. Our adjusted net income grew 25% year-on-year to $512 million, and adjusted net income margin expanded to 2.5%, driven by higher revenues. Our second quarter results demonstrate our strategic potential to capture substantial AI opportunities. AI-related revenues now account for 30% of the group's total with high double-digit revenue growth year-on-year in AI servers and triple-digit revenue growth in AI PC, AI smartphones and AI services. Our PC business continued strong growth momentum and continue to grow share, reaching historic high of 25.6% global market share. Our smartphone business achieved a record high concurrent quarter activations, underpinned by solid end-user demand. ISG delivered strong revenue growth year-on-year and improved operating performance driven by growth in AI infrastructure and related industry demand. SSG delivered a record revenue quarter while continuing to expand operating margin. All reported geographies delivered double-digit year-on-year revenue growth, reinforcing our balanced strength across 180 markets supported by our Global/Local strategy and resilience and agility of our supply chain. Turning to liquidity and cash position. Our growth continues to be supported by disciplined financial management. In the second quarter, we delivered operating cash flow of USD 1.5 billion, while free cash flow climbed to $1.1 billion, supporting continuous investment in focused growth areas. This was driven by robust operational cash and effective working capital management with days of inventory reduced by 10 days year-on-year as well as disciplined expenditure. We also achieved a 31% year-on-year reduction in adjusted net finance costs, reflecting ongoing cost optimization and working capital efficiency initiatives. Our HKFRS net income this quarter was $340 million, primarily impacted by noncash items related to warrants and 0 coupon convertible bonds associated with our strategic transaction with Alat, a wholly owned subsidiary of PIF. Key adjustments to reported figures include $148 million noncash fair value loss from warrant revaluation and $28 million notional interest from the convertible bonds. Further details on other noncash items can be found in the supplementary financial materials at the end of this presentation. We encourage investors and analysts to focus on adjusted operating profit and net income, which excludes these noncash, nonoperating impacts and better reflect our core operational performance. Now let's turn to the performance of our business groups. IDG delivered another strong quarter. Revenue up 12% year-on-year to $15.1 billion, and operating profit climbed 11% to $1.1 billion. This performance reflects expanded PC leadership globally, obtaining a record high global market share of 25.6%. Growth was driven by high-margin segments, premium PC shipments grew 25% year-on-year, and AI PCs are now a major contributor, accounting for 33% of Lenovo PC shipments, solidifying our #1 position with 31.1% market share in the global Windows AI PC market. In China, AI PC with 5 key features now make up 30% of notebook shipments. Our cross-device AI ecosystem is creating a strong foundation for our Personal AI vision, delivering a seamless One AI, Multiple Devices experience that connects PCs, tablets and smartphones. Our continued investment in AI-driven innovation and R&D are delivering strong results. Lenovo remains the clear leader in the PC industry across all major categories. Globally, we hold the #1 position in both consumer and commercial segments, and we continue to expand market share in the second quarter. Within our PC portfolio, our leadership further extends into strategic categories, such as Windows AI PC, gaming and premium PCs. These are critical growth drivers as the industry transitions to a more intelligent and immersive computer experiences. Our global leadership is balanced across the world with #1 market leadership in 4 out of 5 geographies and market share gains in every region during the quarter. This broad-based growth underscores the strength of our manufacturing footprint and resilience of our global supply chain. Turning to our Infrastructure Solutions Group performance in the second quarter. ISG continues to benefit from the strength of AI infrastructure spend and our leading product and technology for advanced computing, delivering 24% year-on-year revenue growth to $4.1 billion with improved operating performance, driven by new customer acquisitions in cloud service providers and advancing enterprise and SMB transformation. ISG continued to experience strong growth in our Neptune liquid-cooling technology, which grew 154% year-on-year, reinforcing our leadership in sustainable high-performance infrastructure. We continue to drive sustainable growth in high potential areas, advancing enterprise and SMB transformation to capture opportunities in AI infrastructure and inferencing. Our AI server business achieved high double-digit revenue growth, fueled by rising AI adoption and supported by clear product launch road map. In China, our operations delivered consistent operating margin improvement, leveraging uniquely localized offerings and our ODM+ model to drive differentiation. In the second quarter, ISG broadened its customer base across CSP, enterprise and SMB segments with wins in the AI infrastructure, cloud computing and high-performance computing. These deployments include AI training clusters, GPU as a service and liquid cooling solutions, reinforcing our position in next-generation infrastructure. We also continue to see growing traction in AI inferencing workloads as customers deploy and scale AI applications across hybrid infrastructure, and we are actively accelerating our capabilities in this area. The enterprise server and storage industry has evolved over the last few decades and benefited from the infrastructure spend behind some of the largest industrial revolutions underpinned by data compute and storage. Lenovo's ISG business has an industry-leading technology and product excellence from its IBM x86 server heritage. Our leadership in high-performance compute and in liquid cooling positions in Lenovo well for the recent growth in demand due to AI training, and we are aligning our resources to capture the next future for AI inferencing in enterprise and SMB to traditional CSP and most recently, the emerging AI opportunities from CSPs. Echoing Yuanqing's remarks, we're entering the next stage enterprise and SMB AI. This represents a significant opportunity as the AI transitions from training to inferencing, driving increased demand towards on-premise hybrid environments. We've delivered another record revenue quarter marking SSG's 18th consecutive quarter of double-digit year-on-year revenue growth. Revenue rose 18% year-on-year to $2.6 billion, and operating margin expanded near historical high. SSG grew at twice the pace of addressable market driven by robust demand in high-growth areas such as hybrid cloud, AI and digital workplace solutions. Growth in Project & Solutions was driven by enhanced AI solutions targeted at key verticals such as manufacturing and retail. Revenue from TruScale DaaS and Infrastructure as a Service also increased year-on-year with notable customer wins across global markets. In addition, both support services revenue and bookings growth accelerated. Overall, SSG deferred revenue grew 17% year-on-year to $3.6 billion, providing strong visibility into future performance. With combined revenue for Managed Services and Project & Solutions now accounting for 59.9% of SSG's total revenue and AI services tripling year-on-year, we are capturing higher-value AI-led services business models. Over the past 4 years, Managed Services and Project Solutions have grown at a 25% compound annual rate significantly outpacing the addressable market. Our tech-driven offerings enable customers to optimize cost and deepen engagement, aligning with the industry shift towards subscription and consumption-based models that are gaining strong traction. Meanwhile, support services remain a solid, profit growth driver, supported by rising attach rates from devices and sustainable recurring revenue streams. We are proud to share that group continues to be recognized globally for our leadership in ESG. In 2025, Gartner Supply Chain Top 25, we ranked 8th highlighting our strong performance in building sustainable, resilient supply chains. Lenovo's factory in Monterrey, Mexico was recently added to the World Economic Forum's Global Lighthouse Network, the second for Lenovo, among only 201 leading manufacturing facilities worldwide. Our ESG scores also improved across CDP and S&P Global, and we maintain our AAA rating in the MSCI ESG Ratings for the fourth consecutive year. We've continued to build on our strong foundation of inclusion, the group was recognized as the Best Place to Work for Disability Inclusion in the U.S., the U.K. and Brazil. We're also honored as an Ambassador in the Workplace Pride Global Benchmark, reflecting our ongoing commitment to LGBTQ+ inclusion. In addition, we've deepened our collaboration with the United Nations Industrial Development Organization, focusing on circular economy initiatives. We also joined the Coalition for Sustainable AI, an initiative led by French government in partnership with UNEP, demonstrating our commitment to responsible innovation and environmental stewardship. These achievements reinforce our long-term commitment to sustainability, innovation and building a more inclusive future. Looking ahead, we are hopeful of global trade improvements. Our Global/Local model remains a key source of resilience and differentiation. We're also elevating our brand through major initiatives like the upcoming FIFA partnership and Tech World at CES 2026. With strong execution and continued focus on Personal and Enterprise AI, we are confident in translating our strategy into sustained profitable growth. Thank you. We will now answer any questions you may have. Lixi Yuan: Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions] While we are waiting for the questions, allow me to introduce the management team again. Other than our Chairman, Yuanqing Yang; and CFO, Winston Cheng, we also have the following business leaders with us today for Q&A. Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group -- of our Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. Our first question is from Albert Hung from JPMorgan. How big will the memory price impact on margin? What is our strategy to go through the memory cost hikes? And when do you expect to see the impact from inflated memory price? And what will be the memory impacts on our business segments? For these questions, I'd like to invite our Chairman and CEO, Yuanqing, to give some remarks. Thanks. Yuanqing, please. Yang Yuanqing: Thank you, Albert, for the question. So if you look at the industry and the market, so 2 key -- 2 key dynamics are top of mind. First is top of AI bubble. And the second is concerns about the supply shortages and the rising component prices. And I believe these 2 topics are related to each other. So let me give you my opinion. First, on the so-called AI bubble, my opinion is as with any major innovation, there will be intense investment and competition at the beginning, particularly in certain areas such as large language models. But overall, we do not see a bubble. The substantial investments in AI infrastructure are laying the groundwork for the next major technology wave, much like the early Internet [ field ] explosive growth in PCs, particularly actually triggered the smartphones first for sure, more PC and mobile applications as well. What's happening now is the next wave of AI democratization, spreading across both personal and enterprise use, which is perfectly aligned with Lenovo's strategy. So we are addressing Personal Hybrid AI as well as Enterprise Hybrid AI. So because this AI adoption accelerates, the supply shortages and high component costs are natural consequences of rising demand. Addressing this issue, so first, this is not new for our industry, supply shortage or supply cost up and down the normal situation for the industry. But I believe Lenovo is better positioned and more flexible and resilient than our peers to manage it effectively. So this is not just because of our scale. So indeed, we are probably one of the largest buyers in our industry, combining PC, smartphone, server storage business together. But also, we have the best supply chain in our industry. So we are very proud of that. So actually, we are ranked #8 as again global supply chain -- top supply chain is [indiscernible]. And we have a much stronger and better relationship with the suppliers. And typically, we signed a long-term contract with some top upstream suppliers. So that we are very confident we can manage this situation better than our competition to ensure not only we have enough supply, not just for short term, but for entire year, next year. But for sure, hopefully, the demand will not grow too fast than we forecasted. But also we believe we can get the most competitive cost so that we can remain competitive in the market while protecting our profit and margin. More specifically, for the next 2 quarters, we are very confident we can continue to drive double-digit growth in both our PC business as well as our server and infrastructure solution business. Meanwhile, we are confident that our margin and profitability will not be impacted during this period. Last but not least, from a longer-term point of view, so we have the mechanism in place to adjust the price and continue delivering on our commitment to ensure the market competitiveness while maintaining our margin and profitability. Thank you. Lixi Yuan: Thank you, Yuanqing. The second question is on PCs, and we also have a few questions on PCs as well. So we've got Anthony Leng from JPMorgan and Leping Huang from Huatai, asking about the PC outlook for the next year. And from Leping, he mentioned congrats on the industry-leading 7.3% OP margin in IDG and looking ahead, how do you assess the headwind from the rising storage memory component prices? Are you confident in maintaining this margin profile via pass-through? Luca, can I invite you to answer the questions. Luca Rossi: Thank you, and thanks, Anthony. Thank you, Leping. So maybe I'll start with the demand side. And here, I will say that we are definitely more optimistic than what we are seeing from some of the industry analyst reports. So with the visibility, order visibility we have, as of now, I think we are confident to continue that we will continue to grow at double digit, at least for the next 2 quarters and also for the remainder of calendar 2026, on top of that, Lenovo will continue to grow at a premium to market, so faster than the market while maintaining industry-leading profitability, which brings me to the second point and our Chairman and CEO already mentioned it. So regarding the memory SSD commodity cost up trend, first of all, I want to remind to all that this is something we have been able to manage several times in the past, in the previous many years, generally speaking, always successfully expanding our market share without impacting our profitability trajectory. And that is coming with the combination of our strong procurement power, strategic inventory preparation that you can bet we made and definitely also the ability to understand each single market globally so that we know how to price correctly. So I think the combination of all these things bring me to say that we will price in the right way to expand the market share, to continue to gain market share, like we did in the past. Now it's 9 consecutive quarters that we are gaining market share and maintaining our industry-leading margin and our industry-leading profitability. Thank you. Lixi Yuan: Thank you, Luca. The next question is from Cherry Ma from Macquarie. So this is on smartphone. She's asking the smartphone outlook for 2026 and what is our strategy for new product launches and the pricing given the component price increases? And what's the market to focus on given emerging market demand would tend to be weak when phone prices go up? So can I invite Sergio to address this question? Sergio, please? Sergio Buniac: Yes. So thanks for the question. I think, I mean, no different than what Luca mentioned. I think, number one, we expect the market next year to go single digit, a little faster in value for the price adjustments. We are not changing our strategy. So we have been 9 quarters premium to market. I think in the last few years, it's not the first time we see component pressures. We have navigated those cycles very efficiently given Lenovo supply chain position. Our strategy continues the same. I mean we are going to double down in double-digit market, share markets, continued expansion in B2B that is growing double digit, and we will continue to accelerate premium. We believe the premium devices will be a little less affected by the component costs rising. Our Edge and Razr franchises are growing 28% year-over-year. We continue to see much faster growth in that segment. And we are now further investing in the [ $400 to the $700 segment ] and above [ $700 ], you'll see some announcements. We also will continue to double down on ecosystem. It's a fast-growing segment for us, and not less important to continue to invest in monetization. Now market-wise, we are more diversified now. So we believe our footprint is not -- we're not going to change. We are seeing strong growth in markets like India, Japan, Italy, Middle East, Latin America, North America. So I think the footprint is appropriate for what we see ahead of us in the next 18 months. But our expectation is to continue to grow premium to market in the next quarters. Lixi Yuan: Thanks, Sergio. We've also got another question on SSG. So how do you capture opportunities in hybrid AI infrastructure, both in and outside of China? And what medium-term targets do you have for managed AI compute under TruScale? Yes. Ken, would you like to address this question? Kin Hang Wong: Yes. Thank you. Thanks for the question, Jim. Well, so when we look at the deployment of AI, and there's a lot of customer feedback in terms of key consideration, right? I mean those key considerations are cost, latency, sovereignty, privacy. And that's why I think our hybrid AI strategy resonate a lot with our customers. And also, as you can see, it's proven in our performance. So that's number one. Number two, that is why we introduced the hybrid AI advantage, which is basically 3 important components. One is about the AI factory. Second is for the AI factory to power the solution, the AI solution for our customer. And lastly is to put together by all these things by our AI services in order to help our customers to accelerate their AI journey and help them to achieve the fastest time to token, right? I think this is so important in AI deployment and also getting ROI out of it. The other thing that we focus on is that there's a lot of requirement on agility and flexibility. And that is why when we put the TruScale as a service on top of our AI factory, I think that is even more resonate with our customers. So with that, if you look at the market and especially on our performance, I think this part of the business is actually growing much faster than the overall market. If you look at the overall IT services market, it's growing at about low single digit, but this part of the business is actually growing at double digit, and we are for sure much faster than the market. So thank you for your question, Jim. Lixi Yuan: Thanks, Ken. So previously, we've also got a question from Randy from UBS asking, can we sustain the strong growth and margins on SSG? And moving forward, are we considering separating the warrant business? Would you like to take this question, Ken? Kin Hang Wong: Well, thank you for the question. If you look at our business, I think there are 3 parts of our business. One is definitely the attached business, right? The attached services is basically to make sure to elevate and enhance our hardware experience from pocket to the edge to the cloud. The other part of our business is an extension of the attached business, right, into managing all the hardware and software and services in the workplace, which is digital workplace solution. Second is based on our compute leadership, right? We help our customers to build hybrid cloud. And lastly is the sustainability business. I think this is one of the most sought after all over the world, right? And the last part is our AI services, which is, as I answered earlier on, this is what is every customer is asking for. But when I look at all these businesses, they're actually interrelated, right? If you look at AI services, I think it's AI are all powered by hardware, powered by compute, right? So you need to make sure you have the world-class hardware as well as the world-class experience in order to deliver AI ROI, right? So my point of view is it has to be integrated and each part of our business plays an important part of the overall AI solution. Lixi Yuan: Thank you, Ken. The next question also comes from Leping Huang from Huatai Securities. It's on our Alat strategic partnership. So could you share a timeline for the MEA manufacturing hub coming online? And when can we expect material financial contribution? Can I invite Winston, our CFO, to answer this question? Winston, please? Shao-Min Cheng: Sure, thank you, Lixi. Thank you Leping for the question. I think in February, our Chairman, YY actually went to do the opening ground ceremony. And last month, he also visited the Saudi and saw now a group over a very well developed plant. So I think I personally was there as well, very much amazed by the progress. I think this is even fast for China standards. So amazing progress in the foreign land. The plant is one of the most complete for us in the international market. We will have desktop PC, mobile and server. So one of the most complete plants that we have in our supply chain. In terms of the timing, we'll start testing next month with volume production really by the middle of next year. I think we are doing quite well in the business, particularly in the PC space, where we have a #2 position there and really continue to gain. And so I think from that basis, we're looking to expand our business there by way of server and also mobile, where we will now have a more focused opportunity. So a lot of dialogue, a lot of excitement for our plants, which have been recognized locally there as the most complete end-to-end manufacturing, not just simple assembly. So I think we expect to have quite a bit of traction and market expansion opportunity with the made in Saudi products coming out. Thank you. Lixi Yuan: Thanks, Winston. We've got more questions on ISG. So can you update us on the ESMB initiatives on ISG to drive profitability improvement? And how much should we factor offsets from the component cost? This question is from Randy Abrams from UBS. Can I invite Ashley to answer this question? Ashley, please? Ashley Gorakhpurwalla: Sure. Thank you for the question. Maybe I'll also address the general server market as well as part of that. Today, we're experiencing strong momentum in the ISG business. That's mainly driven by accelerating demand for AI infrastructure, various new customer engagements and also definitely our unique dual CSP and ESMB strategy. And we think this momentum will provide a strong foundation for our commitment to long-term sustained profitability in our ISG business. If I elaborate in CSP, we're seeing our industry-leading scale and our unique Lenovo R&D deliver strong growth across the customer base of hyperscale to now emerging neo cloud AI providers. And in ESMB, we saw a solid 30% year-over-year revenue growth, reflecting much stronger than market momentum. This is driven by our focus on new transactional models, commercial AI growth and Lenovo's high-performance infrastructure portfolio. We saw Lenovo's AI server growth at high double-digit year-over-year. And we are really proud of the growth in our Neptune direct liquid-cooling solution, which grew well over market at 150-plus percent year-over-year. So for all the reasons that YY mentioned earlier, we believe the server and data center infrastructure market will expand over the next year by high double digits in year-over-year revenue in the CSP segment and by high single-digit percentage year-over-year in the ESMB segment. We remain very optimistic that the compelling value of our AI portfolio and services continue to drive our ISG growth momentum and improving profitability. Thank you. Lixi Yuan: Thank you, Ashley. We've also got some follow-up questions on the general server demand in calendar year 2025. And how do you think the general server demand will trend into the next calendar year? This is from Howard Kao from Morgan Stanley. Perhaps if you can give a little bit more color on the general server demand side. Ashley, please. Ashley Gorakhpurwalla: Sure. Thank you for the question. As I said earlier, I think if we segment the server market through our lens of CSP and ESMB, we believe we'll see continued high double-digit growth in the CSP segment and high single-digit growth in the ESMB segment, which would include for us general server marketplace. What we believe that as YY mentioned, AI democratization is a very compelling transformation and productivity enhancement for our customers, along with our capability to deploy in a very quick manner with our services capability. And we think this market remains impacted by AI going forward. And so we remain optimistic that the general server growth in the marketplace that we see this year will continue in the next calendar year. Lixi Yuan: Thanks Ashley, great answers. For AI PC, we've seen some interest from analysts and investor communities. So Lenovo appears ahead in AI PC penetration versus our peers. So what is the strategy driving this competitive edge? And how durable are these competitive edge to us? This is from Jim Au from DBS. Can I please invite Luca to answer this question? Luca? Luca Rossi: Thank you. Thanks, Jim. So I will say we definitely have been working hard to build our AI PC franchise. And currently, as you probably know, we are the #1 in Windows AI PC with over 30% of share. I would say that the current results come from our innovation capability, combined with time-to-market, combined with the best-in-class cost structure and then our operational excellence and our unique, what we call Global/Local business model. So I think all these advantages that I mentioned, they are structural and they will continue to serve us in the future. But additionally, we are also not standing by, and we look forward to what will be the new AI native device era. And here, we will leverage our unique position for the breadth of our offering, PC, tablet, smartphone, IoT devices, all part of a single ecosystem driven by our vision of One AI, Multiple Devices. So on this front, you will see us doubling down with new innovations, a lot of new innovation coming at the Tech World at the Sphere in Las Vegas coming soon in January 2026 during CES. So I believe that this innovation -- new innovation will also serve us to help us to solidify our competitive advantage. So to be frank, our ambition is to continue to expand our market share above and beyond where we are today while expanding profitability at the same time. Thank you. Lixi Yuan: Thank you, Luca. So back to ISG. We don't really break down the CSP and ESMB, but what is Lenovo's expectation on the growth rate in these 2 segments in the coming 2 years? So this is from Robert Cheng from Bank of America. So actually, we've also got additional question from Jim Au from DBS and asking how do we capture the ISG opportunity through our Neptune liquid cooling service. Perhaps you can help address these 2 questions, Ashley. Ashley Gorakhpurwalla: Thanks for the question. As I said earlier, I think we remain pretty optimistic that the democratization of AI through both personal use and use by enterprise customers is a very compelling reason for our customers and what they tell us to drive enhancements in their infrastructure. And so we don't break out, as we said, our segmentation revenue. But we see double-digit and high double-digit growth in the CSP market that we serve in that segmentation and high single digit in general or the ESMB space as well, mainly driven, of course, by many workloads with AI really becoming one of the most important workloads that our customers are deploying. We believe that one of the factors in AI deployment for all customers, enterprise, small and medium business, global hyperscale Tier 2, it doesn't matter. It's really making sure that power consumption and the efficiency of power usage and cooling remains a factor within how they deploy, how they use, what they can afford. And so this is where a multi-decade development of industry-leading direct liquid-cooling and water-cooling system, Neptune, which we're now on our sixth generation of development of has become a very important engagement with our customers through services and capability. We believe that we've helped the most customers in the industry convert data centers over from air cooled to liquid cool, and that's reflected in our very, very high growth rates going forward. We continue to invest in the business and in the R&D and technology on behalf of our customers. And so over the next 2 years, we believe this will become one of the dominant factors in choosing Lenovo AI infrastructure going forward. Lixi Yuan: Great. Thanks a lot, Ashley. Next question is on our smartphone. So what is our smartphone AI strategy in leveraging Lenovo's strong PC installment? What is the current monetization road map for Moto AI? Sergio, can I invite you to answer this question, please. Thank you. Sergio Buniac: Thanks for the question. Well, our strategy, One AI, Multiple Devices, so full leverage across Lenovo AI capabilities. Our mobile monetization strategy is anchored in providing our customers a differentiated and integrated experience, which will drive growth for the business. So our approach links devices for multiple partners, Microsoft, Google, Perplexity, many others. And these efforts are fully integrated into the group AI strategy. So we believe the cross-device experience is going to be the key differentiator for our solutions in the future. Now in terms of monetization, we are looking to the device value uplift. So AI features drive premium attach rates, AURs and volume increase, preloads and ads and of course, very strategic AI partnerships with shared revenue. So a lot happening, and a lot of leverage from the broader group, and our vision is fully integrated with One AI, Multiple Devices. Lixi Yuan: Thank you, Sergio. We've got one more question on ISG. So in AI servers, you talked about the AI inferencing being a significant market opportunities. What is Lenovo's strategy to capture the potential growth upside? Ashley, would you like to answer this question, please? Ashley Gorakhpurwalla: Thanks for the question. In addition, as you mentioned, with the inference being a significant market opportunity, we think we're only in the beginning of that market opportunity. We see through our -- especially through our CSP business, we're able to work with customers on foundational frontier model training, and we're beginning to see the move into production AI models, agents and capabilities into the enterprise, which requires a focus on inferencing services capability and infrastructure. As an example, today, our recent addition to the portfolio of the NVIDIA RTX 6000 Pro family across, for instance, today, we're delivering on our ThinkSystem, SR675 V3 and the SR658, V4 has already become a significant portion of our AI server demand and delivery. And so we expect as we continue to build out the world's best inferencing capability, as Ken said, really delivering time to token that this becomes a very important part of our business and of into our customers. Lixi Yuan: Thank you. We've got one more question. So on the overall outlook, it's from Randy Abrams from UBS. How are our business tracking into the year-end? And what is the initial view for first quarter versus our normal seasonality? I think with this question, I would like to invite our Group CFO, Winston, to answer it. Winston, please? Shao-Min Cheng: Sorry, the question is -- can you just repeat? Lixi Yuan: The overall group outlook into the year-end. Shao-Min Cheng: As stated earlier, and I think we reaffirmed today by our business leaders, I think we are reaffirming what we have in the Street estimates even prior to the recent changes by some of the analysts, in particular due to the DRAM cycle. So we continue to see strength in the order, particularly for PCs, as Luca mentioned earlier. So we are confident of the estimates out there. I think they may be slightly lower, but haven't tracked in the past few days given some revisions in the target price, but maybe not the estimate. I don't -- this part of me I have not changed the check. But I think overall, we are reaffirming what we had outlook a couple a month ago or even before. So I think consistent with the [indiscernible]. Lixi Yuan: Thank you very much. I think for the next question, we would like to invite Luca to answer. This is from Goldman Sachs, Verena Jeng, and she was asking if there's any plan for AI or AR glasses or new devices outside of our existing portfolio. Luca, would you like to give a few comments on this? Luca Rossi: Sure. So as I alluded before, we are not standing by. And obviously, with this AI revolution that is in front of us, we are getting ready for that. That includes more AI native devices, more AI sensing devices. But of course, today, I will not launch or announce anything, but I will invite all the analysts to follow us at Tech World in the Sphere in Las Vegas, in January. We -- that will be the beginning of a journey where AI ecosystem -- One AI, Multiple devices, will be at the epicenter. Thank you. Lixi Yuan: Thank you very much, Luca. It's an exciting journey ahead, and we're very looking forward to our Tech World next year. So this is the end of our earnings announcement and webcast, and thank you, everyone, for joining this webcast. Thank you. Goodbye.
Fani Titi: [Audio Gap] So before I start, let me just thank all my colleagues for the contribution they make in looking after our clients. Because we're going to be talking a bit more today about our growth plans in the second half of this presentation, I thought to start off with our strategic positioning. As you know, we have always been a business that is not everything to everyone. We have select clients that we serve in fairly narrowly defined markets. And it is really important as we embark on a path of growth that you understand that we will be evolving naturally the model that we have been following all the time. As you know, our model is based on the fact that we support our clients on their journeys, both as personal clients and as business clients. and we tailor solutions to the needs that they have. And these solutions are delivered with a high touch and a level of service that we generally refer to as out of the ordinary. So as we think about the next number of years going forward, that is the lens through which we will look at what we are trying to do. We're very pleased with these results given the environment that we're operating in today. And as a business, as we look forward, we have a level of excitement, enthusiasm and energy that we can do more for our clients. And we will have the opportunity in the second half for some of my colleagues to present on our offering to the corporate mid-market. Really excited to hear what they will have to say. At the final year results in May next year, we will present our proposition to enhance our offering to our private clients. You know that we presented a comprehensive strategy for growth in May. We are now starting to unpack elements of that strategy. And hopefully, you will find that interesting and meaningful. As the last point on the slide shows, this is a business focused on building. this is still the slide. I'm still on the same slide. Is this what is on the screen. See I've got 2 slides in front of me. And I'm talking to the right-hand side of my presentation. So the last point on that screen, which is what I'm talking about in terms of our strategic positioning, relates to the posture of our business for the next 3 to 5 years, a business dedicated to disciplined growth. Okay, Nish, I'm going to do this click. Good. Nish is going to take you through the results in great detail, but I would like to give you some basic highlights on these results and some key takeaways. We are very pleased that we are reporting a growth in adjusted earnings per share of 2.5% to 40.5p. We're also quite pleased that we've seen significant activity in our clients, and this is evidenced by the growth in net core loans and advances, the growth in deposits and the growth in funds under management as represented by the second set of graphs. So our client franchises are deep and our earnings are diversified in nature. Capital generation has continued to be strong, and this enables us to reinvest in the business. The reinvestment, for instance, in our corporate mid-market franchise, the reinvestment in our platforms as we modernize our estate is by an example of the strong capital generation that we have. And in addition, we are able to reward our shareholders with distributions. You will know that in this period, the Board has declared a dividend per share of 17.5p, and we also have undertaken a significant portion of the share buyback program that we announced in May. So capital generation is really quite important. And the last set of graphs on the right show that our return on equity is well anchored within our medium-term targets. The presentation today will talk about how we move from circa 14% to the top end of our range of 13% to 17%. If you look at the next slide, our pre-provision adjusted operating profit is slightly behind at GBP 527.4 million. As I've indicated, we have very good client activity. So our net interest revenue was very strong in this period, but we had the effect of lower interest rates on our endowment. And so, our net interest income was negatively affected by that. As indicated, we are also investing heavily for growth as we move forward. Our cost-to-income ratio at 51.9% is below our indicated range of 52% to 54%. As we look forward, we've indicated to the market that we expect to be in this range even though we will continue to invest in people and technology, firstly, to support our current revenues; secondly, to transform our operating platforms; and thirdly, to invest in the growth initiatives that we have spoken about in May. Our credit loss ratio at 35 basis points is in the through-the-cycle target range of 25 to 45 basis points, even though interest rates from where we stand are still relatively high. We would expect over the next 12 to 18 months that we will see a continued reduction in interest rates, even though that may be at a pace that is slower than we would like. Very happy with the return on tangible equity at 15.7%. And of course, the increase in our tangible net asset value per share of 7.4% is very pleasing in our view. Not going to talk to this slide on our commitment to our path to net zero by 2050. As expected, you don't have changes in this particular slide from period to period. This is a long-term commitment towards reducing our fossil fuel exposures, driving sustainable and transition finance activities and promoting within our client base a movement towards being more sustainable. So you shouldn't expect changes on this slide at every reporting period, but it is important that we indicate that we remain committed to our path to net zero by 2050. Now to unpack the results, I'm going to ask Nishlan to take us through the rest of the results presentation, and I will close off at the end. Nish? The slide on the right is the next slide. Nishlan Samujh: We got it. Thanks, Fani. I'm just going to spend a little bit of time to give you some of the context that we operated in, give you some detail about how we've performed geography as well as across our businesses. So if we start with the context, and we had a debate when we produced this slide as to exactly how you calibrate 1.5% and 1.1% because these numbers are still relatively low in terms of growth. But I think that the direction is extremely important. If we look back into 2024, we were all talking about the election environment and the fact that most of the world will be in a state of flux, in a state of change. And I think we're through that particular cycle, but the consequences is what we continue to live out. And those consequences has a bearing on how these projections actually move out over time. And it does really feel like we're moving into territory, where that's becoming a lot more clearer, albeit that there are still pockets and pockets and pockets of uncertainty that sits in the system itself. Interest rates interestingly have been on a path that's reducing. And if we spoke to you, again, a year ago, we would have probably have expected these graphs to have a sharper line down, and that's not the reality because at the end of the day, some of those uncertainties and particularly the implications around inflation has been tightly managed across the world. But that being said, we are definitely in a reducing interest rate environment. And in fact, from a South African perspective, the debate around setting the inflation target closer to 3% with a 1% [ flex ] around those numbers really will encourage these numbers to get towards 8% from a South African context. Now I'm not sure when we last heard those sort of numbers in a South African context. The rates have been coming down from a U.K. perspective, but probably similar to South Africa, yes, we see it down by 1% year-on-year, but that rate of reduction is still relatively slow. And it's because of these things, we continuously have indicated that interest rate reductions will have a negative impact on our earnings in the short term. But as a business, we encourage and we really want to see a lower interest rate environment. And hopefully, what you will see in these results is the momentum that gets introduced, particularly in the non-interest revenue lines as we go through the detail. We look at exchange rates, the rand had a negative impact on our income statement as the average rates were a bit weaker in the period. And in fact, from a balance sheet perspective, we had a positive impact because the closing rates were a little bit stronger over the period. And off late, I think the rand has seen good support, particularly if you think that, that economy has now come off the gray list, and the fact that we've seen an upgrade from Standard & Poor's an upgrade that we hadn't seen for 16 years. And that, I think we should not underestimate. From a markets perspective, I draw your attention to the March '25 blip that you see on this schedule, and that's really where we opened this financial year with relatively weaker markets at the beginning. And since then, we've seen strong growth in markets, and you will see that in our AUM. But what we are also highly encouraged by is the record flows that we continue to see into our platforms, particularly in South Africa. Now looking at our earnings drivers. AUM for our wealth business in South Africa is up 13.4%, yes, 11.3% in neutral currency, and that's supported by net inflows for this first 6 months of ZAR 11.5 billion, a significant number. We also have acquired a few aspects and bolstered our Swiss platform, and that's added ZAR 5.2 billion of AUM and net inflows. Clients continue to manage their money. So from non-discretionary funds, we do continue to see some volatility in that. Rathbones reported GBP 113 billion of AUM, and that's really supported by stronger markets. They had net outflows. I think it was around about GBP 0.2 billion. But the business has been focused on the integration. And I think from our perspective, we see a business that has now really gone through the bulk of that and should shift to the front foot focused on markets and focused on flows. Net core loans grew by 8%, and I'll unpack that by geography on the right-hand side, and it's quite pleasing to see the green arrows around that particular wagon wheel. It's not a perfect market yet, and it remains a highly competitive market in a low-growth environment. And it's in this context that we produced these numbers. And that is also supported by the fact that we continue to grow our client pools, and we continue to penetrate markets deeper, but really holistically focused on what Fani has highlighted, which is to be pinpointed in terms of where we execute our efforts. Now, you reminded me of how this slide starts, so let's get it done. Adjusted operating profit was down 1.4% in the period, and let's look at what's driven that particular outcome. We see that net interest income has reduced by 2.1%. And again, when we speak of the short term, this is the impact that you will see in the 6-month measurement is that low interest rates in both South Africa and from a U.K. perspective has had a negative impact. However, in certain instances, we've managed to navigate that really supported by the fact that we continue to see book growth across our platforms, albeit at competitive margin levels as well as improving the cost of money across our businesses. Non-interest income has largely neutralized that drop in net interest income, and that has been supported by strong fees and good investment income over the period. And that's momentum that has come into the system as well as the fact that we've seen stronger advisory fees in this particular period. Our impairment charge has dropped from 42 basis points last year to about 35 basis points in this period. I would say the real outcome is a very similar position to what we saw at the end of March. Asset quality remaining robust across our businesses. We do have some experience specific impairments, but we don't see any trending in any of our portfolios that causes any particular concerns for us. I think as we introduce our strategies around, for example, corporate mid-market, we are very mindful of the fact that in that particular market, you may have higher levels of impairments supported by higher margins. And at the end of the day, we will talk about those probably next year when we unpack some of that detail. Operating cost is up 1.5%. So you may think that we've really, really cut our costs. But the reality is that we've -- when I unpack the detail around that, firstly, variable remuneration is lower in both geographies, and that's a function of determining the variable remuneration based on economic return, as well as the competitive environment that we operate in, but really following profitability in the different businesses itself. Fixed costs are actually running well ahead of inflation, and I'll get into some detail around that. And the way we look at fixed costs is what does it cost us to run the business as it stands. And those costs are running at around about 1% to 1.5% ahead of inflation as we absorb some of the costs that have come into the system in both geographies as well as other service costs and the fact that we've -- although tightly managed headcount, we still have increased headcount to service the business overall. And I'll unpack that for you in some detail. And the second area that drives costs is really the implementation of systems and processes that will support our growth initiatives. The third area is to continue to build resilience in our business and to continue to enhance and modernize our platforms. So those are the 3 areas that we continuously monitor across the business with the cost-to-income ratio at 51.9%. From a technology perspective, one day, Lyndon will present this, and I'll get over the nervousness. But at the end of the day, it comes back to what we said. We continue to modernize our platforms and a lot of that modernization is actually in the run rate. We've given you a range of our cost-to-income ratio of between 52% to 54%, and we remain confident that we will maintain the run rate around that. We have very low capitalized software and some may criticize that as the fact that we may be transitioning at a slower pace, and you will see that number pick up as we invest in our platforms, but again, not an overly material number on our balance sheet. Our overall technology spend at 20% of operating expenses, we think, is on par with the market. Yet we continue to invest in our platforms, modernize those and remain extremely mindful in an environment, where AI becomes a lot more relevant, the counterbalances around things like cyber and the rest of it become more acutely important for us to keep a handle on. So getting into the divisional reviews. From a geographic perspective, we have produced GBP 230 million from our U.K. business for this half. You will see that our contribution from Rathbones appears significantly up at 18.2%. And that is a function of the fact that the business has achieved synergies of around about GBP 60 million of run rate in this period. However, if I take you back to markets, we started off with a very weak first quarter, and that was reflected in lower revenue for that particular business in the 6 months that was reported at the end of June. However, we have increased our accrual on the business because although the total shares in issue, we have effectively around about a 41.25% interest, there's a portion of those shares that are held within Rathbones that are not yielding dividends and therefore, should not be included. And in fact, if you take our number of shares and multiply it [Technical Difficulty] operating EPS, we get to accrual rate of around about 43%. And we have some catch-up in this period, which has accounted for just under around about GBP 4 million in that number. The Specialist Bank, I will get into some detail. Net profit is really in line with the prior year. Group Investments represents the dividend on the sort of 10% stake that we hold on Ninety One. With Ninety One effectively combining with the Sanlam platforms, we expect that stake to drop to about 8.5% on the bigger platform itself. That business announced their results recently and have grown their dividends by 11% year-on-year. Group costs are down. As we indicated, it will reduce to some extent. And we think it's at levels, where that probably operates at. Looking at the Specialist Banking business, yes, we did see net interest income reduced by 5.8%. That's in the context of strong growth in terms of our lending books, but the decrease in interest rates in the short term will have a negative impact. When you look at the market, some of the banks have defended that well in this particular cycle because of the larger structural hedges that they have in play. But our mix of our deposit base, we are not in a position to have those levels at this point in -- at this particular position. Net interest -- non-interest revenue grew by 11.4% in the period, really underpinned by strong growth in fees, to some extent, lower opportunities from balance sheet management and other trading activities. And again, hopefully, you have seen that the introduction of momentum into the business in those lines as well as seeing higher listed advisory fees in the period. Our cost-to-income ratio is marginally up at 53.3% with fixed costs growing at 7.3%. As I've indicated, our run costs have probably increased by around about 4.2% to 4.3% and the differential is the cost that we are incurring as we continue to invest into our platforms. And looking at the credit loss ratio for this period at 56 basis points. We think it will remain in that sort of ballpark as we look forward to the year-end as we still think -- we still see the impact of interest rates that, that has on these higher levels. But as you can see from our staging, the book has remained relatively stable over the period, and I've clearly indicated that we see no trending to call out to you guys. I've really unpacked Rathbones from an earlier conversation, but these are some of the key numbers. And I think it's worth calling out that the business remains focused on delivering a trajectory towards a 30% operating margin by the end of 2027 financial year. Now moving on to South Africa. Here, we see total operating profit reducing to -- by 2.6% to ZAR 5.7 billion. And if I unpack the numbers, you can see where the sensitivity in that reduction is in group investments, and that's really a listed stock that has gone up and down in these markets. Overall, you will see that the group investments layer will continue to be less relevant, as we continue to realize add value that remain -- those remaining investments. The Wealth and Investment business grew by 2.1% and the South African Specialist Banking business by 2.6% with group costs remaining relatively steady. Unpacking the Specialist Bank, Here, we saw net interest income increase by 6.5% in the period, really a function of continuing to challenge the cost of money and the cost of deposits. And to some extent, we are starting to see good momentum in our corporate mid-market deposit gathering capability, which will continue to enhance the net interest margin in that particular platform as well as the increase in core loans and advances, but we had to absorb obviously lower interest rates on our net surplus cash positions that we hold. Non-interest revenue decreased by 2.1%, and that's really a factor of lower trading income and lower client flow income in this particular period, offset largely by higher fees for reasons that I've already effectively identified, and that is increased activity in our equity capital markets, advisory activity as well as in the private banking business itself. In this business, investment income has held up relatively strongly. The cost-to-income ratio is also slightly up at 47.4%, but well within the 49% to 52% that we indicate as the long-term sort of level that this business operates at. Here, operating costs grew by 10.2%. And from a run perspective, those costs have grown by about 5.8%, absorbing inflation, absorbing a weaker rand and the fact that you also do have some foreign denominated costs in this particular area. The differential, again, being supported by areas of focus on implementation of strategy. The credit loss ratio is at 12 basis points. So it remains relatively low, and that talks to the quality of the book and the experience of the underlying book. Again, if we look at the staging, the fact that we have seen some curing of Stage 3 assets in the current period, talking to the fact that the quality of the book remains very robust. We are very proud of the performance of the wealth business in South Africa. The business continues to have a very strong and high integration with the private banking business in South Africa, and that's really our private client offering in that market, distinctly positioned with our offshore capability and the fact that we are deeply servicing that particular market. I think the operating margin is slightly tighter, but still very healthy at 30.5%. Now this slide, we debated on whether we should pull it because there's a few red blocks on this slide. But hopefully, you can see at the bottom of the first 2 red blocks, they're actually green in rand, and that's really the impact of the slightly weaker exchange rate in the period. And group investments will continue to become less relevant, but with some volatility because we have a listed position in that. And from a U.K. perspective, underlying profit growing by 3% and in fact, closer to 9% when we factor in tax and the cost of AT1 instruments, as we've removed some of the double cost that was in the system last year, having redeemed some of those instruments. Return on equity and return on tangible equity remaining market comparably strong across the businesses. This is for one of the analysts that asked us to reconcile operating profit to adjusted earnings. And again, I've called out the factors that apply. So I'm not going to spend too much of time on it. And that's a summary of the numbers that we've spoken about, and you can see that our average allocated equity at GBP 5 billion. So that's me. One more slide, Fani, 2 more. Net asset value and tangible net asset value on the next slide, but Fani has gone through that detail. And the last point I'll talk about, Fani, it's now your time, is that capital has remained robust. We have adopted Basel 3.1 in South Africa, and we'll see those capital ratios come down a little bit in the next -- by about 2028, but we have maintained high levels of capital to absorb those. And from a PLC perspective, the ratios are extremely healthy. Now, it's time for you. Fani Titi: Thank you, Nish. You can see that Nishlan is playing some games with me. He says he's done. And with that said, he says he's not done. I hope in the presentation, you have taken away the sense of a business that is performing as we expected in these markets at a headline level, as Nishlan indicated, I'm okay to you. At that level, we have had a relatively strong NII performance, the effect of lower interest rates and continued investment in our business, as we indicated to support current revenues to support the modernization of our estate and to support the growth initiatives. So for us, we feel that we're building for the long term, and we're excited about that as a path going forward. So as we look forward to the full financial year, we will expect the performance in the second half to be generally in line with the first half performance that we have reported here. We still operate in a tale of 2 cities. The South African economy is in a slightly better state, as Nishlan may have indicated, growth forecasts are being revised upwards. We've seen a credit rating upgrade, albeit that we are still 2 notches below investment grade, but the direction is great. We have seen the removal of the country from FATF, the so-called grey list. And as we -- the country hosts the G20, we have seen a greater interest in intra-Africa trade and the commitment by the leaders to open borders and to facilitate more trade. So that economy is looking a little better. In the U.K., while the economy is still constrained, given some of the uncertainty around the fiscal space, and in fact, we are waiting with bated breath, the budget speech by Rachel Reeves next week, we still see a higher level of uncertainty. What we did obviously will be policies that support growth and investment and obviously, policies that do not punish those that are successful and are creators of wealth. That is what we would hope for, what we get is that obviously is what we're all waiting for. So given that macroeconomic picture in the 2 largest geographies, we do expect that ROE for the full year will be at around 13.7%, as I said, in line with the current ROE. SA will be at around 18.5%. We have a target range of 16% to 20% for SA. For the group, we have a target range of 13% to 17%. And for the U.K., we have -- we will expect ROTE to be around 13.6%. Nishlan has spoken quite extensively about costs. We do expect that despite the investments we're making, we should still be coming through in the 52% to 54% range. Credit loss ratio still to be within our through-the-cycle range of 25 to 45 basis points. Again, as Nishlan indicated, we would expect this to improve as rates continue to go down, client activity increases. So essentially, in a diversified model, where you have net interest headwinds, you would expect over time that client activity should improve and that your credit loss ratio equally should improve. And obviously, we have a significant wealth businesses that contribute noncapital-intensive revenue. So we're well positioned to manage the complex external environment. And in addition, we are committed to supporting our clients as they navigate the uncertainty that is in the economic environment. So in conclusion, we remain excited about how tightly our business is focused in the client segments that we target. We are excited about our continuing entrepreneurial culture, where we can flexibly serve our clients in a tight environment and our clients are resilient. They have scale and -- sorry, our client franchises are resilient and they have scale. So as we continue to invest and build, we would expect that we will see even better scale. I spoke about the strong generation of capital to continue to invest in our business and to continue to reward our shareholders with distributions. The presentation that will come shortly is a presentation about the future, about the investments we're making and about how we're expanding our overall franchise. As Jay Neale has said last night when we had a leadership meeting, the business is focused on what we can build. The external environment is where it is. We have to back ourselves to execute on the opportunities that we have ahead of us. On that note, that's the presentation. We're happy to take questions. I think we will start off here in London. Is that the way we do with [ Cue ]? Cue has been conducting how we go about. So I have to look at the employee structure. Any question from London? Fani Titi: Okay. It seems like we don't have a question here. So we'll go to Johannesburg, where Cumesh is holding fort. Cumesh has been wining and dining precedents and to the high heels. So Cumesh, if you can be with [ mortals ] like us for about 40 minutes or so. Any questions from Joburg? Cumeshan Moodliar: Thanks, Fani. I'm just checking in the Johannesburg room if there are any questions. No questions from the room in Johannesburg. Fani Titi: Thanks, Cumesh. I am tempted to give a chance in London again, but Stephen advised me some time ago, don't over offer opportunities for questions. So in respect to the elders, I will bring this particular presentation to a close. Online. Okay. No questions in London, though. So let's see what we have online before we close. [ Don ], do we have anything online? Unknown Executive: Fani, we have a few questions online. The first question is from Radebe Sipamla from Mergence Investment Managers. Could you please comment on the reports this week that Investec would be partnering with Pepkor to help it with launching banking services across its store footprint? Is the SA retail banking strategy pivoting towards being more mass focused? Fani Titi: I have tried throughout this presentation to indicate that we remain a niche player. We have select client segments that we serve. And as we go into the next presentation, you will see why that is the case that we can win in the corporate mid-market because we are not trying to be everything to everyone. So in short, we do not have any agreement executed with anyone. And we will not comment on any of our clients and any discussions that we may or may not have as we go forward. Needless to say, inclusion, financial inclusion within the South African context is something that a lot of players are worried about. And we continue to see what role we can play in that market, but nothing of significance. I understand that the client you're talking about has also said categorically that they are not in any such bank partnership. Unknown Executive: The next question is from Baron Nkomo from JPMorgan. Customer deposits increased by 3.6% annualized. Please discuss your funding strategy, both in South Africa and the U.K. going forward, especially in light of the changing interest rate environment. Fani Titi: Okay. I'm going to ask Cumesh and Ruth. They've had such an easy ride today, so they're going to have to answer. Let's just say it quickly this way. One of the critical reasons why we want to go into the corporate mid-market is also to expand our deposit franchise and have access to transactional deposits. We have been gathering retail deposits at a significant pace. And within the South African environment, we have been improving our liability mix, reducing reliance on corporate deposits and obviously getting a much more optimal funding base. That's why as much as interest rates have decreased there, if you do more work on our margin, you will see that we've been able to defend some of that margin. And in the U.K., we have a wide distribution network in terms of how we access deposits. But let me leave it with Ruth first and then Cumesh next. Ruth Leas: Good morning, everyone. Thanks very much, Fani. We are always looking to optimize our overall cost of funding. You will have seen, if you look through the analyst book this morning that our loan-to-deposit ratio looks very healthy at around 81%. In the recent period, we have repaid our TFSME, and that's why you see the level of deposits where it is. We are seeing the overall cost of deposits reducing as interest rates are coming down, and we'll constantly be looking for opportunities to reduce our overall cost of funds. Very comfortable with where we positioned our funding, continue to keep our sources well diversified in multiple different markets, and the Investec brand has very good traction in the U.K. deposit market. Fani Titi: Thanks, Ruth. Cumeshan Moodliar: Thanks, Fani . I think you -- just in your opening, you covered a fair bit of the deposit strategy in South Africa and funding strategy in South Africa. I think safe to state in the period under review, we were able to grow our non-wholesale deposits by close to 10%, and that's part of a very clear funding strategy to continue to grow retail deposits and continually balance that against wholesale deposits. So I think our funding channels, particularly in our private bank and other areas, including our corporate cash management channels, have all been quite successful in raising retail deposits. We're excited about what can be achieved in the corporate mid-market over a period of time, and we've already started to see how that business is getting on to the flywheel of deposit raising. So a very clear strategy in South Africa. The team have been working on it extensively over the period to continue to ensure that we have the right balance of funding mix to support the growth of the business going forward. Fani Titi: Thanks, Cumesh. I know that about a year or 2 ago, some people were worried that our overall deposits looked like they were going down in SA, but it was really the wholesale side, and it was part of our strategy. So thank you. And may you continue to be successful there. Unknown Executive: A follow-up question from Baron Nkomo of JPMorgan. The cost-to-income ratio increase also reflects investment into people and technology. Please elaborate on the nature of these investments and how quickly you expect them to translate to revenue and efficiency gains. Fani Titi: The question is probably not as accurate as it has been stated. If you look at the full year cost-to-income ratio to FY '25, our cost-to-income ratio was 52.6%. So the current 51.9% is actually in line and in fact, better. Of course, relative to the September number last year, which was about 50.8%. If memory says well, it looks like it has increased. So we're very comfortable with where that number is and our efforts to continue to run efficiently. Nishlan tried to explain the 3 areas of cost, one being the normal run, where we are just over inflation and then the investment in the modernization programs. We would expect that in the modernization program, quite a significant bulk of those investments should be done in the next 3 years or so. And the other will be probably 2 to 3 years thereafter. So the benefits will obviously come as you implement those investments and you complete them. And in some cases, you then do not run a parallel infrastructure. And obviously, with respect to the investment in the mid-market, we've given you a sense, and we will unpack it of what levels of revenue we may expect to achieve by 2030. And in the case of the U.K. corporate mid-market, because South Africa is a number of years ahead in terms of implementation, we will give you both a '30 view, but an FY '32 view just to give you a sense of the returns we hope to get from these investments. We run a highly disciplined process of investment, well governed by both the executive and the Board reviews that on an ongoing basis. And as Nishlan indicated, we have a very low level of capitalization on the balance sheet in terms of technology. I think the number is GBP 8.6 million or so. And as we go forward, given the investment, that number may increase. And again, in Nishlan's words, non-materially from the perspective of the overall balance sheet. Next, [ Donald ]? Unknown Executive: Thanks, Fani. The next question is from Chris Steward of Ninety One. Can you give an update on the cleanup of the South African group investments portfolio, please? Fani Titi: We're really at the tail end of that process. As Nishlan indicated, that number is getting to be non-material as we go forward. We have 2 or 3 investments. The largest investment you will know, Chris, and we continue to work with our core shareholder there to find ways in which we could achieve our goals. They are the smaller investments, some of them are in process, but we are not duly concerned about it. It's really something that is almost out of the system. That's why Nishlan says that number is getting smaller and smaller and largely irrelevant. Chris, you must be happy about that table Nishlan gave you, which has the cost of AT1. So Nishlan was referring to Chris. So now that he's online, I can talk to him. Unknown Executive: Thanks, Fani. The next question is from Harry Botha from Bank of America. Can you provide more color on the reduction in your 2026 U.K. ROTE guidance from 14% to 13.6%. Fani Titi: We've indicated that the environment continues to be constrained. I talked about a tale of 2 cities, where from a South African perspective, the sentiment in the economy is better, some upward revisions in the expected growth over the medium term. Clearly, the U.K., there is still a higher level of uncertainty, even though the opportunity for us remains quite significant. We've tried to explain the trade-off between net interest income impact as rates come down and the activity that we see, the increased activity that we see amongst our clients and over time, as those rates go down, an improvement in the credit loss ratio. So that is the interplay between those 2. We are not concerned about what in our view is a marginal decrease, about 2% or so percent in that ROTE. And from a market context, we remain very competitive, as Nishlan said. Unknown Executive: Thank you, Fani. We have a follow-up question from Harry Botha. Can you provide detail on the outlook for the South African fee and commission income? Fani Titi: Cumesh, do you want to bet on that? I mean, obviously, we're going to try to wrap this one up in the next 5 or so minutes at most because we do have a mid-market -- corporate mid-market presentation. Cumesh? Cumeshan Moodliar: Thanks, Fani. I think if we look at the period ahead, we see equity markets positive movement in equity markets. We've also seen higher levels of IPOs and M&A activity. So all things being equal, we hope to see an upward trend in terms of fee and income growth in the SA context, together with some increased trading activity. Fani Titi: We have a strongly performing wealth business, 13.4% increase in funds under management, [ ZAR 11.5 ] billion net inflows in rands. So our outlook on [ thus score ] is positive. Thanks, Cumesh. Shall we take just one last -- how many more questions do we have? Unknown Executive: We have one last question, Fani. The last question is from Jarred Houston of All Weather Fani Titi: [ Hoping you have many whole lot ] of questions there. Unknown Executive: He asks, why has the progress on the share buyback program been slow? Fani Titi: Well, we've executed about half of it. We're comfortable with the pace, and we will continue to execute as necessary. When we made the commitment, we said over the next 12 months. So achieved about closer to half at half year. So that's okay. Unknown Executive: Thank you, Fani. At this time, there are no further questions. Fani Titi: Thanks, Don and Cumesh. And to everyone that's attended, thank you for your attention. And, in particular to the analysts, thank you for your interest. As usual, we are available for more in-depth interaction on the results to provide more depth and color on the different aspects of it. We're going to now take how much time, Cue? About 10 minutes. If we could be back at the top of the hour. So in London, that will be 10:00 and in South Africa, that will be 12:00, and we're really excited to show you what we are building on the corporate mid-market side. Thank you very much and see you in about 10 minutes. [Break] Well, good morning again. And it's always -- it's noon in South Africa actually. It's always lovely to see the Zebra Gallup. And it is really appropriate for this next stage of the presentation because we are front-footed, excited about growth and energized to execute. I'm talking to the slide on the left, Cue just to make sure that I've got my orientation right. Just to start off, as you know, we are on a journey of disciplined growth, and we will cover but one element of the journey, and we will give you a sense of how that plays into the overall strategic path over the next 5 years or so. I will be joined on the stage by Nick Riley, our Head of Corporate Mid-market in SA; and [ Andy ]. I don't know how it happened that we all have the same ties, but let that be. So I'll give a brief overview of why this segment is both relevant and important for our journey as we go forward. And starting off, I will not repeat our strategic positioning other than to say that the whole organization is energized behind the objective of growth. And this is one element of that story. We started this journey in 2019, and we had a CMD presentation, if you remember, in early 2019, where we said to the market that we would like to achieve at least a 200 basis point improvement in the performance of the business as measured by ROE; and the key planks in that plan were that we would look at capital allocation particularly strictly with the intention of generating returns above the cost of capital. So as a consequence, we exited a number of businesses either because our risk appetite was a bit narrower or because we could not gain scale in those businesses. And while the restructure was an important part of what we did, we also invested in our U.K. Private Banking proposition. You may remember that at that time, we were losing about GBP 30 million a year on that proposition. And we decided to make an investment, and we have been able to execute on that growth plan. So as we engage on another fresh investment into an area, we are encouraged by the past successes over the last number of years. So we embark on this process with a lot of confidence about what the business can achieve. In May, we laid out a strategic path for the next 5 years or so. Just to go over it quickly without too much talk on it: The first idea was that we wanted to grow our existing client franchises. So we sought to deepen our franchises. We sought to scale them a lot more. And of the 200 basis points that we sought to gain in the upliftment of our ROEs, half of that would come from the scale and the leverage coming out of our franchises. The second area of work was the corporate mid-market, and we will talk about that later today. So I wouldn't say much. The third was the expansion of our private clients capability. We have an international franchise. We have, as we discussed earlier today, a leading franchise in South Africa, which is international. We have a capability in Switzerland and so on and so forth. And we have a strategic positioning in Rathbones post the combination of Investec growth and investment in Rathbones to gain scale and capability. So in May, we will give you a sense of how we will go about that. And then we also said that we will continue to exercise discipline in how we go about our business. Capital allocation would be important. And one plank that was really important at the time, we said we would like to increase the proportion of noninterest revenue and in particular, wealth-related revenue. And we gave you a number of about 35%, and we were specific that to achieve that objective, we will definitely consider inorganic growth. And the last element of that strategy was that we would intensify our efforts around creating a single organization that is client-centric, where we deliver for our clients holistically and our operating platforms will be such that we can support that single organization that is client-centric. We've talked quite a lot about the investment we are making in these platforms. Just to move forward, why would we go into this space? And some people would say it's late in the day, some would say it's a "highly competed for" a segment of the market. The reality is that we already have a significant presence in the corporate mid-market. Nick will go through the work we've done over the last number of years in South Africa, the level of revenues we are already generating about ZAR 1.7-or-so billion and the number of clients we have there. So this is an expansion of our capabilities to more fuller service -- our clients in the mode of One Investec. In the U.K., as you know, we've built a pretty good corporate mid-market capability, and we do a lot with our clients in that space, but we do not offer transactional banking and the fullness of the offerings that we have. So if you look at Investec and where we are, a leading Private Clients business, as we've spoken about, equally a leading Corporate and Investment Banking business in the markets that we operate in, and we already have a number of clients in the corporate mid-market. And we think it is time for us to get into this sector and to gain market shares that would appear small relative to others, but they would be consistent with our approach of niche markets and high levels of service and high-value proposition. So it's really important to understand that we're not trying to go very wide and deep into the market. We will still follow our DNA of select client segments, high-value relationships and deep commitments and partnering of clients. So how do we think we will go about in this environment? As I said, we will be bringing a niche-style operation, what we call a private bank service style to the corporate mid-market. And when we went down the journey of a private bank 5, 6 years ago in the current form, people said, but what would you really do that is different in terms of the market. And we have proven that our targeting was quite specific that our service model was quite specific as well, and we've been able to build a fantastic business with 8,000 to 9,000 clients, and we would be looking to get that to about 18,000 clients in the next 5 years. So we know how to build niche businesses. We know how to work with a private bank-style service, and we're bringing this to -- this particular segment of the market. As indicated earlier, the idea is to close the gaps in our current offering in the mid-market. In South Africa, we already have a significant presence and track record. In the U.K., as part of the group strategy, we are starting that journey. But given the advantages we have already, we are very excited about that opportunity. One of the advantages of coming in at this time, firstly, we are leveraging off our existing brand capability, our existing operating platform, but we can flexibly tailor integration of our platforms with those of our clients because technology is much more flexible. You don't have to build the way that legacy systems have been built. So for instance, API enablement in terms of being able to do something that's bespoke to a client. And because this is the approach we're taking, we are not looking at hundreds of thousands of clients or millions of clients, because you can't offer this level of customization and flexibility if you go mass market. In South Africa, we are looking at about 10,000 clients in this horizon. In the U.K., we are looking at about 1,000 clients. You can't do this if you are focusing on the broader market. And this is in our DNA. This is how we operate. I remember, I had a chat with a friend of mine who used to run a large bank in South Africa with more than 20 million clients. And he said to me, I cannot understand how of the 100,000 clients and the few corporate lines you have, you have built a business of the scale you have, the profitability that you have. But that's the DNA of being a niche operator with high levels of service with a level of flexibility to tailor solutions for clients. Lastly, we are going to be naturally evolving what we already have in terms of our franchises. We hear every day that those clients, private clients who have businesses say to us, why wouldn't you develop a capability to services because we love our experience with you. So this is a natural extension of the client franchises that we already have. In the mid-market, as we said, in the U.K., we offer a number of products from risk management-type products to lending products, but we do not have that glue that a transactional banking, full service mid-market corporate banking capability would offer. It is time for us to get in and build this business. So why this particular market? Obviously, a high-growth segment of the market and a really important contributor to economic growth in the markets in which we operate. We think we have the opportunity to build and scale a business that will contribute meaningfully to our business. The risk-adjusted returns in this sector of the market are quite attractive. In South Africa, the operators there are generating in excess of 30% ROE in this segment. In the U.K., I think the average is around 20% or so. And this represents for us a significant opportunity. We spoke earlier today about our efforts to diversify our deposit book and our funding base. This business is really quite important if you look at the performance of banking businesses in being able to access transactional operational deposits. We already have in South Africa, a significant deposit base. We will seek to grow that as we go forward. As Cumesh said earlier today, we are trying to diversify away from wholesale or too much reliance on wholesale deposits. So this is part of that overall strategy in building a deeper, much more differentiated and much more diversified deposit franchise. I've already alluded to the fact that technology makes it possible for us to springboard and to serve our clients flexibly. We probably wouldn't have been able to do this 5, 7 years ago because we were building other parts of our business. And I do not think that our operating platforms would have been amenable enough for us to put this additional capability onto it. So technology will give us an ability to move forward faster. As indicated already, we believe this is smack bang in the middle of who we are as Investec. So the strategic fit is really incredible. On this slide, and I won't read what our clients have said, the high-touch service model is really exceptional. And if you ever had the opportunity to sit with our private clients and for them to tell you why they choose to have us as their primary bank. And some of the corporate clients, we have equally do say so. So we'll take advantage of technology, and we will have the platforms that are competitive. But what will always differentiate our offering is that at the end of the line, you can talk to a human being, a very qualified human being who can solve for your problems. We get the stories about clients having issues at midnight in New York, and they can actually get their issues solved by calling into our client support center. This model works. We have seen it work over a long period of time. We're excited to bring it to the corporate mid-market. As I say, a number of the owners of these businesses are already our clients, directors of some of these businesses are already our clients on the private side, and we are excited to extend our service to them. How do we see the client value proposition? I mean, obviously, we're looking at -- we're already doing a lot of funding for investment in working capital that we do today. We will be able to do this with a level of focus and dedication that allows us to do even more for our clients. As indicated earlier, we have treasury risk solutions that we offer to our clients, whether you think about cash management, you're thinking about ForEx management that we do today. So we'll be able to help our clients optimize their returns and manage their risks by working with us in a partnership-type model. And that really is what is different about Investec. We are not a transactional bank in the sense of trying to do a deal and move on to try to do another one. We walked the journey. I spoke in the morning about our model being that of partnering with clients on their personal and private journeys. That's why for those directors of businesses, when we say to them, we now can offer you a full-service transactional banking, it makes sense for them to bring those business for those owners for whom we are already doing, for instance, wealth management, and we now have this capability that we can bring to their businesses. It's a fantastic market opportunity for us. So just expanding what we do for clients and going into the market with more services. Our clients are generally very active. So for us, we will be able to continue to advise them, but also to provide them funding to act on opportunities. In that space, being nimble, being flexible and being able to make a quick decision is actually more important than the cost of money, because our clients can take advantage of opportunities. We'll be able to do that in a more holistic way for the corporate mid-market, and we've been building over a period of time. Those who know our business well in South Africa will know that over the last number of years, we've concentrated on the payment space, making sure that we work both with regulators and with others to make payments a lot more easier and a lot more seamless. And to go into this part of the market, you ought to be able to handle a level of volume from a payments perspective for your clients, and we have been investing in that capability. And I've talked about the personalized engagement that we offer. And there's no doubt in our minds, is a huge distinguishing feature of our offering. So let's look at the growth and the proposition we are looking for in perspective. Firstly, we are not going outside of our term lines. We are still targeting fairly -- in a fairly limited manner. We're still looking to select clients carefully. The numbers we mentioned, 1,000 clients in the U.K. corporate mid-market, about 10,000 SA. These are not crazy numbers, but they present for us an executable opportunity. And what we are going to do with these clients is deeply ingrained in our DNA. So we know our people can execute on the proposition. We've already invested in the U.K. in the private bank over the last 5 years and the successes they have given us the confidence that we can embark on this journey and be successful at it. So the targets we have set are really achievable. Serco 8% market share in SA. We're already at 3,000 clients. You get the next [ 7, ] it's only 5% more market share. We are very confident we can get there. Within the U.K. context, as equally said, tiny market share, but we should be able to offer high-value services; and as a consequence, do better from it. So how does this fit into the overall perspective of a business that continues to improve its return profile? As I said earlier today, returns are an outcome. Our focus as a management team is on building capabilities, supporting our clients, being flexible around their needs. And if we do that right, the returns should follow very logically. So on the -- on this particular bridge, I've indicated that the leveraging and scaling up of our core franchises will contribute a significant portion to the returns uplift. We already are looking -- are working on capital optimization. A shareholder or an analyst asked us why we are not a bit quicker in the share buyback, but we are on course and on program. So we're comfortable about that. And we will continue to manage our capital dynamically. If as an example, we get an opportunity to acquire a business, that means that we may have then to be flexible in how we look at capital allocation. It will be dynamic, but supporting of the overall strategic intent that I talked about yesterday. So the South African piece of this of this strategy will contribute significantly in this time period. The U.K. piece by 2030 will just be gaining traction. So we expect that piece to contribute more significantly beyond the FY '30 horizon. We'll give you a sense of what we think the revenues will be by FY '30 from our U.K. business, but this is really exciting if you look at it long term. As I said about this earlier, because we've tested the model in SA, and we are successful, and we've been investing in these platforms and we have the benefit of latest technology, we think our U.K. rollout will, in fact, benefit from all of those. So that's how we will be building over the next number of years. To give us a bit more of a sense of how we will do this in each of the 2 geographies. I'm now going to call the top youngsters to present, starting off with Nick Riley. Nick, you're ready? Thank you. Nicholas P. Riley: Okay. Let's make sure we get these slides right. Thanks, Fani. Certainly an exciting opportunity for us. It's been lots of fun getting stuck into the detail over the last 7 weeks since I stepped into the saddle. The next few slides will unpack the corporate mid-market opportunity and strategy for South Africa. So what is this client segment? Juristic entities with a turnover between ZAR 30 million and ZAR 1.5 billion are banked by the Business and Commercial Banking divisions of the incumbents in South Africa. This client segment is extremely profitable and a high ROE segment for the banks. Whilst it's highly competitive, we think it remains ripe for disruption. There are approximately 3.5 million juristic entities in South Africa with a turnover between ZAR 0 billion and ZAR 1.5 billion. Our definition of the corporate mid-market incorporates unlisted juristic entities. Now we're still on that slide, [ Donnie. ] All right. I'm now looking -- I'm making the same mistake you made. Look left, not right. So our definition of the corporate mid-market incorporates unlisted juristic entities with a turnover between ZAR 30 million and ZAR 1.5 billion. This takes us out of the SMME segment, which is experiencing fierce competition by the incumbents and new entrants to the market. It's a deep segment, ZAR 79 billion in revenue, ZAR 620 billion of loans and ZAR 405 billion of operational deposits. Our market share is between 0.5% and 5% in terms of these measures and presents significant opportunity for growth. Investec believes its niche are companies with a turnover between ZAR 100 million and ZAR 1.5 billion, representing an opportunity set of about 220,000 clients. We would consider banking clients below the ZAR 100 million threshold where we foresee the ability to grow and support these clients. We're underrepresented in this growing market and are well positioned to gain market share. We're not starting from scratch. We have 3,000 existing high-value relationship-led clients. We already offer lending, certain transactional banking capability, savings product, risk management product and advisory service to this existing client base. Historically, we've serviced these clients from different divisions within the Investec Group, limiting the full enablement of the bespoke service model that we offer. We now have one business, one leadership team with full accountability and responsibility to deliver the strategy with laser-focused execution. We are targeting 10,000 clients by 2030. So in terms of the numbers of the client set of 220,000; 5%. The 8% Fani referred to was loan market share by 2030. So to reach our 10,000 clients, we need to acquire another 7,000. So whilst we're materially increasing our base from 3,000, the target number remains at a level which allows us to deliver the Investec bespoke service model. Our competitor banks have between 20,000 and 50,000 clients, which makes it difficult for them to replicate the high-touch tech-enabled Investec client experience, way easier for us to create a comparable product set, way more difficult for them to compete with our service level. The upside to this 10,000 clients is the client acquisition opportunities that reside within the bank, where either we bank the individual and not their business, which Fani has spoken to, or existing clients have told us that they want to do more with us when we've got a comparable product offering. They tell us, if you can do for me what you do for my personal, I'll move my business banking tomorrow. We see these opportunities as low-hanging fruit. So what does a typical client look like within the existing base of 3,000? They have a turnover greater than ZAR 100 million and have either 1 or 2 products with Investec. We see this now as a significant opportunity to further cross-sell to these 3,000 clients, increasing the average product from 1 or 2 to 4. I'll illustrate what this trajectory looks like shortly in an example. Our existing lending clients are concentrated within sectors that are working capital or asset heavy. We'll now look to broaden that sector focus as we scale, leveraging the sector specializations, intellectual property and network within our Corporate and Investment Bank. Here's a short example of what the trajectory looks like. We first engaged this client in 2018. They're a provider of infrastructure to the ICT sector. We provided a term and trade facility of ZAR 24 million to unlock growth out of their working capital. Fast forward 7 years, they've grown their turnover by 6. We've increased our facilities by a factor of 5, and we now have 5 products across 3 juristic entities. Investec funded the vertical integration into a transport business. We funded the acquisition of the owner-occupied property. Our current funding consists of trade, term and overdraft and access facility. And we provide transactional banking through underlying transactions, corporate credit cards and FX facilities. We've recently introduced our leveraged finance team with the opportunity to introduce a new investor. This is what that trajectory looks like. This is what we will aim to do in terms of increasing the products across that client set. So what is the execution of the corporate mid-market strategy look like in terms of numbers? We've already got ZAR 1.7 billion across the existing client base. This is not a nascent business. The execution of the strategy is expected to more than double our revenue from ZAR 1.7 billion to ZAR 3.8 billion. Similarly, more than doubling our profit, representing compound growth between 18% to 20% over this 5-year period to 2030. We expect to achieve this through doubling our loan books, capturing operational deposits to increase the existing base by a factor of 5 and a significant increase in capital-light transaction banking fees. Whilst the execution of the strategy will require further investment, we have the benefit that these are existing businesses with existing infrastructure and existing platforms. This additional expenditure will not impact on the Group's target cost-to-income ratio range. So the more than doubling in profitability and naturally higher ROE from this business segment is expected to deliver meaningfully to the 200-basis point increase in the Group ROE that Fani mentioned earlier. So where will we focus and where will our priorities be to successfully execute on the strategy? The lending, savings, risk management product and advisory services, which form a part of this product suite, as reflected in the earlier wagon wheel are all mature platforms, already servicing the existing clients -- our base of 3,000 clients. There will be further investment in transactional banking feature rollout, modernization of the tech stack, automation of client touch points, including KYC and onboarding, API-led integration over the next 12 to 18 months. These enhancements will assist with a simpler and friction-light move of clients from some of our incumbents. The additional investment will, for the first time, enable a holistic transactional product set comparable to our competitors. It creates the opportunity to access a subset of the market that we have not been active in before. So with a level playing field in terms of product, we can now really differentiate our bespoke service model, offering corporate mid-market clients access to our world-class client support center, deep specializations and relationship-driven and empowered bankers. So let's now bring it all together. This is a natural evolution for Investec. We're building off an established base with a history of successfully servicing selected client segments in a highly competitive market. In a segment traditionally underserved, we will, for the first time, be able to offer the full product capability with our distinctive and differentiated service. Always Human, enabled by our culture and values. The experience is effortless and professional; the expertise is specialist, value-adding and proactive; and the attitude, passionate and can do. To win, we only need 5% market share in numbers. And within the next 5 years, this will lead to a tripling of our client base, increased entrenchment with 4 products per client, a more than doubling of profitability with a CAGR of 18% to 20% and a meaningful contribution to the 200-basis point enhancement of ROE. This new division that will be delivering on the strategy will be known as Investec Commercial Banking. Thank you. Andy, over to you. Unknown Executive: Okay. Good morning, everyone, and good afternoon for those of you in South Africa. Fani and Nick have both spoken about the mid-market plans being a natural evolution. Nick and the team have clearly got a head start on us here in the U.K. But I've been amazed by the energy and enthusiasm that we've experienced when talking about this proposition to our clients and everyone else actually that's in the street that we get to talk about. Lots of our existing clients are really keen to get involved as soon as possible. In fact, I was recently at a lunch with some clients I know really well, and they were pushing me seriously hard on how quickly we can get this moving so they can come and join us. In a very short space of time, we've attracted some incredibly experienced individuals from existing mid-market banks in the U.K. And we've got others that are already keen to join. And let's not forget that's in addition to the really high-quality people who have already been helping us build these franchises over time. Everyone wants to be part of building this Corporate Banking business that has a private banking feel. We're excited and confident to grow something that's truly unique in the U.K. for the mid-market clients. And I'm going to spend a few minutes talking about the U.K. proposition more specifically, and in particular: Why we like the market? What we're focused on building? And how we're going to deliver that at pace? I've got the slides, [ fine. ] There are around 80,000 businesses in the U.K. with a turnover of between GBP 5 million and GBP 250 million. We believe 60,000 of those play to our existing strengths and sector expertise. So that's where we're going to focus. Banking in this segment is dominated by the big 5 banks, but there's no significant differentiation between them. We're going to deliver a premium out of the ordinary alternative that simply isn't available elsewhere. We have a distinctive brand with a great reputation. Clients already choose us due to our high service standards. And we have an exceptional client relationships and deep expertise, regularly winning awards for client experience in this mid-market. So let's look at the next slide for what we have today and what we need to build. If you look at the green and orange dots, you'll see that we already have one of the most comprehensive and compelling propositions in the mid-market. We have the vast majority of lending products, a strong treasury and risk offering, and we're one of the few banks in the mid-market with advisory and equity teams. And of course, we have our private banking expertise. The key ingredients that we need to add are scalable transactional banking and best-in-class relationship managers who are going to pull all of this together for us. So let's look at some of the time lines and the value of what we think we can deliver. The big banks in the U.K. make around GBP 6.5 billion of profit per annum in this space. And as Fani said, that's made at an average of about a 20% return on equity. So strategically, this is a very key driver for us for accretive growth as we move forward. Working backwards from right to left, by 2030, our ambition is to be delivering GBP 80 million to GBP 100 million worth of revenue from these 1,000 clients. Between now and then, which is the middle column, we will have a full proposition live by quarter 1, '27, a full relationship banking team in place by '28, and we expect to break even by '29. Our current focus is on product development, relationship management and operations and technology. And on the next slide, I'm just going to give a flavor of a longer-term view because this is just the start of what we can achieve. If you look at the left-hand side of the slide, we already have award-winning franchises in the U.K., be that the 60,000 clients we have in our asset finance businesses or the corporate client base with treasury, FX, risk solutions, direct and specialist lending. We are building relationship banking in the middle of this to enhance our existing clients' offerings and also allow RMs to confidently attract new clients. By 2032, we aim to have 40 to 50 relationship managers in the market, delivering a revenue of about GBP 175 million. That means we'll have 2,000 clients who, on average, will hold 3 to 4 products with us. And this will make a material contribution to the growth and returns of our U.K. bank. To deliver this full-service relationship banking, we need to build scalable transactional banking, an operational platform that's intuitive and gives great client experience. And for that, we're clearly leveraging, as others have said, the good work that's taken place so far in our infrastructure. We're in the process of recruiting a market-leading relationship team to offer the whole of Investec to our clients. Our service-led approach is to provide a private banking experience in the mid-market and the differentiation will be operations and technology that allows RMs to spend their time with clients, not spending 70% of their time as many do today on admin and other queries that come through. Relationship managers need time to understand their clients properly. We want them to have that time to listen and proactively help those clients to grow. And we want them to offer the full breadth of capability across Investec. For day-to-day client needs, our clients are going to have access to our market-leading client support center, phones answered quickly by people who will do their best to fulfill their needs there and then without further handoffs. We're on track for putting our relationship managers, our first relationship managers into the market in quarter 1 of '27, but we may well bring that forward to H2 of '26. We're going to test our capability with a small number of pilot clients as we progress to full rollout. So let's move on to delivery. Our approach to delivering at pace is guided by a few key principles. Product and service development will be client-led, driven by insight and testing. We will leverage lots of our existing capabilities. We will adopt the latest tools, including AI, wherever possible. And clearly, building the right team is critical. I'm just going to take a minute to talk about the team that we're building. We're bringing in new expertise where required. And let's not forget, we've already got lots in-house, but we're bringing in people who have been there, seen it and done it in the U.K. mid-market for the activities that are going to be new for us. In a very short space of time, we've attracted some incredibly experienced individuals, and we continue to build out this team. Everyone wants to be part of building this unique Corporate Banking business that has a private banking feel. The focus, the energy and the expertise is incredible to see. So let me just summarize. In the U.K., we believe we have a clear opportunity for Investec to differentiate in the U.K. mid-market. It's not just what we do. It's about how we do it. We create real expertise and trust, and that drives exceptional client relationships. This is a natural evolution, as everyone has said, for our U.K. bank to support the growth of mid-market clients as well as our own at accretive returns. We already have a compelling mid-market proposition. Investment over the next 2 years will significantly enhance this [ for ] transactional banking, relationship management and a modernized digital platform. Increased client acquisition and deeper client relationships would increase our share of wallet to drive income growth and return on equity. We're now laser-focused on the execution to build this, and we have a unique proposition for our mid-market clients. I'm now going to pass back to Fani. Fani Titi: Thank you, Andy. Thank you, Nick. You can see we do have some top youngsters in our team. Ruth, thank you for supporting the development of this capability in this market. The opportunity is real. The execution will require the level of focus that Andy spoke about. So from the perspective, as I said, of the uplift in our returns, the U.K. piece is the blue sky because we haven't factored that much into our 5-year horizon as excited as we are about that opportunity. The U.K. -- sorry, the South African opportunity is "in the now" because we've been building there for some time. It's about the flywheel momentum that we are now building in that business, more than doubling in a number of the metrics that Nick spoke to. It's important, again, to say that we've given an outlook of 52% to 54% cost-to-income ratio despite the level of investments that we are making in these new initiatives. We remain comfortable that we've been prudent before in getting some of the investments into the normal run. So while we are investing more, we are unlikely to significantly move upwards our cost-to-income ratio. And this is why this particular capability makes sense for us because it leverages not only of the DNA of the business, but also of the investments that have been made and expanding relationships that we already have with our clients. So we conclude again by giving you this simple slide about our right to win, a private client banking experience for a select number of clients in the market and expansion and evolution of the relationships that we already have and that we have the experience to implement a growth strategy. We have the people to do this. We have the culture that can support this nimble high-touch offering to clients in the corporate market. We've got the capital and the liquidity to stand behind the efforts that we have indicated. Excited about this Zebra that is galloping forward. In May, we'll give you a view into our private clients strategy. And if I'm excited today, I'm even now just running towards May because we would love to show you what we are doing. But the execution challenge is significant. We are not underestimating that at all, but we are a team focused on building enduring value for our clients. So thank you. We'll take some questions. How do we do the questions in this room first? Okay, Cue. Thank you. Any questions from the room? Okay. No questions. We'll go to Cumesh in SA. I seem to see how this pattern is going to go. We're going to have questions from the online line. Cumesh, any questions from SA? Cumeshan Moodliar: We're just checking Fani. [ Donovan, ] are there any questions online? Okay. There's some online. I'm just going to check the room first. Fani, are there any -- if there are any questions in the room? No questions in the room. Donovan, can we go to the online questions? Unknown Executive: Sure. Our first question is from Kevin Harding from Investec Investment Management. For the South African Corporate Mid-market business, what is the current cost-to-income ratio for that business? And how are costs expected to grow relative to revenue growth? The current target assumes revenue grows at about 17.5% to 2030. Fani Titi: Nick, do you want to -- the youngsters have to work for their lunch. Nicholas P. Riley: And I'm hungry. Kev, so the trajectory will be slightly different over the 5-year period. So the next 2 years, we'll complete the expenditure, as we've said, in line with the broader cost-to-income ratio, and that's new people, that's technology, systems and processes, which will then give us the platform for the full transactional banking capability. That's when we would look to ramp up on the operational deposits. So towards the end of 2030, we'd expect that cost-to-income ratio to be in the high-40s, sub-50%. As it stands now, it's in line with our existing ratios. Fani Titi: Thanks, Nick. Nick has run a listed company before. So I think he has, what shall we call it, the agility to field the bouncers as they come. Donnie? Unknown Executive: Thanks, Fani. The next question is from Harry Botha from Bank of America. In South Africa, what is your sense of the number of private banking customers that can provide links to mid-market corporate clients? How sticky are clients with South African incumbents? And is there a significant customer acquisition cost as you help customers switch over to Investec systems? Fani Titi: I think both of the youngsters should come on the stage so that you don't have to be going up and down. Let's just give you the opportunity to excel. Unknown Executive: Just coming up, because I've not been called a youngster for a very long time. I'm going to enjoy this moment, Fani. Nicholas P. Riley: Sorry, Don, could you repeat the first part of the question? Unknown Executive: Sure. So what is your sense of the number of private banking customers that can provide links to mid-market corporate clients? Nicholas P. Riley: So the work that we've done, it's between 1,500 and 2,000 that the -- we think there's the opportunity to bring across private clients that we bank in their personal capacity in terms of their businesses. And that's what we referenced as the low-hanging fruit. I think the second part -- what's the acquisition cost? I think if I understood correctly in terms of bringing across clients from the incumbents. Look, I don't think we underestimate that there's going to be a flush of clients. We understand that some of these clients have been banking with the incumbents for 20 to 30 years. But I think now that we have the full product offering, I think the proof is in the pudding that we've already got 3,000 clients. So we've got clients internally and externally at the group that are investing in banking with us based on that capability. We understand that potentially it could take 3 to 4 years product by product to be able to unhook some of the clients from the incumbents. Around acquisition costs, we don't see that elevating again above our cost-to-income ratio. So we'll manage it within the group's targets. Fani Titi: Donnie? Unknown Executive: Thank you. One last comment online from Nathan Jeffery from Brown Jeffery Ventures. He says, it is very good to see a shift to commercial in the U.K., and he seems pretty pleased by that. Fani Titi: Thank you. That is fantastic. Unknown Executive: Someone else is excited by it. Fani Titi: I was just about to say, Donnie, why are you taking comments? I thought you were giving us questions. But that comment we will take any day. That brings us to the end of our presentation. It's now back to work. Thank you very much.
Ioannis Stefos: Welcome, everyone, to PPC's Capital Markets Day. Today, we will present our strategic plan for the period 2026-2028, along with an update on PPC's financial performance for the first 9 months of 2025. A very warm welcome to those joining us here in London and to everyone connected via the webcast. We are here today with our Chairman and CEO, Georgios Stassis; and our CFO, Konstantinos Alexandridis. Since 2019, Georgios has been guiding PPC's transformation, steering the company towards clean energy and sustainable growth. With nearly 2 decades of experience in the energy sector, he has positioned PPC as a leading player in Southeast Europe's energy transition. Konstantinos, who joined PPC in 2020, brings strong financial expertise and a proven record in managing large listed and private companies. He has played a key role in strengthening PPC's financial foundation and supporting the execution of its transformation strategy. Together with a wider management team and all PPC employees, they continue to advance our strategy, delivering growth, efficiency and long-term value for our stakeholders. Let me briefly walk you through today's agenda. We'll start with a short introduction where we will initially present 9-month performance, proceeding next with how PPC positions itself in the Southeast European region as well as highlighting its strong track record to date. We will then outline PPC's strategy and how the company continues to lead across all parts of the value chain. And after that, we will move on to our financial targets before closing with some final remarks and conclusions. And of course, we will end with a Q&A session where we will be happy to take your questions, both from those here in the room and from everyone joining us remotely. If any question remains unanswered, our Investor Relations team is always at your disposal to follow up after the event. We expect the session to last no more than 2 hours. And now let me hand over to our CEO, Georgios Stassis, to begin the presentation. Georgios, the floor is yours. Georgios Stassis: Thank you, Ioannis. Hello, everyone, and welcome to our Capital Markets Day from the City of London. Before we present our track record, let me provide you an update for the 9-month 2025 financial performance, focusing on the main areas. Robust profitability in the 9-month period with adjusted EBITDA reaching EUR 1.7 billion, up by 24% year-on-year. Strong performance in the third quarter, which has been driven by improvement in our integrated business and by higher revenues in the distribution activity in Greece, following the implementation of the new network charges as of June 2025. Adjusted net income after minorities amounted to EUR 400 million, being fully on track for the target we have set for the full year, which will also lead to increased dividend per share as we have committed since our previous CMD 1 year ago. We will further discuss on this later in the presentation. Investments stood at EUR 1.9 billion, mainly driven by renewables, flexible generation and distribution projects, which are the key focus areas for our business plan. Free cash flow stood at minus EUR 1 billion due to high investments despite improved FFO performance in line with our plan. Net debt at EUR 6.7 billion at the end of September with a net debt-to-EBITDA ratio at 3.1x and below the ceiling of the 3.5x that we have set in our financial policy and in line with our strategic priorities as we progress our investment plan. Let me now turn to our performance against our 2025 targets. As you can see on the slide, we are well on track on all key metrics. On the financial side, adjusted EBITDA is expected to reach EUR 2 billion, while net income will close at EUR 400 million with dividend distribution increasing to EUR 0.60 per share. CapEx, even though below our initial estimates, are expected to reach at EUR 3 billion area, reflecting our continued investments in renewables, flexible generation and distribution networks. And all that, keeping our net debt-to-EBITDA ratio comfortably below the 3.5x ratio, supporting a strong and balanced capital structure. In terms of strategy, we continue to deliver on the transformation we set out. PPC is becoming greener and more predictable as we remain on track to phase out lignite by 2026, end of 2026 with no additional decommissioning liabilities thereafter. We have extended the PPC model across Southeast Europe, strengthening our position as a regional energy champion. We are also driving customer centricity, expanding our reach through new cross-sector touch points and digital services. And we have enhanced our balance sheet through disciplined financial management and higher cash flow stability from our network business. Finally, all this progress is reflected in the performance of our share price, which, combined with our increased dividend distribution, adds value to our shareholders. PPC delivered a 168% total shareholder return over the last 3 years, outperforming the EURO STOXX Utilities Index, which stood at 62%. Overall, our progress demonstrates that our strategy is delivering the targets we have set both operationally and financially, delivering ultimately increasing value to our shareholders. During the last years, we have been consistently growing our operations, aiming at becoming a leading clean power tech and critical infrastructure player in Southeast European region. Our activities span from electricity generation to electricity distribution as well as the sale of advanced energy products and services in our 2 key countries in Greece and Romania, while also expanding our renewables footprint in Italy, Bulgaria and in Croatia. We have a total installed capacity of 12.5 gigawatts, of which 50% from renewables, including hydro, while our total regulated asset base amounts to EUR 5.6 billion. We are also the leading supplier of electricity in Greece and one of the leading in Romania, servicing 8.6 million customers in total. As highlighted at the bottom of the slide, our Energy Management unit acts as a strategic catalyst driving profitability. At the same time, we are expanding in new sectors to extract additional value and new avenues of growth. First, we have entered the telecom business, rolling out one of Europe's fastest-growing state-of-the-art fiber-to-the-home networks in Greece based on the competitive advantage we have of the rapid development of the new network at low cost through the use of our existing infrastructure. Second, we are active in e-mobility through the deployment of public charging points, being the leader in the Greek market, having also a strong presence in Romania. Last, we are also exploring further opportunities in the data center space, given our position in Greece, as we will see later in the presentation. Getting into more detail. Let me start with the distribution activity, which is keep growing, leveraging on the attractive regulatory framework with long-term periods that follow European DSO regulation with regulated asset-based models having a WACC of close to 7% in Greece and Romania. Distribution grids are the backbone of the energy transition and require major investments to keep pace with rising electrification, renewable rollout and grid flexibility demands. And towards this end, we are upgrading our networks in both countries, focusing on the digitalization of the infrastructure, implementing a nationwide rollout of smart meters, especially in Greece, which is lagging compared to the other European countries. As a result of continued investments, we have increased our total RAB at EUR 5.6 billion, having doubled the EBITDA to EUR 800 million over the last 4 years. Next, a few words about our integrated business model, which is supported by a total generation capacity of 12.4 gigawatts, about half of which comes from renewables and a customer base of 8.6 million customers in Greece and in Romania, where we hold -- when we are the leading market in both of the countries positions. This integrated model covering generation, retail and energy management has consistently driven our profitability while providing a natural hedge against volatility in energy markets. It allows us to deliver resilient performance even during periods of extreme market disruption. We have seen both sides of the cycle in low prices environments, such as during COVID, when wholesale prices and generation margin declined, our retail line provided a stable revenue stream from our large customer base, keeping overall profitability within the targets. On the other hand, during periods of high prices, such as the recent energy crisis, retail margins came under pressure, but our generation business benefited from stronger wholesale prices, again, balancing the overall performance. As a result, PPC has managed to consistently meet its profitability targets, effectively leveraging the advantages of its integrated business. Between 2021 and 2024, we doubled our adjusted EBITDA, achieving a 26% CAGR, and we are now on track to reach EUR 1.2 billion in 2025. PPC's growth trajectory is further supported by favorable macroeconomic trends in its core markets despite some headwinds in Romania, especially in Greece, is among the fastest-growing economies in the European Union with GDP growth expected to outpace the European Union average over the coming years. The macroeconomic environment in both countries continues to strengthen, particularly in Greece, where the 10-year government bond spread has normalized significantly, now trading below Italy's for the first time in many years. This improved macro backdrop supports investment confidence, providing a stable foundation for PPC's continued expansion and value creation. A growing economy, combined with ongoing electrification, is expected to drive power demand higher in both Greece and Romania, reaching an approximately 25% increase until 2035 for both countries. We have already seen such inflection points in Greece with power demand increasing in the last years by 4% between 2020 and 2024, which sets the basis for the evolution of the years to come and provides comfort in our projections. Beyond macroeconomic growth, both our key markets are also benefiting from European Union funding, which continues to support investments across multiple sectors, stimulating GDP and further boosting electricity demand. In addition, the acceleration of data centers development is expected to become a significant new demand driver. However, in our projections, we have taken a conservative approach, assuming a base case scenario for data centers in Greece and Romania. Let us now pass to the next section of our presentation, focusing on how our company will continue in the next 3 years, its journey of transformation in one of the most significant European utilities. Over the past few years, we have been focusing on our integrated model, aiming to capitalize on the opportunities presented by the ongoing energy transition and digitalize all our operations. The digitalization theme becomes more and more important, especially given the AI revolution that is underway. In the distribution activity, we have been increasing our investments to modernize our networks and improve service quality. However, we need to continue investing further to address the new challenges posed by rising demand, also driven by the rapid deployment of data centers. On the generation side, we have been scaling up investments in renewables and clean energy technologies, and we will continue to do so as these are much needed in the Southeast European region. At the same time, we are not investing only in renewables. We are also deploying capital in flexible generation assets, which are critical to balancing the market and are able to secure higher capture prices compared to other generation sources. And for that purpose, we are investing in batteries and in new gas assets, in new CCGTs. And of course, all these initiatives are supported by our retail activity and our customers who remain central to our strategy. We are committed to meeting their energy needs and offering additional complementary services, focusing in particular on high-value customer segments that are key to our long-term growth. Before we proceed to the various activities analysis, let me make a brief reference to the strategy we follow focusing on 4 key areas. At first, we are a vertically integrated utility with presence in the generation, distribution and sale of electricity, having, therefore, an internal natural hedge that protects us from the volatility of energy markets, making our business more resilient to exogenous shocks. And it's very important part of our strategy. Then we are technologically agnostic, I would say, investing in all kinds of electricity generation technologies, which are competitive and sustainable for the long run. Technologies which complement each other, so we can be well prepared for power price fluctuations, which we think will continue in the years to come. We are investing in renewables; solar, wind and hydro. We are investing in batteries as well as flexible gas units. So technology diversification is a strategic choice for us. Third point, we are doing a regional play, expanding in neighboring countries, all of them interconnected as a common European market, but with physical interconnections linking them to each other. Countries that have high growth potential where renewables rollout is not yet in a mature stage and the decommissioning of coal assets has not finished yet. In fact, in some of them, just started. These are countries with interconnections between them that provide significant cross-border trading opportunities. In the Southeast region, we are operating in the utility space where the power prices are impacted by, I would say, 4 main forces in the area we are. First, the energy transition itself. So those countries have their own growth potential. Then the energy saving, meaning that through technology improvement, there is an energy saving. But also on the other hand, the electrification coming from other industries moving to our industry, meaning heating and cooling or the automotive industry, for example. Then again, in these regions, we have also something unique that you cannot find elsewhere. And that is, unfortunately, the Russian-Ukraine conflict that is draining energy through interconnections and that will continue to do so in a much higher pace, especially, god willing, during the reconstruction phase when hopefully, the war will end. So Southeast Europe is an area with relatively high prices versus the rest of Europe versus Central and West Europe, a situation that we don't expect to change by the end of the decade, being impacted a lot by the reconstruction of Ukraine. So to conclude on this point, our regional play strategy is very important for us and of course, a source of value. Then the fourth point of our strategy is our focus on customers, which, as I have said many times, are the anchor for our growth, and that is why we are strengthening our retail services to achieve best-in-class holistic customer experience. We try to offer a holistic service to our customers in various different ways, so to stay in every household and on back of this to support our generation transformation and growth. And to achieve all this, we are leveraging on the AI and digital evolution, assessing its impact across all operations, as I will elaborate in the next slides. PPC has been in a growth path all these years, increasing its renewables footprint, investing in flexible generation assets while at the same time, decarbonizing its generation portfolio. We saw earlier that we have achieved a good track record so far in the renewables build-out, but our targets are even more ambitious going forward. We are targeting a 12.7 gigawatts of renewables capacity by 2028, which is 5.5 gigawatt increase compared to the projected capacity at the end of this year, increasing its share in our energy mix up to 77%. At the same time, we are phasing out lignite by the end of next year, shutting down the last unit of Ptolemaida V and starting its conversion to a gas unit. Initially, it will be converted to a 295-megawatt open cycle by the end of 2027. And next, it will be upgraded to a 400-megawatt CCGT by the second quarter of 2029, having already locked a total CapEx cost, which is significantly below EUR 1 million per megawatt. On top of this, we are also adding a new 840-megawatt combined cycle gas turbine unit in Alexandroupoli, as you know, which is ongoing its construction in Northern Greece. Those 2 new high-efficiency units will actually replace 2 older units, improving the efficiency of our overall generation portfolio. As a result, our portfolio is becoming greener and more efficient with significantly decreased CO2 emissions, which will be even further reduced driven by decommissioning of oil capacity given that additional Greek Islands are interconnected in the mainland in the coming years. Let us now take a closer look at our renewables rollout, our forward targets and the confidence we have in achieving them. As we saw earlier, our goal is to reach 12.7 gigawatts of renewable capacity by 2028, representing an increase of 6.3 gigawatts from where we stand today, more than doubling our current installed base. And while this may appear quite ambitious, we are fully confident on delivering it. Our strong track record, as highlighted in previous slides, supports this confidence. But even more importantly, we have already secured 3.9 gigawatt of projects that are either under construction or ready to build, including our operating capacity of 6.4 gigawatts. This brings the total to 10.2 gigawatts already operational or secured, which accounts for about 80% of the target we have for 2028. And on top of that, we have a total of 20 gigawatt, anyhow, gross pipeline of various in development stages and technologies projects, giving us significant optionality and flexibility in selecting the most attractive projects for future investments and replacing also projects which things might not go well. Volatility is another thing. Volatility is one of the most commonly used words over the last years to describe energy markets. In the key markets where we operate, such volatility is evident from the increase of average spreads of power prices in the day-ahead market that has been recorded in the recent years. And of course, we do acknowledge the role of 0 and negative power prices that we have started experiencing within the last 2, 3 years, which we have embedded in the assumptions of our business plan since this has become a part of the environment we operate. It is true that the renewables evolution inherently produces periods of excess generation with wind and solar output exceeding grid or market capacity. Traditional systems view this as a failure. However, we think there is a great opportunity which lies in monetizing this surplus of generation. Curtailment is a feature of the clean energy system, a reflection of abundance, not of inefficiency. By embracing this as a resource, we transform volatility into profitability and variability into resilience. For us, it is not a story of constraint, but of integration and smart capital allocation, turning a systemic challenge to a competitive advantage. Batteries are the most compelling asset absorbing excess generation when they charge and discharging at high value during low renewables times, particularly in the evening. As the cost of solar and wind continues to fall and their contribution to the power mix rises, flexibility is becoming a top priority. Fossil fuel currently provides the bulk of flexibility in the power system, both in terms of dispatchability and meeting peaks in demand. It is a feature, a signal of successful decarbonization and the market opportunity for those positioned correct to extract value for flexibility, integration and optimization. As a vertical integrated utility PPC, we are uniquely placed to transform curtailments viewed as a waste into sources of margin, resilience and growth. Flexible generation is key in the current market environment, both for profitability optimization as well as to support the stability of the grid and the security of supply. With wind and solar playing a central role in the power systems of the region, assets that can adjust their output in response to system needs bring substantial value. There is a range of technologies that satisfy flexibility needs. Their contribution depends on their ability to react over shorter or longer periods and their cost competitiveness. Flexibility requirements over shorter periods can be better satisfied by batteries, while flexible hydro and gas are better positioned for longer-lasting challenges. Flexible assets unlock earnings by turning volatility into opportunity, capturing intra-day price spreads, firming our renewable output and protecting supply when the system is tight. Through the combination of multiple revenue streams, these assets sharpen our commercial edge, boost cash flow resilience and support disciplined growth in a more volatile power market. And that's why on top of the significant renewables build-out that we are implementing, we are also investing in flexible generation assets. We already have a significant portfolio of pumped hydro and gas assets, and we are also developing batteries. Our main focus is stand-alone batteries. By charging in low-price hours and discharging when power prices are high, stand-alone batteries give us flexibility when it's most valuable. Additionally, they provide ancillary services where reserve capacity is tightening. And this allow us to monetize volatility, combine revenues from both day-ahead and balancing markets, creating a flexible trading asset that enhances our commercial performance across the portfolio. There are also certain cases where batteries co-located with the renewable assets in the same physical site also work for us. Colocated batteries paired directly with our solar and wind assets unlock a different value proposition. They reduce curtailment and cost of imbalances, stabilizing output profile of the renewable asset, enhancing its economics. The main constraint is that charging is limited to the paired asset, which reduces arbitrage optionality. However, the availability of subsidies and grants outweighs that constraint in Romania, for instance, making their business case very solid. And that is why we are proceeding with the development of additional 232 megawatts of co-located batteries by 2028. Overall, our business plan includes the development of approximately 1.5 gigawatt of batteries in Southeast Europe over the next 3 years. These batteries are coming mainly from our internal licenses development, but we will not exclude further batteries capacity deployment also through partnerships. Gas. Gas has a dual role to play in the region, both as bulk generator and a source of flexibility as well. With approximately 13 gigawatts of thermal capacity coming offline over the next 5 years due to both technical and economic constraints, the region faces a structural capacity deficit, which is a huge opportunity for us. Apart from renewables, new high-efficiency CCGTs can fill this gap, delivering reliable baseload and mid-merit power with high fuel efficiency and lower emissions. And that is exactly the space within which our under construction CCGT in Alexandroupoli will operate on one hand. And additionally, we are also exploring the possibility of a CCGT in Bulgaria. Moreover, gas is also a valuable source of flexibility. As mentioned earlier, as renewable surge and volatility grows, fast ramping gas units become essential, offering long duration unconstrained flexibility. And this flexibility is becoming a premium commodity in the region in Southeast Europe. The conversion of Ptolemaida V lignite unit into the open cycle gas turbine, we said, is such an example, alongside with an opportunity of a peaker gas plant in Romania. These 2 roles, the bulk power and the high-value flexibility, create a compelling opportunity for our integrated portfolio. We already have a substantial flexible generation capacity of 6 gigawatts, which generates close to 10 terawatt hours on an annual basis from a series of technologies. And we will continue to invest in flexible technologies for generation since we see high value as explained previously. In this slide, we try to illustrate the growth of our flexible generation assets to 2028 in such technologies as we described in the previous slides. Just to note that apart from batteries and gas, we are also investing in hydro with 29 megawatts coming in operation until 2028 and being added to the existing 3.2 gigawatts that we have in operation, out of which 700 gigawatt has already pump hydro capability. And of course, we are also developing significant pump hydro capacity in our former lignite areas in the quarries of these lignite areas, which will become operational beyond 2030. As a result, we are modernizing and increasing our flexible generation capacity at 7.5 gigawatt by 2028, generating 11.4 terawatt hours on an annual basis. Let's take a look now at how we are strengthening our position across the region. I talked about our regional play before, and this is the slide which illustrates this better. Over the past few years, we have built a solid presence in Greece and Romania, also expanding in the broader Southeast European market. And these markets where we see significant growth potential driven by increasing demand. These are countries which are lagging behind renewables penetration versus the rest of Europe, countries that have not proceeded with the decarbonization of coal-fired assets in the same pace as the rest of Europe. And on this, we see additional benefits from the existing interconnections between these countries. The vertical corridor; Greece, Bulgaria, Romania, including also Italy, enables PPC to optimize our integrated portfolio, achieve economies of scale, diversify risk and assess opportunities in less congested renewable markets such as Croatia. Energy management orchestrates the total commercial performance of our entire portfolio. Every megawatt, whether produced by our conversion plants, generated from renewables, stored in batteries, traded cross-border or contracted through PPAs, every megawatt is optimized across day ahead, intraday and balancing markets. And this ensures that we monetize flexibility, not just the energy produced. Overall, our regional footprint provides a unique competitive advantage as PPC remains the only vertical integrated utility with a strong operational presence across the Southeast European region, a region characterized by significant energy flows and growing interconnectivity. We have already seen the strong progress we are making in our generation portfolio. But what is also really important is how we grow in renewables and flexible generation, how this growth strengthens the other side of our integrated business model. I'm talking about the retail across both Greece and Romania. Starting with Greece. We continue to hold a long position in retail, and that remains practically unchanged even by 2028. That is despite the major build-out in renewables since we are also retiring older, less efficient thermal plants during the period. So what you see in this slide, our growth is not just about adding capacity. It is making the system cleaner and more efficient. The same story applies in Romania. As we deliver on our pipeline there, we will be able to significantly narrow the gap between generation and retail, reinforcing the balance of our integrated model. And even beyond 2028, PPC remains long in retail, and this is something we like since it is giving us the flexibility and the headroom to keep growing across both markets and in the region in whole. Given the importance of our customers, we have been following all these years a customer-centric approach. During the last 3 years, we have been rationalizing our customer mix in Greece by reducing market share from low-value customers, which have no meaningful margin for us, while keeping market share in segments with high value for us. And this has helped us build a retail portfolio on a solid customer base with low switching behavior and increased profitability. In Romania, we have entered the market since the end of 2023, having a resilient position in terms of volumes sold, and this is something that we are expecting going forward. But we are not only a commodity provider to our clients, we are looking to expand our portfolio of value-added services to support our customers across all aspects of their energy transition journey such as heat pumps, solar panels or consulting services. In parallel, we are also introducing technology services that enhance the everyday living for consumer and businesses such as fiber-to-the-home, charging points for electric vehicles, AI-based tools and devices as a service. Our Retail business unit is strategically important, and we will pursue further growth opportunities also throughout our regional footprint if available. A very good example of our synergies in the retail activity is Kotsovolos, the Greek retailer of wider electronic appliances that we acquired in 2024, which is bringing valuable assets in PPC Group. First, procurement capabilities and strong logistics infrastructure, which allow us to manage products and equipment efficiently at competitive costs with reliable delivery performance. Second, a consolidated delivery and field force network providing nationwide execution capacity across installation, maintenance and aftersales services. Third, an integrated technology platform for product sales and supply chain management, enabling seamless customer journeys. Fourth, an upscale channel network with access to large and diverse customer base, including both physical and digital touch points. And finally, a broad portfolio of around the home products and services covering energy solutions and everyday home needs. Building on these assets, several synergy streams with PPC as well, we are already up and running and ongoing in this process. We have launched a joint heat pump proposition, and we introduced products and service corners inside the PPC stores supported by Kotsovolos technology. In addition, we have built a new service of Kotsovolos field technician network that allow us to offer home energy network, safety certificates mandatory for all households in Greece and a huge market for PPC. We are also extending the reach of PPC's energy and fiber plants through Kotsovolos channels and enriching PPC's energy consulting tools with Kotsovolos marketplace offers. And all of these synergies are designed to accelerate commercial performance, enhance customer experience and demonstrate the value of Kotsovolos in our holistic approach towards our customers. It is this value that Kotsovolos is bringing to PPC, which makes it one of the best acquisitions we have ever made. Moving next to our telecom business, where we are building a leading position as a wholesale provider to a fiber-to-the-home network in Greece. During the last 2.5 years, we have been deploying our network all over Greece, taking advantage of our electricity distribution network. This existing infrastructure is mostly aerial, providing us a unique competitive advantage to quickly roll out our fiber network and at a lower cost compared to other telco players, having an average cost of EUR 160 per home passed. Our network has already exceeded 1.4 million homes passed, and we expect to reach 1.7 million at the end of the year. Given the high pace that we are having so far, we are targeting 3.8 million households by 2028. Currently, we are able to provide connection to the FTTH network to 600,000 ready-for-service homes and businesses. And at the same time, we have recently launched a retail telecom FTTH offering, providing ultrafast Internet services at very competitive prices given the very low development costs that we have in the FTTH network rollout. As we speak, we have reached a pace of 5,000 customers per month, although we almost just launched. I mean, we launched in the middle of the summer. And by the end of the year, we expect to reach 18,000 connections, and that is in an area of 600,000 ready-for-service neighborhoods. For this going forward, we are targeting at ramping up significantly our customer base, leveraging on our existing clientele on the electricity side as well as our unique retail proposition, which combines the most technologically advanced FTTH network in Greece at the lowest price. We have already invested around EUR 190 million, and we plan to invest another EUR 420 million until '28, targeting at a run rate EBITDA of more than EUR 100 million beyond 2030. Let's now take a look at our distribution business in Greece and Romania, where we plan to continue investing significantly to capitalize on the stable and favorable regulatory frameworks in both markets. Both countries operate under a regulated asset-based model with long-term regulatory periods and a weighted average cost of capital, the WACC, of around 7%, providing strong visibility and attractive returns to support the continuous growth of our asset base. In Greece, the WACC has been set at 7.05% for 2025 with a WACC being on average at the 7% area for the period '25 to '28. In Romania, the regulatory framework is broadly similar with a 5-year period extending to 2029 and a WACC of around 6.94%. Importantly, we have also secured RAB indexation for inflation, further supporting returns and value growth. We plan to invest an average of EUR 900 million per year until 2028, which will enable us to increase the share of regulated EBITDA and enhance our overall cash flow stability. By 2028, our target is to reach a total RAB of EUR 6.5 billion, split between EUR 5 billion in Greece and EUR 1.5 billion in Romania. Investments in distribution networks are essential to support the rapid electrification of the economy, the large-scale integration of renewables and the overall energy transition. And to this end, we are increasing the pace of our investments in order to enhance and digitalize our electricity distribution networks. As you can see in the left 2 graphs, we are increasing investments for the period '25 to '28 by 40% in Greece and by 36% in Romania compared to the previous 4 years. And even though this increase may seem as quite high, still it is not enough to fully address the challenges that the distribution networks are facing. However, we need to keep a balance between the modernization of the grids and the affordability of electricity tariffs for the end consumers. For the next 3-year period, we are focusing on grid enhancement and digitalization, placing emphasis on smart meter rollout, especially in Greece. Over the past few years, PPC has undergone one of the most ambitious transformation journeys in our industry. We began by building the digital foundations of the group, modernizing our core systems, migrating 100% of our applications to the cloud and digitalizing customer and operational touch points across the portfolio. This work has already delivered significant performance improvement with our digital performance index increasing nearly twofold since 2021. We are today one of the very few utilities that we are 100% cloudified. And this is very important because only in that position, you can now have all data available in the cloud for AI engines to begin work and operations and applications in our way of working. Unless the digital transformation work was not performed in the past years, this benefit would not have been in front of us. And moreover, this year, PPC has entered our next AI-driven this time chapter. Our strategy is clear. On one hand, to reinvent PPC as an AI-powered utility so to let AI guide us in the changes we need to do internally, while on the other hand, to benefit from the AI infrastructure needs as a utility servicing others, and we'll talk about that later on. But first, becoming AI reinvented utility. This means embedding artificial intelligence across every part of our business, reimagining the customer experience, optimizing our core operations, accelerating new business growth, transforming corporate functions and empowering every employee with AI capabilities. We see AI not as an add-on, but as a fundamental competitive advantage that will allow us to operate smarter, faster and more efficiently. And we have a disciplined plan to deliver this. At first, we have activated AI across the group, launching priority AI use cases and upskilling our people. Then we scale adoption and accelerate value creation across business units. And from year 3 onwards, we reinvent key processes end-to-end, embedding AI at the heart of how PPC operates. The result will be a PPC that is more agile, more customer-centric, more operationally efficient and better positioned to lead the energy transition across the region. Our commitment is simple: To execute with certainty and to continue creating sustainable, measurable value for our shareholders. And as I said, this is the one side of the coin is how AI is impacting the way we operate internally, while the other side is how we, as a utility, impact and help the AI evolution through our infrastructure. Around the world, data centers have become one of the fastest-growing sources of electricity demand, driven by cloud expansion, AI adoption and digitalization of every sector. Global capacity continues to increase at a fast pace. Europe is a dynamic market in transformation, driven by sovereignty mandates and enterprise adoption. Historically, development has been concentrated in the primarily European Union markets, the so-called FLAP-D, where connectivity and hyperscaler presence created powerful network effects. But today, those core markets are increasingly limited by land, scarcity, grid constraints and long connection queues. As demand accelerates, the industry is expanding outward, creating new growth corridors across Europe where power and land can be secured at scale. This shift opens a strategic window for energy players like us. As a vertically integrated utility with access to land, infrastructure and reliable diversified power, we are uniquely positioned to step into this emerging market. Our entry into data centers builds on our core strengths and supports regional digitalization. Our role is evolving from a traditional energy supplier to infrastructure provider for AI-driven growth. With our generation portfolio expanding renewables, flexibility assets, grid capabilities and fiber connectivity, we can offer the reliable diversified energy ecosystem that AI consumers need. And for this reason, we have announced the development of a mega data center in the region of Kozani, where our former lignite mines were located. Initially, the mega data center will have a capacity of 300 megawatts with a potential of expansion to 1 gigawatt. The data center will be powered by a diverse mix of power capacity, including both clean and flexible technologies that are already under development. Leveraging the existing grid infrastructure, the availability of land and the new power capacity; the biggest advantage of this project is scale and time to market. However, I want to highlight that this project is not included in the business plan that we are presenting today since we do not have a fair commitment yet from a hyperscaler. This is an optionality that we are developing, but we will only invest when the commitment is in place. Our mega data center development in Kozani location is unique. It brings together grid connection, water for cooling, gas infrastructure, land ownership and soon international fiber connectivity. Very, very few places in Europe can offer this full package. The site can host 300 megawatts within 2 years of signing and is fully scalable up to 1,000 megawatts. Behind-the-meter supply ensures no impact on the National Electricity System, neither on prices nor on grid stability. And to support the 300-megawatt phase, we would upgrade Ptolemaida V to a 440-megawatt CCGT and add an additional 100-megawatt OCGT next to the data center, giving us 540 megawatts of flexible capacity dedicated for this ecosystem. We are already in discussions with several hyperscalers and global DC developers, and the feedback has been very positive. Demand today is centered in the U.S., but Europe will follow. And when it does, we want to be ready with what we believe is one of the best sites in Europe. Such a project derisks totally the output of the 2.7 gigawatts we are developing in Kozani, secures long-term PPAs with top-tier offtakers and creates additional value from land and infrastructure. All in all, Kozani site provides everything a data center needs in one place; power assets, cooling facilities, fiber connectivity and land, positioning PPC with a site that very few locations in Europe can match. Again, I want to be very clear. What we are presenting here is an optionality. We are investing 0 equity today, and we will move only once we have an agreement with a hyperscaler. Let me now pass the floor to Konstantinos, who will present you our group financial targets for the following years. Konstantinos Alexandridis: Thank you, George. Hello to everyone, and thank you for being here today with us and also for the webcast. So before deep diving into the financials, let's see how the drivers, the key drivers of our operations are expected to evolve during the years compared also to our view in last year's Capital Markets Day. Power prices are driven mainly by the marginal cost of the generation, heavily influenced by gas prices and CO2 prices. The evolution is further shaped by the growing share of renewables and the region's capacity tightness. We expect a steady deescalation of gas prices from the current level of EUR 40 per megawatt hour down to EUR 27 in 2028 as the gas market becomes oversupplied due to new LNG production coming online from Qatar field and the U.S. On the other hand, we continue to believe that CO2 prices will escalate as we move towards 2030, surpassing the EUR 100 per million ton threshold as allowances withdrawal creates a tight market. At the same time, rising demand and aging and inefficient thermal fleet in the region as well as Romania's major nuclear refurbishment strain the regional capacity balance, adding upward pressure on power prices. As a result, we foresee that prices will hover around EUR 100 per megawatt hour area. The financial targets I'll be discussing about have been thoroughly stress tested for various ranges of all these assumptions. But the most crucial element, as I mentioned before, is the gas price. Although we consider that further decrease of the gas price versus what you see in this chart should be treated as a tailored scenario, we have assessed the impact of a 10% reduction in the gas price that results to less than 1% negative profitability in our numbers, and this is due to our vertical position. Nonetheless, the level of prices we have used in our models are in the right direction since they have been verified during our discussions with hyperscalers for the data center. The realization of which we fully derisk our profitability from generation. Having seen the market dynamics, let's now see the targets that we have set in this year's strategic plan. We continue our transformation journey while at the same time, we keep improving our profitability. In terms of adjusted EBITDA, PPC reached EUR 1.8 billion in 2024 full year results, and we are confident we will reach a EUR 2 billion performance for 2025. Our next year's adjusted EBITDA will reach EUR 2.4 billion. And for 2028, we expect the performance to climb to EUR 2.9 billion. That is an 18% compound annual growth rate between '23 and 2028. Key drivers of this growth are the resilience provided by our integrated model irrespective of the persistent volatility within the years. We have demonstrated this resilience with our solid performance throughout 2020 to 2025 during COVID and also during the energy crisis. Another key driver is the additional capacity in renewables, but also flexible generation. As George mentioned before, we want to be present in all technologies and in all geographies, leveraging on the interconnections between the countries. Adding to that, we have the regulated business of distribution that grows as we keep investing in the network. Lastly, let's not forget the loss-making lignite activity that we have committed to stop operations in 2026, and we expect to free up profitability. Greece is our home country and given our significant investments in the country, the majority of this growth is generated in Greece. Still, the contribution of our international activities are expected to gradually and steadily increase. To better understand these dynamics, let me give you some data. I said before that 2028 will be a EUR 2.9 billion EBITDA. This is additional EUR 0.9 billion from 2025. Let's break this down. The integrated business, meaning the generation, energy management and customers is expected to contribute approximately EUR 0.7 billion, and this is mainly driven by the new capacity additions in renewables, but also flexible generation. If we also add the benefit from shutting down the lignite, the fully integrated business delivers a EUR 0.8 billion increase in profitability. And within this number, we do not take into account the capacity that's still under construction, we expect to see this additional profitability of approximately EUR 100 million to EUR 150 million in the next year's profitability, and that is after 2029. For these amounts I just mentioned, we feel very confident as they are directly correlated with the new additions in renewables and flexible generation, where we have a solid set of projects under construction already to build as well as in the licensing and permitting process. All these are backed by a strong pipeline of projects totaling more than 20 gigawatts in various maturity stages. Distribution will add another EUR 0.2 billion, given that the regulated asset base is expected to reach EUR 6.5 billion. This operational profitability drives the bottom line. We expect that the adjusted net income will grow to EUR 0.7 billion in 2026 and reach EUR 0.9 billion in 2028. This is a 50% increase from '25 to '26 and a 100% increase from '25 to '28. Main drivers remain the additional capacity in renewables and flexible generation, the lignite phaseout and the distribution. With the planned full decommissioning of the lignite assets by the end of 2026, we will eliminate the high depreciation charges that are associated with these assets, resulting in a net income improvement of EUR 0.2 billion from '25 to '28. This also explains the faster pace at which the net income is growing versus EBITDA. Consequently, earnings per share will increase from EUR 0.7 in 2023 to EUR 2.5 in 2028, reflecting a compound growth rate of nearly 30%. This EPS growth is translated to a dividend per share of EUR 1.2 in 2028, indicating a compound annual growth rate of 37% versus the EUR 0.25 DPS of 2023. This is the fastest DPS growth in the European utilities industry. In fact, by 2028, our shareholders will be receiving nearly 5x the dividend of 2023, reinforcing our commitment to delivering consistent tangible value and making our equity story stand out in a traditionally low growth sector. To reach this growth in our financial performance, we continue our investing efforts in the Southeast Europe region. Over the next 3 years, we will plan to invest EUR 10 billion in CapEx, being selective on the projects we prioritize. Our top priority remains our renewables expansion, along with the opportunities we have identified in the flexible generation. The combination of the 2 will consume 58% of our EUR 10 billion investments. That is approximately EUR 6 billion. If we compare this amount against the incremental profitability I told you before on the integrated business, this is an implied EBITDA yield of 13%. And this is without accounting for the CapEx that is not delivering EBITDA yet. Adjusting for the net effect of this, the EBITDA yield grows to 14%. Remaining areas where we will be focusing are networks, telecoms, digitalization and, of course, retail. Specifically for networks, we will continue building on enhancing the grids, increasing the smart meters footprint and of course, digitalization to support the national energy and climate plan in the countries we operate. Excluding the maintenance CapEx of around EUR 200 million to EUR 250 million per year, the growth CapEx is at the level of EUR 9.5 billion. Out of this, approximately 50% is not yet committed, and therefore, it is at PPC's discretion to deploy. Our disciplined capital allocation policy allows for a spread between IRR and WACC of more than 150 basis points. PPC will continue to generate a strong annual FFO totaling to EUR 7 billion for '26-'28. These operational cash flows will serve as the primary funding source for our ambitious CapEx plan and our dividend policy in the coming years. The remaining needs will be covered by new debt of approximately EUR 3 billion that will be raised mainly at parent level, being mindful of structural subordination. Part of this debt is already secured, utilizing our RF funds with the participation of commercial banks. We have well-diversified funding sources, but one of our primary channels will remain the debt capital markets as we intend to be repeated shares. Thus, it is evident that we have no need for any equity increase to achieve our growth targets. We are maintaining our financial policy targets unchanged to previously communicated guidance. Our leverage target remains at 3x to 3.5x by 2028. And as you can see in the chart, we allow headroom to absorb volatility in the markets. This leverage ratio supports sustainable growth, balancing ambitious investments in all our business lines with sound financial discipline. This balance positions us to create value for our stakeholders while preserving financial health, clearly reflecting our intention to achieve investment-grade rating metrics in the medium term. And with that, I'd like to pass it back to Georgios for his concluding remarks. Thank you. Georgios Stassis: So thank you very much, Konstantinos. We have tried to illustrate to you our key strategy on the basis of which we are growing the last years and how we will keep on growing in a remarkable manner the following years, navigating the energy transition and the associated volatility. We have presented our vertical integration, our regional growth strategy, our technology diversification, our natural hedging possibilities and the analytical way, we will keep on growing the coming years. This strategy has enabled us to meet the targets we have promised so far and provide us comfort for the ones that follow. As you can see in this slide, we are targeting for a significant step up to an EBITDA level of EUR 2.4 billion in the next year and an EBITDA level of EUR 2.9 billion in 2028. Accordingly, we are targeting for a net income of EUR 700 million in 2026 next year and EUR 900 million in 2028. Increasing substantially EPS initially at EUR 2.1 next year and EUR 2.5 in 2028. With regards to dividend per share, DPS, follows a similar trajectory, increasing at [ EUR 0.8 ] in 2026 and growing up to EUR 1.2 in 2028. And all of that, following a prudent financial policy, keeping the net debt to EBITDA -- the net debt-to-EBITDA ratio below 3.5x. In the previous slides, I have been referring a lot to the volatility we see in the energy markets, how our integrated business model has helped us navigate in such conditions, and how we prepare ourselves to face this market volatility. Such volatility is also evident from the increase of average spreads of power prices in the day-ahead market that has been recorded in the rest of the years. And of course, we do acknowledge that all of 0 negative power prices that we have started experiencing within the last 2, 3 years which have been embedded in our assumptions since it has become part of the environment we operate in. And that is why, on top of the significant renewables build up, but we are implementing. We are also investing in flexible generating assets in order to be -- to balance -- to be balanced in times of low renewable generation or profitability that may be driven by 0 or even negative power prices. We have a large portfolio, pumped hydro and gas assets, and we are also developing batteries and such flexible generation technologies can capture significant upsides in times of volatile power prices. In essence, we are trying to be present in different technologies to be able not only to address the volatility in the markets, but maximize our profitability as well through overall portfolio management. And it is equally important that we are not a pure generation company, but a utility with retail exposure as well. And this has helped us secure our overall profitability in times of lower power prices, offsetting the losses that we have experienced on the generation side. Therefore, we do have all the needed tools and instruments to navigate high priced periods as well as low priced periods and volatility between the 2 of them, between long-term periods and short-term periods or even in intraday. On top of this, we are also investing on our regulated and visible distribution activity, which is not affected by market volatility and provides stable and visible cash flows. Therefore, our overall integrated business model is predictable in terms of performance, which we target to further increase in the years to come as we implement our growth investments. Let me also make a special reference to the management team of PPC that has been implementing our strategy. This is a very strong team that consists of individuals with a wealth of experience from many industries and various countries. We bring in the team experience from energy, telecommunications, FMCG, construction, industrial processes, strategic advisory and others in several countries and several continents. Many of them repatriated in Greece in the last years for PPC. Each one of them, top on their field, all of us together absolutely capable to deliver the targets we've set and bring PPC to even greater heights. But before I conclude today's presentation, let me summarize the key goals of our plan for the next 3 years. In terms of financials, we are investing EUR 10.1 billion focusing on renewables, flexible generation and distribution networks. And this is fully self-funded, mainly through our operating cash flows and to a lesser extent, by debt, keeping our leverage ratio below 3.5x. Consider that around EUR 5 billion of those investments are discretionary. Please note that if needed, we might prioritize share buybacks versus CapEx. We are targeting EUR 2.9 billion EBITDA in 2028, a 45% increase compared to the EUR 2 billion area EBITDA, we target for this year. And by 2030, it will exceed EUR 3.2 billion. Our bottom line performance is also expected to record a material improvement with net income doubling by 2028, climbing to EUR 900 million. Dividend distribution further improves with DPS reaching EUR 1.2 in 2028. On the operational level, we are building our successful renewables rollout so far further increasing our capacity by another 6.3 gigawatts by 2028, increasing, at the same time, our focus on flexible generation assets to capture high value from the market. We are approaching towards the end of our decarbonization journey with our generation portfolio becoming coal-free by the end of 2026. And we are growing our regulated business as well with RAB increasing to EUR 6.5 billion. And we are doing all that, having as a basis of our strategy, our vertically integrated business model, which has been a source of resilience but also fueling our growth in Southeast Europe region. Through our announced strategy and investment plan, we are becoming one of the European leaders in the energy transition. Thank you all, and now look forward to get your feedback and your questions. Thank you very much. Ioannis Stefos: Okay. So we may now proceed to the Q&A session. As mentioned earlier, we will take -- we will start by taking questions here from the room. And then we will also answer any questions, that have not been covered, from the webcast. From those that -- from you that you are here in the room, please, if you want to make a question, please raise your hand, and we will bring a microphone to you. Okay. So we have the first question from Alessandro. Unknown Analyst: I have 3. First one is related to the Greek power market in the sense that your business plan has a significant amount of renewable capacity additions. I understand that the company is focusing on flexible capacity investments, but still the 1.5 gigawatts of batteries are covering only a portion of the output. So I wanted to understand how do you see in the medium term, the evolution of the Greek power market, if you see any risk? And I wanted to understand the extent of CapEx flexibility that you have on renewables, especially in light of the EUR 5 billion investments that you mentioned at the end of the presentation, does that -- could be done or not? Georgios Stassis: You may repeat the last part, I cannot hear you very well. Unknown Analyst: I was telling. I wanted to understand the extent of CapEx flexibility on renewables, especially on the EUR 5 billion opportunistic investments that you mentioned at the last part of the presentation. Second question is linked to the first one, and it's on the distribution business because I wanted to understand, well, the company has already increased distribution investments quite a lot in the last years. I wanted to understand if we can consider this as the upper threshold of investments in distribution because I understand that you also want to balance the tariff increase for customers. And the third question is on batteries. I wanted to ask if you could share some color on the types of returns that you see on this type of projects. We understand that you want to implement mainly standalone batteries. Yes, if you could provide some data on maybe the IRRs that you see in the Greek market nowadays. Georgios Stassis: Okay. Thank you very much. I mean, with regards to the Greek market and what we try to illustrate here is that you don't have on a stand-alone, the Greek market or the Bulgarian market or the Romanian market nowadays. These are markets which are coupled, interconnected and they work together. So when we do our analysis, we model the Greek market, but we also model Bulgaria and Romania and so on and so forth. We go to Hungarian and other markets, and we understand the interconnections, and we are resolving, let me say, the model in assuming the demand versus the trends we see and the different pace the countries are moving. For instance, in Greece, we moved very fast in the last years, and we did a lot of investments in clean technologies and the result of that is already visible, not only in our company, but in the market because Greece used be, for more than 20 years, if I don't mistake, a net importer and now has started switching becoming a net exporter. Why is this happening? It's happening because the internal generation mix is a little bit cheaper versus the rest of the countries, and therefore, somebody is asking this energy outside the country. What I'm trying to say is that in order to understand the Greek market or the Bulgarian, the Romanian, you need to think the whole. This is the first point, and this is how we work. Then considering that there will be a need for very big interconnections in the overall area, also in Europe, but interconnections take time. The bottlenecks that today exists between Austria and Hungary are reaching a limit right now on the capabilities of that region. And therefore, as demand is growing, we don't see the region following on the lower price trend of the rest of Europe, especially taking into account the Russia-Ukraine situation. God will, the war, we hope will finish soon rather than later. And then you will have the reconstruction of this wonderful country. And this will increase the demand of this country for quite a few years until they reach their own capacity internally. So this is draining up, it's juicing up all the energy on the north. Therefore, this is another important element. And the third important element is the energy transition that every country is doing and is doing it in different pace. There will be a lot of -- if I'm not mistaken, around 13 gigawatt of capacity, which will removing -- which will be removed from the system in the following years, especially in Bulgaria and Romania. Greece has already started earlier, we are close to the end of that. But also in Greece, we will start removing oil generation, we will start in the islands or we will start removing the older gas units. So taking all the situation together, you see today -- you start to think of the maximum penetration of renewables that you can have. And then you add batteries and as batteries are added, then the possibility of renewables can increase further and then you add more batteries and then renewables go back -- it takes an example of California, what's happening in California is a typical example. So we see -- we think that all our investments in our system analysis but also cross check with a lot of the researchers, Bloomberg Energy Finance and many others, let me just make a name, seem to more or less agree with us. But in this region, there will be a need for a lot of capacity, a lot of buildup of capacity and of course, the capacity that nowadays means renewables and flexibility. And this is what we do. On the other hand, I've said that around EUR 5 billion of investments are investments that are discretionary. What do I mean? We are in a constant check of every park, every investment we do before we started. We double check, even the very fact that we have a Capital Market Day on an annual basis. Why is this happening? Because we fine-tune every third year that we announce every time that we meet. And this is a system we will keep on doing. So we are checking every time. We will have the proper returns on the projects that we invest, and this is how we invest. I've said before, we will not hesitate to prioritize share buybacks versus CapEx. What I meant is that as the market is understanding PPC day by day and year by year, it should, in my opinion, upgraded significantly. And if not, we will be prioritizing more our buybacks because it's the best investment we can do for us. So this is a combination of how we will move in the coming years. Then on the DSO, very correctly, you said that we have increased our investments. We will keep investing. Of course, this is -- you need to be -- to fine-tuning what is the end tariff for the customers. There is no question that in Europe, all over the world actually, but in Europe as well now, my capacity as a Vice Chair of Eurelectric, we have done a study last year, showcasing the huge investments that need to happen in the European networks. They need to quadruple in the coming years. But if you quadruple the grid investments, it's impossible to be paid by the European citizens. So what we do, we increase so much as we think it's doable by the citizens. And the pace we have, we think we are in a correct way. This is the third point. The fourth, I don't remember what you asked at the end. Unknown Analyst: On BES. IRRs on BES what you're seeing. Georgios Stassis: On BES, we see returns around 8%, 9%, closer to 10%, let's say, 9% to 10% on BES right now. Unknown Analyst: A few questions from my side. You talked about Southeastern Europe. Do I understand correctly that your business plan incorporates investments in -- beyond Greece and Romania in the other countries that you have presence like Italy, Bulgaria and Croatia. Do you -- will you consider investing in other countries in Southeastern Europe as well? This is one question. If you -- if there are opportunities in -- if you find opportunities, could you consider acquiring retail in the countries that you have presence beyond Greece and Romania? And regarding batteries, you talked about 1.5 giga, if I'm not mistaken. What could cause delays in your business plans in developing batteries, especially in Greece since you start from 0, as I understand? Georgios Stassis: Well, I'm starting from the last one, not from 0 because we have a very strong pipeline of batteries projects actually from 1.5 gigawatt of batteries projects. 1 gigawatt is fully secured. We have everything we need and we are in execution. It's a matter of construction, so we will build them. I would say 2/3 are fully secured on our battery ambition and 1/3, we will work in the coming years to secure them. So we are very relaxed with our batteries. We -- actually, we're even more relaxed because we have our customers, we have our demand and the tons of developers are knocking our door every day, asking to find an agreement to develop batteries. We see a very big enthusiasm. We are very selective on the projects with you. Already 2/3, as I said, is secured, and we will find the best of those for the last 1/3. Now about other countries, of course, we will keep investing in all the countries that we have opened. We are investing as we speak in Italy. We do solar. I think Italy will be a good market for batteries, but it's not a must, we will see. We will be investing in Bulgaria. We'll be investing in Croatia. Of course, about majority of our investments is in Greece and secondary in Romania and then the rest. But all of them have the characteristics that we like these countries. They are interconnected to the same system, which is linked to the periphery of the Southeast Europe with the energy perspective that I described earlier before. So we will not invest in countries which are not interconnected or are not part of the European energy system. Having the strategy of the regional play, the strategy of the vertical diversification means that you need to go in countries which are touching each other with fiscal interconnections, but also setting the same rules of the game, the same European trends. So we will not grow in other countries. We might do spontaneous, for instance, little things here and there, but very insignificant. Now about retail. I think when you are looking at PPC, given the vertical integration that I've talked many times, we have delivered in low commodity prices, very high commodity price and what is our strength at the end is our customers. We say the customers is the anchor of our growth. It is truly like that. I mean having the demand of the customers, we are able to build behind all we need. PPC has no merchant risk in reality, 0 because we sell to the market, we buy from the market, but all we do goes to our customers at the end. And still, we are long on customers. And therefore, we pay a lot of attention on the customer-centric model to keep the customer base, not necessarily to keep it -- to keep the best part of the customer base, let me rephrase. And that's why you see us talking a lot about retail, talking about Kotsovolos, I have the slide for that because we see a lot of synergies there. You see the value of control is not directly the value of Kotsovolos, indirectly what it gives you. That's why we entered the retail service of telecom because it's another way to approach a customer. We want to -- we are approaching the customer in a holistic way, and we want to preserve that in many different ways in order to keep the demand and having the demand to do all the play behind it. Therefore, we don't need a bigger share in Greece, of course. Actually, in Greece, we will keep on losing. Actually, we are losing in a far lower pace from what we thought initially. So we're doing something very good in Greece. In Romania, we are in a stabilization period right now because Romania moved from the regulated base back to the free market in the last year. So we need to stabilize there in the coming years. May be in the longer term to increase a little bit, but always through our own organic operation. In other countries like Bulgaria or Italy, Italy, particularly could be an opportunity of growing inorganically in the supply sector. But only we find something attractive, it's not a must. In general, talking about M&A, we are not looking any segment in a big way. We will be looking M&A only opportunistic in whatever we find valuable to fit our strategy. We don't need M&A to deliver our targets. That's it. Ioannis Stefos: Again, if there is any other question from the room, you may raise your hand and we will bring the microphone to you. Ella Walker-Hunt: Ella from Citi. I was wondering, given that -- in the first 9 months, you've already achieved more than 80% of your full year guidance. I'm wondering why there wasn't a sort of guidance upgrade there for the full year? That's my first question. My second question is to do with the distribution CapEx actually. Does that include any subsidies that wouldn't enter the RAB? And if so, can you just give us some -- does the distribution CapEx include any subsidies that wouldn't enter the RAB? Or does it 100% of the -- of the CapEx going to the RAB? Georgios Stassis: Okay. So about our net result. We started the year saying that it's not a good year from the hydro perspective, for those who are following us, they know very well but unfortunately, this year is not a good year from a hydro point of view. We managed to have -- already a result that we wanted to have. We think we will keep it. Actually, our target was to do above EUR 400 million, and we think we will do above EUR 400 million. But we still have reduced hydro reserves when we enter the last couple of months. Of course, rain is coming, and this is very good. But we think right now, given the seasonality of our market from quarter-to-quarter, it's more prudent to stay on our initial projection. Although we might also overpass it a little bit by the end of the year. This is how we feel. Then on subsidies, in Greece, no, in Romania, there are part... Konstantinos Alexandridis: Yes, there are some subsidies included. That's why we do not include those in the RAB. So that's why you do not see a significant ramp up in line the distribution of Romania. Georgios Stassis: Because in Romania is a part of a period there are a lot of additional investments, which are fully subsidized by EU and they don't accept inside the RAB. This will be something for 1 or 2 or 1.5 years. Ioannis Stefos: Okay. Thank you, Ella. We have another question on the back. Richard Alderman: Richard Alderman, BTIG. Just a couple of clarification questions, if I may, please. You said you have absolutely no merchant risk exposure. Does that mean then you have absolutely no trading profitability contribution within the plan. And then also just to clarify your thoughts on -- you talked about the risk of weaker gas prices from the middle of '26 onwards. How long do you think that weakness could last? What's your worst-case scenario? Georgios Stassis: Sorry, can you repeat the second part because I can't hear you very well. Sorry for that. Richard Alderman: I changed microphone. Is that any better? I think I'm feeding back from the speaker. The first question is, do you have any trading profitability within your generation mix? You say you have 0 merchant exposure. So I'm just clarifying whether you have any trading profits inside FlexGen as per other utilities? And then the second question is, you talked about the prospect of weaker gas prices. I'm just wondering what your worst-case scenario is for those weaker gas prices from, say, mid-'26 onwards? How long does that last? What could that do to regional power prices? Georgios Stassis: Yes. Okay. Thank you very much. We don't do significant prop trading. So we don't have, in our numbers, big profitability from trading, it's insignificant. Our energy management is focused primarily on managing our own internal portfolio. We do some trading, but it is insignificant in terms of margins. Then on the gas prices that I've told -- I've said, do you want to take that? Konstantinos Alexandridis: Yes, of course. So what we have said is that according to the plans that we have, we expect that the gas price will be moving down to '27 when looking beyond the '26 period, '26, '27 and as I said, we have tested our numbers even versus a further decrease, but this -- we consider this to be a remote scenario given that the pressure that will exist in terms of the LNG needed for Europe will not allow for further decrease below the '27 area that we have forecasted. Ioannis Stefos: Okay. So we can switch to the webcast. And in the meantime, if you think of something at this moment from the room, we can come again back. We have a question about the 9-month performance and the working capital. We have seen a negative working capital in Q3. If we expect this dynamic to reverse and why, in the fourth quarter? Konstantinos Alexandridis: Yes. This is based on the seasonality that we experienced all these years within the group. We expect that by the end of the year, we will be positive in terms of working capital usually, the 9 months results include some sort of pressure on our working capital. And therefore, we do not foresee any problem for the year-end. Ioannis Stefos: Okay. We also have a question that relates to our plans to explore any opportunities in Romania for gas capacity. If we can provide more color on this. Georgios Stassis: Yes. We think that we can do some gas in Romania, and this will be mostly acting as a picker. I cannot disclose exactly which locations we think we have -- we are very close in finalizing 1 or 2 locations. But this will be a total not exceeding, let's say, 100, 150 megawatt more or less. But because we are still negotiating. I wouldn't like to expose the exact locations. That's it. Ioannis Stefos: Okay. So another question from the webcast relates to our telco business activity. Three questions about that. The first one, if and when we are planning to launch a voice service as well? Georgios Stassis: Very shortly. Ioannis Stefos: Okay. The second, if we would consider starting bundling telecom with energy in the retail market? Georgios Stassis: Quite shortly. Ioannis Stefos: Okay. And the third one is, apart from the EUR 420 million that we have already deployed as capital, how much likely is it to invest in connecting customers, what is the additional amount, both for connecting customers, but also for the retail part of the business? Georgios Stassis: That's the beauty because we already are very, very, very big in retail in general. We are not building new stuff for our retail. We are servicing our customers with the existing retail engine we have for energy. So we don't have additional billing or whatever you need to do in order to serve the customers. We have everything in place already. We have huge synergies with our current activities. So I would say almost 0 is the additional investments we do internally to serve the retail. On the other hand, of course, you have customer-related vertical costs when you do the connection, and this is passed through to the customer. Ioannis Stefos: Okay. Clear enough. So another question about the data center that we discussed in the presentation, how close we are at securing commitment from a hyperscaler? And if we could -- let's say, at what point in time, we believe that this would cease to be an optionality and become part of our business plan? Georgios Stassis: Well, that's, of course, a very important question and very difficult to answer because you see there's a huge investments happening in the United States, and people are struggling sometimes to raise the debt needed to perform these investments. So everybody is focused right now there. As I said, this is an optionality for us but a very important optionality, it is -- and it will be transformational if and when it will be happening. I don't -- we have very good discussions with several of them. And the way I understand them, I believe that probably -- and I said this as well in March when we first discussed about that. I would think that somewhere next year, end of next year, we will have a clear picture on this project. And by the way, anyhow for us, this time is needed because we are doing all the analytical engineering and permitting. So I think we will end the next year with a fully permitted project, which is not yet done, fully permitted project and with a clear answer. Ioannis Stefos: Okay. Thank you. Another question about the CapEx. Given the fact that we have already announced a EUR 10 billion CapEx plan for the next 3 years, and our leverage is at 3x, net debt to EBITDA. And at the same time, we are also distributing dividend. If we would see any risk of ourselves at a point in time to need additional capital in order to preserve this headroom that we have -- this threshold of 3.5x. Georgios Stassis: There is no need for any said capital increase in PPC at all. So we will not pursue them at all. I'm very firm and clear. Ioannis Stefos: Okay. So another question about -- if we can provide an update about a possibility of waste-to-energy project in Kalamia, Northern Greece. Georgios Stassis: The waste-to-energy regulatory regime is in discussion in Greece. There are consultations going on. The Hellenic Republic has opened the dialogue. We are not very interested into entering in this business other than in Kozani, where we are -- we have a specific area where we have a district heating. So our interesting angle is coming from that fact. We are waiting for the regime to finish in order to take our final decision in order to see if we will add to the district heating service we give to the nearby city, also a waste-to-energy part or not. Ioannis Stefos: Okay. So there is also a clarification to provide about the CapEx plan. We mentioned that EUR 5 billion is discretionary CapEx. If we can, let's say, provide a clarification what exactly we mean by that? Georgios Stassis: I think I just explained. Ioannis Stefos: You just explained, okay. Okay, I missed that. I missed that. Okay. Okay. So there are no other questions from the webcast. Richard Alderman: Richard Alderman, BTIG again. Just coming back to the data center point and your applications going through the next 12 months for more planning to get the whole project ready for a customer for a data center hyperscaler. When you think about all of the changes you're making in your FlexGen portfolio, so you're closing gas, you are building gas, you're closing lignite, you're building a lot of renewables. In your plan, how much of your existing grid connection that you already own are you utilizing for yourself? And how much might be available for more than one data center customer to utilize with you, be it with or without new renewable CapEx or with or without a PPA? I asked the question because the trend at the moment amongst utilities is just to discuss the amount of powered land, as they call it, RWE is example of selling a project where you have land, grid connection guaranteed and energy services. Obviously, in your model, that's a similar sort of strategy, but I'm wondering how much space you have over, say, the next 5 years to utilize that grid connection. Georgios Stassis: This is a very valid question. You're right. And the way we are doing it, designing it behind the meter, injecting it directly to our capacity is -- we'll be releasing also capacity from the system. So it's the same question from another angle. Let me say that in that particular area, we have availability of around 4 gigawatt that one could build, let's say, and we are building, we are using it. But when we will put the data center, we will use it through the data center to interconnect and therefore, we will land probably if we were and we will reach this point. When we will reach this point, we will add additional capacity to serve the market. It depends how you see it. Ioannis Stefos: Any other questions from the room? Okay. We also have some additional questions from the webcast that we can cover. The first one relates to the distribution CapEx that we are doing. If we can elaborate on the benefit of having EUR 900 million, more or less CapEx per year in the distribution business, given the fact that -- as the question says that we expect a low increased uplift in the distribution profitability and whether specifically the smart meters investments can benefit us on overall profitability? Georgios Stassis: First of all, the smart meters, they get an additional percentage of premium on the investing in -- you have 1% more. And any digital investments in Romania, they get 1.5% more. So all these investments, they get a bonus. That's why this is one -- it's very correct for the regulator to drive investments in that direction. So I think we need to always to have this in our mind. Ioannis Stefos: Okay. Another question about the AI initiatives that we touched in the presentation, and we have made a calculation or quantify what could be the return until 2028 from these initiatives? Georgios Stassis: Well, we have assumed -- we were quite conservative, I have to say, because all the world is just entering this story. In our worst conservative calculations, we have assumed in our plan EUR 50 million saving because of this, which I think is very modest. And we will be able to forecast and project better next year as this plan will develop. Ioannis Stefos: Okay. Another question about the telco business, whether we would consider to do something similar as we are doing in Greece in another country. Georgios Stassis: No. No, because that was a very specific case in Greece. Greece has 75% of its distribution network, aerial. There's no other country in such a high proportion of aerial network. So for us, doing this infra play in Greece, makes absolute sense. We are very cheap by rolling out this network. We have a rollout cost of EUR 160, somebody was telling me that the FTTH association was looking at an average of EUR 350 in Europe. So we have an average of EUR 160 just to give you an order of magnitude. So this is a very specific project for Greece that we found the opportunity and we entered. Ioannis Stefos: Okay. Also, if we can provide sensitivity for the power prices in terms of our profitability, I think [indiscernible] that you made a reference in your presentation, if you can again, repeat it because maybe it was... Konstantinos Alexandridis: Yes. So what we have said is that we have tested a downward movement of gas, gas price that, of course, affects the day-ahead market price and therefore affects both sides of the equation, both the generation, lower profitability and generation so what we are saying is that this 10% move on the gas price is sort of something like less than 1% in our profitability which means we will be losing something like EUR 20 million out of the EUR 2.4 billion in 2026, if we were just to see a huge jump by 10% further than what we have assumed. Ioannis Stefos: Also another question about the net profit estimate that we have, what is the average cost of funding that we have assumed for 2028? Konstantinos Alexandridis: Yes. Well, we have -- the blended cost of funding is close to EUR 4.2 billion as this is comprised of various elements that we have within our existing portfolio of debt, but also new ones coming in. Ioannis Stefos: Okay. Okay. If there is no other question as we speak from the webcast. The rest of them have been already covered. Not sure if there is any additional questions from the room? If not, I mean, we're close to 2 hours now. So we can conclude the event. Georgios Stassis: Thank you very much for being here and for also participating through the web. Thank you very much.
Operator: Welcome to the Soitec Half Year Results 2025, 2026 Presentation. Today's conference will be hosted by Pierre Barnabe, Chief Executive Officer; Albin Jacquemont, Chief Financial Officer; Steve Babureck, EVP, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations. [Operator Instructions] Now I will hand the conference over to Pierre Barnabe to begin today's conference. Please go ahead. Pierre Barnabé: Hi, everyone, and welcome to Soitec H1 '26 Results Conference. I'm Pierre Barnabe, Soitec's CEO, and I'm very pleased to be with you today as well as with Albin Jacquemont, our Chief Financial Officer; Steve Babureck, Chief Strategy Officer; and Alexandre Petovari, Head of Investor Relations. Before we begin, please take a moment to read the disclaimer included in this presentation. We have a lot to cover today. But before we start the formal presentation, let me share a few words about the current fiscal year. Fiscal year '26 is a special year for Soitec. As you know, I have decided to leave the company at the end of March after 4 years, and I personally recruited Albin as our new CFO, giving him a clear mandate to strengthen our financial discipline and clean up our balance sheet. This job has already been done and done very well. H1 '26 reflects that discipline and the priorities we set back in May, meaning focus on what we can control, give absolute priority to cash and take deliberate sometimes tough, actions to correct inventories and improve cash conversion. These actions have been fully launched, but the impact has just started to materialize. We are being methodical and sequential, managing our own inventories, optimizing working capital and adjusting our cost structure accordingly, while maintaining selective investments in strategic areas. At the same time, we are progressing on multiple fronts, expanding our product portfolio, preparing for new end markets and rolling out our new client and product-centric organization, which positions us to capture the next phase of growth. Our incubators introduced last May are also delivering promising results. We are identifying significant opportunities as key players explore SOI for advanced computing applications and memory. This is a large and fast-growing market, and we are at the forefront of materials innovation, combining cutting-edge R&D capabilities with the ability to industrialize rapidly and produce at scale, a unique differentiator for Soitec. These initiatives comes with a high risk reward profile. So we will remain prudent in our commitments until we see clear customer engagement. That said, recent developments confirm that our efforts are well targeted and aligned with where the market is heading. As you will see, I have asked the teams to continue executing this disciplined plan, combining financial rigor and strategic focus, so that Soitec emerges stronger and ready for its rebound. Let's begin with the main highlights of our first half -- first year -- first half year. Our H1 '26 performance reflects the actions we have taken to strengthen cash generation with lower production volumes to support the reductions of inventories. Revenue reached EUR 231 million, down 29% organic, compared with last year. Our 34.1% EBITDA margin mainly reflects the smaller revenue base and a temporary increase in inventories supported by continued volume production. Initial cost measures have had a limited impact so far, as expected, given their recent implementation. Their benefits will start to materialize in the coming quarters. Finally, our EUR 26 million operating cash flow reflects our effort to reduce production volumes to correct inventories and a temporary increase in working capital as inventories rose in H1 to support our H2 deliveries, partly offset by lower CapEx. Looking at revenue by quarter. Q2 confirms the expected rebound from our low Q1 '26 with a 47% sequential organic increase. Our first half revenue reflects different dynamics across divisions, strong growth from AI-related products with the Edge and Cloud AI division, up 34% organic year-on-year, excluding the impact of the anticipated major SOI phaseout, offset by continued weakness in mobile and automotive. Let's start with Mobile Communications. H1 revenue reflects the continued inventory correction at certain foundry customers as anticipated. RF-SOI inventories remain high, but they are going in the right direction. We expect further correction in H2 '26 and fiscal year '27. We also continue to expand beyond RF-SOI. POI remains a major growth driver with 11 customers in production and 12 in qualification. While we saw a temporary slowdown in Asia after a very strong initial ramp last year, adoptions continue to expand among leading fabless companies, supported by new design wins for flagship smartphones. Beyond RF-SOI, we continue to make solid progress in next-generation communication product with FD-SOI adoption advancing in Wi-Fi 7 SoCs for premium smartphones, confirming our position in future communication architectures. We are also progressing in our 18-nanometer FD-SOI road map as shown by the announcement on Tuesday of a design win from a key customer. FD-SOI technology brings advanced low-power computing with high level of reliability, which is critical for satellite communications applications. Our Edge and Cloud AI divisions continue to show strong momentum. In the first half, revenue reached EUR 96 million, flattish organic year-on-year, but up 34% when excluding the anticipated Imager-SOI phase-out, reflecting robust demand for AI-related products. The increase was mainly driven by higher Photonics-SOI sales, benefiting from AI-driven investment in data center infrastructures and by strong demand for FD-SOI across both edge and cloud applications. On Photonics-SOI, we are leveraging the AI acceleration across the industry, supported by large-scale CapEx investment. The technology stands out as the most efficient solution for high-speed optical interconnects, including co-package optics, which enable faster, more energy-efficiency and cost-effective data center architectures. Photonics-SOI continues on its fast growth trajectory from a very low point in fiscal year '22 to approaching $100 million in revenue for fiscal year '26. On FD-SOI, our product portfolio continues to expand, supporting new generations of AI computing devices and edge applications with strong customer engagement and committed capacity investments. On Imager-SOI, we completed the phaseout of first-generation product in H1 '26, which represented an impact of around $32 million. Residual purchase order in Q2 '26 generated a few million euro revenue. Let's move to Automotive & Industrial, where market weakness continues to weigh on activity. In a challenging automotive context, we continue to see increasing adoption of our products and rising content per vehicle, driven by infotainment, autonomous driving, functional safety and electrification trends. Power-SOI sales were impacted by inventory adjustment at customers following a strong restocking at the end of last year. We are preparing the transition to 300-millimeter to meet growing demand for battery management systems and vehicle electrification applications. FD-SOI adoption continues to progress, supported by leading foundries and IDMs, developing automotive solutions for ADAS and edge computing in radars, microcontrollers and wireless connectivity. On SmartSiC, we have revised downwards the market perspective set. When Soitec launched the program in 2021, reflecting intensified competition from Chinese monoSiC players. We are continuing to qualify 5 customers. While we are seeing growing interest in SmartSiC's efficiency benefits for next-generation power supply and data center applications, these opportunities are unlikely to materialize in the near term. Let me now say a few words about our new organization, which the entire Executive Committee has been working on for several months. This new client and product-centric structure strengthens Soitec's readiness to expand into new SOI and beyond SOI end markets and applications. It is built around 4 key pillars: one, the acceleration of our product portfolio expansion and diversification, structured around 5 established product lines, already industry standard or on their way to becoming SoCs, FD-SOI, Photonics-SOI, RF-SOI, POI and Power-SOI. Recent progress on the product development front supports our strategy to enter new markets and new applications with SOI and beyond SOI. Two, a more balanced customer, supplier and geographic base, expanding our ecosystem influence. Three, an innovation powerhouse driven by more targeted R&D investments focused on future growth opportunities; and four, agile industrial capacity management, ensuring optimized utilization of our state-of-the-art production tools and greater asset fungibility across sites. Let me now leave the floor to Albin for the financial review. Thank you, Albin. Albin Jacquemont: Thank you, Pierre, and good morning, everyone. Let me begin with the key financial highlights for the first half, some of which Pierre has already touched upon before taking you through the details of our financial performance. As Pierre mentioned, we have mandated teams across the organization to reinforce financial discipline and accelerate the cleanup of our balance sheet. I will update you on the progress we have made on this front. Our first half results reflect the deliberate actions we have taken to initiate a reduction in inventories in the second half of the year and to strengthen cash generation, all while maintaining close oversight of customer demand and inventory levels. We delivered revenue in line with our first half guidance, although organic revenue declined 29% year-on-year, reflecting continued complexity of the market environment. Our EBITDA margin improvement is largely attributable to a lower revenue base and should be viewed in conjunction with a temporary increase in inventories, supported by ongoing production volumes. Our net result was minus EUR 67 million, primarily reflecting nonrecurring items including the SmartSiC impairment and the one-off noncash foreign exchange conversion loss, recorded in the first quarter. Excluding these nonrecurring effects, current net income was broadly stable at minus EUR 2 million. Free cash flow was minus EUR 31 million, reflecting seasonality, lower revenue and a temporary increase in inventories ahead of second half deliveries, partly offset by lower capital expenditures. Turning to the balance sheet. Our position remains solid. We closed the half year with EUR 483 million in cash and investment, pro forma the repayment of the OCEANE, which took place on October 1 -- October 2025 and with EUR 145 million in net debt. This maintains a robust financial profile with 0.5x EBITDA leverage, including leases recorded under IFRS 16 and provides us with ample flexibility to support our strategic and financial priorities. Pierre already addressed the revenue performance, so let me move directly to the P&L. As you heard from Pierre, reducing working capital and reinforcing cash generation are top priorities, and we have advanced on these fronts. First, we actively managed fab utilization to better align production with planned deliveries, thereby paving the way for a reduction of our own inventories in the coming months. Second, we launched a comprehensive cost reduction program, addressing our major cost drivers. Third, we scaled back capital expenditures. These actions are all aligned with our objective to enhance cash generation, improve operational efficiency and secure lasting savings across the company while preserving our technological capabilities. The key message I would like to leave you with is that while these actions will take a few months to translate into meaningful results, we will remain relentless, systematic and disciplined in the execution. Gross margin declined 490 bps year-on-year, driven by 3 factors: the disposal of Dolphin Design, representing 120 basis points; lower fab loading as an initial step towards reducing inventories and an unfavorable mix price effect. Going into H2 2026, do expect a significantly lower loading of our fabs and that will weigh obviously on our gross profit. Net R&D expenses decreased by EUR 23 million year-on-year, reflecting the disposal of Dolphin Design, a favorable phasing of public funding and lower material purchases linked to reduced use of pilot lines. Excluding the effects of the Dolphin Design disposal and the timing of public funding, gross R&D spend was broadly stable year-on-year, underscoring our continued commitment to technology leadership. SG&A expenses declined by EUR 6 million compared with the prior year, driven by lower compensation-related expenses, tighter control of discretionary spending and the disposal of Dolphin Design. Other operating expenses totaled EUR 46 million and include a EUR 41 million impairment loss on SmartSiC, noncurrent assets following a downwards revision of business prospects as a result of increasing competition from Chinese players and EUR 3 million downward adjustment to the earn-outs related to the disposal of Dolphin Design. As a reminder, the SmartSiC program was launched well before 2022 at a time when prices for alternative competing products were significantly higher than they are today. For context, Dolphin Design acquired in 2018 generated EUR 40 million of operating losses over the period since its acquisition. We also incurred a EUR 17 million one-off noncash foreign exchange conversion loss in Q1 of our financial year. This loss results from the reevaluation of balance sheet, foreign exchange exposures following the depreciation of the U.S. dollar against the euro with the euro-USD moving from 1.08 at the end of March 2025 to 1.18 at the end of June 2025. As background, in 2021, the company began contracting euro-denominated loans at the level of our affiliate in Singapore, whose accounts are kept in U.S. dollars. Converting euro-denominated debt into U.S. dollars had been beneficial to our financial results as long as the U.S. dollar was appreciating against the euro, and we repeatedly recorded foreign exchange gains. However, in Q1 of our 2026 fiscal year, the situation reversed, leading to the foreign exchange loss recorded this quarter. Because experiencing significant foreign exchange volatility on our results is clearly not in line with our standards, we took action. As a first step, we implemented appropriate hedging instruments to prevent foreign exchange movements from impacting our financial results. This is now in place. In addition to that, we engaged external advisers to conduct a comprehensive review of our foreign exchange risk management framework, and this review is now well advanced. Now moving to the free cash flow. First, let me note that we have aligned our definition of free cash flow with prevailing market practices. The updated definition incorporates 3 key changes. First, all tangible and intangible capital expenditures are included in the free cash flow calculation regardless of how they are financed. Capital expenditures that were previously funded through finance leases and therefore, excluded from the CapEx base are now fully taken into account. Second, free cash flow now includes both interest received and interest paid as well as other financial expenses. Previously, only interest received was taken into account in the free cash flow calculation. Lastly, the free cash flow definition now excludes inorganic CapEx, which incidentally was nil over the period. Operating cash flow was EUR 26 million for the period, down EUR 103 million year-on-year mainly, reflecting lower EBITDA and an increase in working capital driven by higher inventories built ahead of deliveries scheduled in the second half of the year. Working capital resulted in a cash outflow of EUR 57 million compared with an inflow in the prior year. This primarily reflects the seasonal buildup of inventories to support second half deliveries and the reduction in trade payables, partly offset by a decrease in trade receivables following the strong fourth quarter 2025 activity. Capital expenditures were largely directed towards industrial investments, including manufacturing tools for SOI and POI products in Bernin and Singapore, upgrades to our industrial facilities and targeted IT investments to enhance operational efficiency. This results in minus EUR 31 million of free cash flow under the new definition. We maintained a moderate leverage ratio with net debt to EBITDA at 0.5x EBITDA at the end of H1 2026. Let me conclude my remarks with a few comments on the balance sheet. As part of the financial discipline mandate issued by Pierre to the teams, we have carried out a restatement of the prior year account. In accordance with IAS 8, we have retrospectively restated consigned raw materials as inventories with a corresponding amount recorded as trade payables to reflect the transfer of control upon receipts at our sites. This restatement has no impact on the group consolidated income, EBITDA, working capital, free cash flow or equity. As a result, EUR 37 million of additional inventories and trade payables were recognized as of March 2025. For context, this compares with EUR 31 million of consigned inventories as of September 30, 2025. As of September 30, 2025, cash stood at EUR 808 million, reflecting a temporarily high level of liquidity ahead of the repayment of the EUR 325 million OCEANE 2025 bonds, which took place on October 1, 2025. Post OCEANE repayment, net cash was EUR 483 million at closing. As of September 30, 2025, we are undrawn on the maximum EUR 150 million use of proceeds loans secured from EIB. Our available liquidity post OCEANE repayment, including our undrawn confirmed revolvers was EUR 603 million. Financial debt totaled EUR 953 million, up from EUR 782 million at the end of March 2025, reflecting the new EUR 200 million Schuldschein loans and prior to the OCEANE repayment. This brings my prepared remarks to a close. As you can see, we did not shy away from making tough decisions. As I mentioned, our first half performance reflects the mandate to take decisive actions on inventories, strengthen balance sheet discipline, reduce costs and improve cash conversion. While the initial measures were implemented in the first half, we will accelerate and amplify these actions in the second half and expect to see inventory improvement by year-end. Our focus remains laser sharp on generating positive free cash flow under the new definition by the end of the fiscal year. At this point, let me pass you on to Pierre to take you through our strategic priorities and guidance. Pierre Barnabé: Thank you, Albin. That's very clear. Let's now have a word on our guidance. On revenue, we expect Q3 '26 organic growth in the mid- to high single-digit range sequentially. For the end of this year -- fiscal year, we expect continued undershipment in RF-SOI as we pursue the inventory correction, persistent weakness in automotive and a strong momentum in Edge and Cloud AI, supported by sustained demand for Photonics-SOI and FD-SOI. On capital allocation, we remain fully committed to a disciplined and agile investment strategy. We now expect fiscal year '26 CapEx of around EUR 140 million, down from the EUR 150 million previously indicated and well below the EUR 230 million spent in fiscal year '25, reflecting our selective approach and focus on cash generation. We continue to leverage the fungibility of our industrial footprint to optimize asset utilization. On financing, we redeemed those EUR 325 million OCEANE 2025 convertible bonds on October 1 and successfully secured new funding. Finally, on profitability, our H2 gross margin will reflect fab unloading with headwinds from mix price, FX and lower volumes. Some important data points for profitability, a 10% decline in fab loading resulted in a 300 bps negative impact on gross margin. The 5% -- $0.05 removed in the euro-dollar rates represent roughly 150 basis points impact on EBITDA and EBIT margin. And our net exposure is about 95% hedged at around 1.10; as well deliberately reducing production to bring inventories down year-on-year by the end of fiscal year '26, while moderating our CapEx profile. All actions remain focused on securing a positive free cash flow for the full year. To conclude, H1 '26 was in line with our expectations. We are focusing on what we can control, taking deliberate actions to reduce inventories and applying strict financial discipline to improve our cash generation. Our new client and product-centric organization ensures tighter alignment between innovation, product road maps and customer needs, reinforcing Soitec's readiness to expand into new SOI and beyond SOI markets and applications. We are also progressing on our incubators with strong traction in advanced computing and memory. A large and fast-growing market, where Soitec materials innovation and ability to industrialize rapidly give us a unique position. I have decided to leave the company at the end of March, but I remain fully committed until then to deploying our new organization, accelerating the company's shift towards AI-driven markets and application and preparing Soitec for its rebound. We are strengthening the foundation of the company. Our growth potential remains intact in an addressable market set to expand at a double-digit pace. I have full confidence in Soitec's ability to deliver meaningful value. This concludes our remarks. Thank you for your attention. Now let's please move to the Q&A. Operator: [Operator Instructions] The next question comes from Aleksander Peterc from Bernstein. Aleksander Peterc: I have 3 to start with. So the first one is, if you could explain what drove the relative resilience of your gross margin and your EBIT margin in the first half? And how we should think about margins sequentially. You do cite headwinds into the second half on unloading charges. Could you quantify them? And when you say you have headwinds, is that implying a sequential decline in EBITDA margins in the second half? Second question is on your investment in SmartSiC. Is that now a total write-off? Or do you still keep assets on your balance sheet that are attached to SmartSiC? And can you also tell us what you're going to do now with Bernin 4. Is it going to be repurposed? What are you going to do aboutit? And then final question on your situation with your former licensee GlobalWafers. Now your press release suggests that the cross-licensing agreement between you and them has been terminated. But it seems to me that they continue to manufacture SOI wafers, they have a big fab being built in Missouri in the U.S., 12-inch fab that they described in their third quarter results as an SOI facility. So does this mean that they have a work around your patents? And if they do it, will others follow? Pierre Barnabé: Thank you, Alex. What I propose is the question one regarding the EBITDA H1 and H2 to be treated by Albin as well as the first part of your second question of SmartSiC, I will take over the B4 fulfillment as well as your third question on GlobalWafers, then Albin, please. Albin Jacquemont: Yes, sure. Alex, of course, what we are doing will have a meaningful impact sequentially and on the full year on the profitability very clearly. Like Pierre said, the priority for us is to reduce our inventories. In a context -- in market context where revenue is under pressure, it is probably not very easy. And what we are doing to achieve our objective is to significantly reduce the loading of our fabs. It's quite mechanical. When revenue is stable or under pressure, if you don't reduce the loading of our fabs, then inventories do not decline, and that wouldn't be consistent with our objectives. Now when you look at our profitability and our gross profit, I think that the 2 main key drivers of our gross profit are: first, fab loading, which is very important; and second, the mix and price. So what we will see in H2 is significantly lower fab loading, whereas typically, the loading of the fab would be higher in the second half of the year for the company. That will not be the case this year. We will see lower process costs, and we will see a much lower absorption of these process costs in the inventories. To put things -- to take -- answer your question with a different angle, idle costs or underutilization costs will be significant in H2. And that will weigh on the profitability. So yes, you should expect a sequential decline of gross profit, EBIT and EBITDA in H2. As for your second question, Pierre said that we review downwards prospects on SiC, but still, the product is -- has great technical capabilities, and we are in the process of qualifying with some customers. So we do expect some business, and the impairment that we took against our assets reflects our expectations. And overall, what we are doing is maximize the fungibility of our assets to minimize the financial consequences of these prospects being revised downwards. Pierre Barnabé: Then I will take over, if you don't mind, Albin, on the Bernin 4 capacity. First of all, we need to keep -- we need to keep in mind that we're going to continue and we'll have to continue to produce SmartSiC. First of all, because we have 5 customers today under qualification and pre-advanced qualification, and that is progressing on automotive applications. Second, we are working on new prospects for new applications in the data centers areas and the lower efficiency, let's say, management. And third, SmartSiC as a road map going to evolve and going to improve because this product is recognized and has an excellent product. That's the reason why we believe that despite the postponement in the business plan, this product is going to find several market applications in the future. And we need to keep Bernin 4 product line for SmartSiC. That said, as you know already, B4 is busy with other applications in our process because close to 1/3 of the footprint of B4 is dedicated for refresh, SOI refresh that is, as you know, a very important piece in our process, a very important milestone in our process. B4 is already partially used for refresh SOI. And talking about rebounds, B4 going to be used for the rest of the footprint for any other application, particularly around SOI, if necessary, to produce more of the product, we will have to deliver to our customers in the coming years. And we are not concerned by the ability to use as it is already the case, B4 for SmartSiC, refresh-SOI and other SOI production in the near future. Regarding your third question on GlobalWafers, then it has been said that we terminated our license agreement with GlobalWafers. We are today in a transition period of this application. Of course, you can't make SOI without using SmartCut and our dedicated and patented processes. Then we're going to observe in the future, in the near future the way GlobalWafers going to produce SOI product in their brand-new U.S. factories. And we are today in transition and in observation. Operator: The next question comes from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: One on the inventory situation, both on RF-SOI at your large foundry customers, and also, on the other hand, on auto and industrial market. Where are you standing right now in terms of level of inventory in mobile? Are you still in RF-SOI, are you still expecting to go back to 11 months of inventory in December or you are a little bit trending behind this target? And the second question is on -- a follow-up on the first one on fab loading. What was the fab loading in H1 exactly? And where do you see the loading trending in H2 based on the Q3 guide and what you can expect for Q4? And the last one is on the OpEx trend for H2 because in H1, you had big subsidies impact or tax credit, I don't really know, but the OpEx were quite low. How do you see OpEx moving to the back half of the year? Pierre Barnabé: Hello Seb, then I propose to take the first question, and I will ask Albin to relay me on the fab loading and the OpEx evolution. Then regarding inventories, what we said in July is that the equivalent 8 inches, 200-millimeter wafers in our customers' inventories, Soitec's inventories by our customers, were around 2.5 million wafers units. What we are measuring today, what we are observing is around 2.3 million, then we are clearly in a trend of depletion, that's a fact. And we want to focus on what we can measure, and this one is measurable. Then what we see is a continuous depletion of these inventories, meaning that some of the customers going to go for a minimum level of inventories. We can translate it in the fact and this is what we already said in July, and we repeat it right now is that H2 is going to be another semester of depletion to reduce the level of 8 inches wafers inventories equivalent by our customers. But we think also that the year 2026 going to see even further depletion to reach a level that's going to be pre-COVID. But what we believe is really to give you a maximum of information on what we can measure. And what we can measure is the evolution of the overall inventories by our customers. And 2.5 million equivalent 8 inches July, 2.3 million equivalent 8 inches September, and we're going to give you another point for the next call in February. Albin, for fab loading. Albin Jacquemont: Sébastien, yes. Sébastien Sztabowicz: In automotive, Pierre, where do you see the inventory? Pierre Barnabé: Sorry, I missed the automotive. For the automotive, of course, we are not a major player with Power-SOI, but we see what is observed everywhere in the automotive world, meaning that there are quite big inventories still, then Power-SOI is experiencing a big drop this year. We don't see, let's say, a clear rebound for the year after for calendar '26. It seems that what we have today engaged with some customers going to be sufficient for this year and next year, provided the execution of the existing LTAs. And we don't see, let's say, a clear rebound in automotive before 2027 so far on Power-SOI, linked to, of course, a low level of electrification volumes in units of cars that is not very high. The good news is that we see a shift with more and more qualification by new customers on 300-millimeter platforms that's going to give another [ double ] of oxygen to develop Power-SOI beyond 200 millimeter. Albin? Albin Jacquemont: On fab loading, Sébastien, look, traditionally, our loading is much higher in H2 than what it is in H1. For instance, last year, in H1, our loading was slightly below 60% in H1, and it was in excess of 80% in H2, that was for fiscal year 2025. In the current year, in H1, our loading was a little bit lower than what it was in H1 2025. And that was because the actions -- the decision, the actions Pierre, referred to have been taken in July. And there is a time line for us to -- a time lag, sorry, to adjust the production planning. So the decision we have taken will take full effect in H2. And for H2, I'm not going to give you -- I'm not going to share our forecast fab loading. But think of it as being slightly lower than what it was in H1 of the current fiscal year. So you see that compared to the fab loading in H2 2026 compared to the fab loading in H2 2025, it is much, much lower, and that's a very significant shift, which, like I said, we will have significant impact, temporary impact on our gross profit in H2 2026 fiscal year. Very atypical for Soitec. As for the OpEx, the first thing to say is that while we are telling you that our profitability will be will be lower, we do not stay idle, and we have engaged a comprehensive program to reduce our cost drivers. Our OpEx line is not very easy to comprehend in our net income because it is OpEx, what you see is a net of our gross OpEx, net of what has been charged to the process cost. So of course, what we are doing on the production has an impact on the OpEx level that you are seeing. On H1, as you could see, OpEx are down EUR 5 million. And for the full year, OpEx will be down as well. And in fact, the financial impact of what we are doing on our SG&A is higher than the EUR 5 million that you are seeing, but not fully visible on the P&L because of this charge-out framework that you see -- that we have in place. Operator: The next question comes from Francois Bouvignies from UBS. Francois-Xavier Bouvignies: I have a couple of quick questions. So Albin, maybe on this cost saving program that you are also delivering on top. Can you quantify a bit the cost saving program that benefit you could bring maybe for '27 once it's fully implemented or a bit more time line and details around this cost savings at the group level? And then the gross margin, I mean, what kind of gross margin do you target in terms of range post all these adjustments and inventory correction. How should we think about Soitec's gross margin in the medium term? And then my last question, if I may, is on POI. I mean it seems that you have good prospects and the penetration is increasing, but we feel like now your revenues are under pressure because of Asian customers. How should we think about POI trajectory from here? Is it going to recover like in the second half of the year? Or would that take longer? Albin Jacquemont: Yes. On cost savings, we did tell you that we did not shy away from transactions. To give a little bit of color, we have agreed with the unions about a thorough being put in place across the company. That does include absolutely everyone, not only the production, but also the innovation and also the G&A and functional departments. So it shows, it testimonies how resolved we are at driving costs out of the system. First -- that was the first thing. Second thing is that incentive related and the profit sharing related expenses will be lower and will reflect our results. So the impact of this is significant -- is significant and goes -- is above EUR 5 million savings that you see in H1. The third things that comes on top of that is that there is a frugality which is being put in place under the direction of Pierre across the company. And all in all, we expect the savings to be significant on the year. As for fiscal year 2027, we will see lasting impact of these savings, but we don't want to hamper the potential of the company for a recovery by doing inappropriate cuts into our resources. It's too early for me to -- for us to guide on 2027, obviously. Pierre Barnabé: Francois, on POI, to take your question. POI experienced a very, very intense growth last year to equip our Asian, particularly Chinese customers, and that really made our POI as a standard in this area. And we see clearly a relay coming from Western world customers for flagship smartphones. This year being, as we already said, a transition between these 2, let's say, these 2 moves and to shift of, I would like to say, continents. But we clearly see and we continue to see a 20% growth CAGR on POI because we see more and more adoption, more and more customers than plus 50% may be flattish for this fiscal year. And -- but we see, over the years, clearly, a strong growth, around 20% CAGR and more and more adoption. Francois-Xavier Bouvignies: And on the gross -- and on the gross margin potential for the company, I mean what kind of target do you -- anything you can add here? Pierre Barnabé: I'm trying to -- I will try to answer this question and help with modeling. The first thing is that we don't want any more to guide on the gross margin. And the reason for that is not because we don't have visibility on what the gross margin will be, but we don't want our action on the inventory reduction to be hampered or constrained by the guidance we gave to the market on the gross margin. So we don't guide. Nevertheless, you need to model what our gross margin will be and we'll help you in so far as we can. So a few things for you to know. When you look at our costs, of course, raw material cost is 100% variable. So needless to elaborate on this. When you look at our direct manufacturing costs and indirect manufacturing cost, I would say that around 30% are variable, 70% are fixed. So if you combine these manufacturing costs with the raw material, it's 1/3 fixed, 2/3 variable. And to go a bit further helping you with the modeling, when you look at our cost split in terms of cash and noncash that may be useful because we fully realize how difficult it is to model, I would say that our manufacturing costs are approximately 70% -- 30% minus cash and 30% plus noncash. And I hope that helps. Operator: [Operator Instructions] The next question comes from Jakob Bluestone from BNP Paribas Exane. Jakob Bluestone: Firstly, you made a comment, I think it was part of the SmartSiC write-down around increasing competition from Chinese players. And I just wanted to clarify, is that just purely for SmartSiC? Or are you seeing broader competition emerge from Chinese players? If you could maybe just clarify that comment. And then just secondly, I think you mentioned further inventory destocking in FY '27. So maybe if you can maybe put that in the context of where do you see the EUR 2.3 million kind of going next year? And is that your expectation that, that's the bottom? Or just kind of what are your thoughts around FY '27 in the context of the comments you made on inventories? Pierre Barnabé: Yes, Jakob, on the first question, yes, very fierce competition coming from monoSiC has impacted our SmartSiC, let's say, initial plan that was built in 2021. And we revised it to really bring SmartSiC as a premium product that fits with the 5 customers' expectations we have today under qualification. And of course, competition is everywhere. But so far, so quite good because we are maintaining our market shares everywhere, including in China. As you know, if we look at just RF-SOI that used to be our mono product a few years ago, and we're still, of course, observing cautiously this market, we are proceeding with many tier downs of smartphones coming from any integrators, any OEM, and we clearly see that SOI is a standard, first for particularly radio front end and more and more for filters with our POI solutions. And in many cases, it is Soitec solution. Then our market share today are, let's say, protected because we continue to innovate because we are able to deliver in terms of quality to our customers wherever they are, including in China. But that said, we are not naive, and we are very picky in the observations on any players trying to promote SOI-like solution. But today's impact, we have clearly disclosed that concerns the monoSiC particular competition that is changing the trajectory of SmartSiC. If we look at the evolution of the 2.3 million 8 inches equivalent inventory Soitec by customers, we clearly -- we're going to continue to undership. It means that the trend of depletions going to continue semester after semester for sure. Then in H2, we're going to undership. And we do believe that even further, we're going to undership in the year '26. We don't know, at the end of the day, what's going to be the objective of each of our customers. It's going to depend on their strategy of inventories, but we are taking cautious assumptions, meaning that we do believe that many of them, a large part of our customers, going to reach the pre-COVID level of inventories, and we prefer to have this cautiousness than under shipment, depletion of the inventories, and it is highly probable the 2.3 million to decline semester after semester at minimum end of year '26. Operator: The next question comes from Emmanuel Matot from ODDO BHF. Emmanuel Matot: I have 2 remaining questions, maybe for Albin. First, what do you target in terms of inventories in the balance sheet, what normative level would be growing given the current visibility you have for the business? I mean maybe an indication as a percentage of your sales revenue would make sense. And second, has there been any progress in the tax adjustment procedure with the French authorities? Albin Jacquemont: Very good question, Emmanuel. The company said in the previous year, I wasn't there, that the normal working capital requirements as a percentage of revenue should be within a range of 30% to 40%. And I fully subscribe to what has been said. We will not guide for now in terms of components of working capital requirements, but I do confirm that 30% to 40% is something, which is a level, which is adequate, which should lead you to the conclusion that there is much cash generation opportunities ahead of us. Because obviously, as things stand today, we are at a much higher level. So that's for the working capital requirements level. As for the tax reassessment. So we are done, as you know, on responding to the request of the tax authorities. We did not receive an answer to our response yet. We will -- I will not forget. In the meantime, we have strengthened our defense, worked a lot with independent experts. I could not say more than that, but it should bring you some level of confidence on this. Operator: The next question comes from Craig Mcdowell from JPMorgan. Craig Mcdowell: Just the first one on pricing. You've talked about pricing in the context of gross margin. I'm wondering whether you can translate that back to what that's doing to your top line? And is this pricing pressure, more negative pricing pressure on particular products? Or is it particular customers? Any commentary probably on pricing impacting your sales would be helpful. The second question, I just appreciate your thoughts at this early stage on the merger between Qorvo and Skyworks, I understand both of them are your customers. Just if you could give any thoughts on what that might mean for both pricing, but also how that might impact your sort of channel inventory worked on, presumably, they'll look at some kind of synergy on inventory if they do merge. Pierre Barnabé: On the pricing than what we can see that, of course, there are continuous pressure depending on the product. But overall, we are in low single-digit decrease and quite limited because we are also promoting more and more high and added value product. We are also -- we are having road maps. There are projects that is increasing the overall value. And we are protecting, thanks to a good mix and a better mix, the level of prices to compensate the pressure we are getting. And of course, as a kind of parallel of this pressure that we are limiting at the end of the day, we are benefiting from lower prices from bulk providers, thanks to the fierce competitions we have today. Of course, we continue to have this discipline and to invest in our existing road maps to invest in our innovation and R&D to keep higher the value and the prices of our product and putting in the market new products and new features. Just I will not comment that much on the Qorvo-Skyworks, let's say, ongoing project of merger. What we can tell you is that these 2 companies are customers, but complementary customers. We don't see any de-synergies and potentially rather synergies, but it's going to be a long process, and we'll have to -- I'm sure, to comment later when they're going to be completed. Operator: This concludes the question-and-answer session. I'd like to hand the program back to Pierre Barnabe for any closing comments. Pierre Barnabé: Thank you all for following our H1 '26 analyst call and for the quality of your questions this morning. The next date in our agenda will be the release of our Q3 '26 revenue on February 4 after market close. In the meantime, we'll be very happy to host you in Shanghai on November 25, where we'll be hosting our first Soitec China Day with key industry leaders and customers from the China SOI ecosystem. This ends our call for today. Operator: Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Lixi Yuan: Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Lixi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us. Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group; Ken Wong, President of Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. We will begin with earnings presentations. And after that, we'll open the call for questions. Now let me turn it over to Yuanqing. Yuanqing, please. Yang Yuanqing: Hello, everyone, and thank you for joining us. Today, I'm pleased to share that Lenovo has delivered another quarter of record performance, capitalizing on the AI democratization trend, we have made significant progress in both Personal AI and Enterprise AI, driven by our clear strategy, operational excellence and the relentless innovation. The results reflect not only our strong performance today, but also our strength to leading the AI era. First, let's start at the group level. Last quarter, our group revenue reached an all-time high of USD 20.5 billion, growing at almost 15% year-on-year. Our profit grew even faster with adjusted net income increasing more than 25% year-on-year. All business groups and all sales geographies, delivered a double-digit year-on-year revenue growth. While our AI-related revenues reached 30% of the group total increasing by 13 points year-on-year. While uncertainties remain in the external environment, we are seeing positive signs of stabilization. We will continue to leverage our unique Global/Local model to navigate uncertainties, lead the industry with operational resilience and capture the tremendous hybrid AI opportunities. We are seeing today's AI era unfold along a clear path. The first wave was marked by the emergence of large language models, which triggered a massive demand for AI infrastructure, and led to our explosion in cloud-based and training intensive computing power. Now as large language models become increasingly commoditized, user priorities are shifting towards personalization and the private domain. This is accompanied by growing emphasis on efficiency, response speed, security privacy and sustainability. This evolution is steering AI development towards a more human and enterprise-centric paradigm unlocking substantial opportunities in AI devices of diverse form factors, hybrid infrastructure of public cloud, private cloud, on-prem data center and edge computing as well as AI solutions and services tailored to diverse needs. This very trend, the democratization of AI is now accelerating rapidly across both Personal AI and Enterprise AI. In Personal AI, consumers are increasingly looking for AI outputs that are based on their own experiences, memories, behaviors and knowledge. At Lenovo, we are addressing this demand for hyper-personalization by landing our vision of One Personal AI, Multiple Devices. You will witness this firsthand at our upcoming Tech World on January 6, 2026, where we will launch our Personal AI super agent to the global market. It orchestrates across wearable and ambient devices to see what you see, hear what you hear, and memorize what you have experienced. Furthermore, it leverages portable devices and personal trusted computing hubs using personalized algorithms and models to continuously learn from your habits and anticipate your intentions, so that it can think as you would think and act as you would act, and ultimately becoming your Personal AI Twin. I invite you to join us for this spectacular event at Sphere in Las Vegas in person or via live stream. Our IDG or Intelligent Devices group acts as the core engine behind the Lenovo's Personal AI strategy as demonstrated by strong results from last quarter. Its revenue exceeded USD 15 billion with a 12% year-on-year growth. PC market share exceeded 25% for the first time in our history with a sustained industry-leading profitability. Our AI PC leads the Windows AI PC category as a global #1. We also achieved a record-high Motorola smartphone volumes last quarter. Our momentum in AI device is particularly encouraged with its revenue mix within IDG increasing by 17 points year-on-year to 36% now. In Enterprise AI, the infrastructure market is undergoing an important shift from AI training in public cloud to AI inferencing increasingly happening on-prem under the edge. It's significant because the scaling of infrastructure will potentially drive even higher growth of devices and applications, further expanding our total addressable market. At Lenovo, we are driving our Enterprise AI strategy by helping businesses, turn data and knowledge into insights and value. Specifically, we started with helping enterprises collect and process various types of data, organize it into knowledge, leveraging the computing power of our hybrid infrastructure. We then apply AI models and AI agents to turn data and knowledge into insights and outcomes or engage the business processes. These are consolidated into repeatable, scalable solutions for horizontal functions or vertical industries are supported by our full-cycle services. Ultimately, our goal is to create Enterprise AI Twin for our enterprise customers. ISG or Infrastructure Solutions Group is the key driver of Lenovo's hybrid infrastructure. Last quarter, its revenue grew 24% year-on-year to exceed USD 4 billion. We continue to execute our Cloud Service Provider, or CSP, and the enterprise SMB dual strategy. For CSP, the business not only delivered a record fiscal Q2 revenue, but also demonstrated a robust growth in AI infrastructure with a strong pipeline. For Enterprise SMB, we are optimizing and even rebuilding our business models to better serve the distinct needs of enterprise and SMB customers. We are confident our infrastructure business will return to profitable growth soon. SSG, our Solutions and Services group. By leveraging the Lenovo Hybrid AI Advantage framework, strives to provide the solutions and services for enterprises on their journey of intelligent transformation. Last quarter, SSG achieved 18% year-on-year revenue growth, its 18th consecutive quarter of double-digit expansion with our operating margin over 22%. Projects & Solutions and Managed Services revenue mix further advanced to almost 60% of SSG's total revenue. We are accelerating this business further by unleashing the power of Lenovo Hybrid AI Advantage, combining the AI factory, AI services and the AI library of repeatable, scalable AI solutions for selected vertical industries and horizontal functions. To conclude, we are proud of our record results, confident in our vision and strategy and determined to capture the enormous opportunities ahead. It's our firm belief that by rigorously executing our hybrid AI strategy, we will not only deliver sustainable long-term returns to our shareholders, but also make AI truly personalized for every individual and every enterprise and eventually bring smarter AI to all. Thank you. Now let me turn it over to our CFO, Winston. Winston, please? Shao-Min Cheng: Thank you, Yuanqing. I will now go through the Lenovo's Fiscal Year 2025, '26 Second Quarter financial and operational results. The group continued its strong performance into the second quarter, maintaining strong momentum across our business groups and sales geographies. We delivered record fiscal quarter revenue of $20.5 billion representing 14.6% year-on-year increase with balanced double-digit growth across all business groups. Our adjusted net income grew 25% year-on-year to $512 million, and adjusted net income margin expanded to 2.5%, driven by higher revenues. Our second quarter results demonstrate our strategic potential to capture substantial AI opportunities. AI-related revenues now account for 30% of the group's total with high double-digit revenue growth year-on-year in AI servers and triple-digit revenue growth in AI PC, AI smartphones and AI services. Our PC business continued strong growth momentum and continue to grow share, reaching historic high of 25.6% global market share. Our smartphone business achieved a record high concurrent quarter activations, underpinned by solid end-user demand. ISG delivered strong revenue growth year-on-year and improved operating performance driven by growth in AI infrastructure and related industry demand. SSG delivered a record revenue quarter while continuing to expand operating margin. All reported geographies delivered double-digit year-on-year revenue growth, reinforcing our balanced strength across 180 markets supported by our Global/Local strategy and resilience and agility of our supply chain. Turning to liquidity and cash position. Our growth continues to be supported by disciplined financial management. In the second quarter, we delivered operating cash flow of USD 1.5 billion, while free cash flow climbed to $1.1 billion, supporting continuous investment in focused growth areas. This was driven by robust operational cash and effective working capital management with days of inventory reduced by 10 days year-on-year as well as disciplined expenditure. We also achieved a 31% year-on-year reduction in adjusted net finance costs, reflecting ongoing cost optimization and working capital efficiency initiatives. Our HKFRS net income this quarter was $340 million, primarily impacted by noncash items related to warrants and 0 coupon convertible bonds associated with our strategic transaction with Alat, a wholly owned subsidiary of PIF. Key adjustments to reported figures include $148 million noncash fair value loss from warrant revaluation and $28 million notional interest from the convertible bonds. Further details on other noncash items can be found in the supplementary financial materials at the end of this presentation. We encourage investors and analysts to focus on adjusted operating profit and net income, which excludes these noncash, nonoperating impacts and better reflect our core operational performance. Now let's turn to the performance of our business groups. IDG delivered another strong quarter. Revenue up 12% year-on-year to $15.1 billion, and operating profit climbed 11% to $1.1 billion. This performance reflects expanded PC leadership globally, obtaining a record high global market share of 25.6%. Growth was driven by high-margin segments, premium PC shipments grew 25% year-on-year, and AI PCs are now a major contributor, accounting for 33% of Lenovo PC shipments, solidifying our #1 position with 31.1% market share in the global Windows AI PC market. In China, AI PC with 5 key features now make up 30% of notebook shipments. Our cross-device AI ecosystem is creating a strong foundation for our Personal AI vision, delivering a seamless One AI, Multiple Devices experience that connects PCs, tablets and smartphones. Our continued investment in AI-driven innovation and R&D are delivering strong results. Lenovo remains the clear leader in the PC industry across all major categories. Globally, we hold the #1 position in both consumer and commercial segments, and we continue to expand market share in the second quarter. Within our PC portfolio, our leadership further extends into strategic categories, such as Windows AI PC, gaming and premium PCs. These are critical growth drivers as the industry transitions to a more intelligent and immersive computer experiences. Our global leadership is balanced across the world with #1 market leadership in 4 out of 5 geographies and market share gains in every region during the quarter. This broad-based growth underscores the strength of our manufacturing footprint and resilience of our global supply chain. Turning to our Infrastructure Solutions Group performance in the second quarter. ISG continues to benefit from the strength of AI infrastructure spend and our leading product and technology for advanced computing, delivering 24% year-on-year revenue growth to $4.1 billion with improved operating performance, driven by new customer acquisitions in cloud service providers and advancing enterprise and SMB transformation. ISG continued to experience strong growth in our Neptune liquid-cooling technology, which grew 154% year-on-year, reinforcing our leadership in sustainable high-performance infrastructure. We continue to drive sustainable growth in high potential areas, advancing enterprise and SMB transformation to capture opportunities in AI infrastructure and inferencing. Our AI server business achieved high double-digit revenue growth, fueled by rising AI adoption and supported by clear product launch road map. In China, our operations delivered consistent operating margin improvement, leveraging uniquely localized offerings and our ODM+ model to drive differentiation. In the second quarter, ISG broadened its customer base across CSP, enterprise and SMB segments with wins in the AI infrastructure, cloud computing and high-performance computing. These deployments include AI training clusters, GPU as a service and liquid cooling solutions, reinforcing our position in next-generation infrastructure. We also continue to see growing traction in AI inferencing workloads as customers deploy and scale AI applications across hybrid infrastructure, and we are actively accelerating our capabilities in this area. The enterprise server and storage industry has evolved over the last few decades and benefited from the infrastructure spend behind some of the largest industrial revolutions underpinned by data compute and storage. Lenovo's ISG business has an industry-leading technology and product excellence from its IBM x86 server heritage. Our leadership in high-performance compute and in liquid cooling positions in Lenovo well for the recent growth in demand due to AI training, and we are aligning our resources to capture the next future for AI inferencing in enterprise and SMB to traditional CSP and most recently, the emerging AI opportunities from CSPs. Echoing Yuanqing's remarks, we're entering the next stage enterprise and SMB AI. This represents a significant opportunity as the AI transitions from training to inferencing, driving increased demand towards on-premise hybrid environments. We've delivered another record revenue quarter marking SSG's 18th consecutive quarter of double-digit year-on-year revenue growth. Revenue rose 18% year-on-year to $2.6 billion, and operating margin expanded near historical high. SSG grew at twice the pace of addressable market driven by robust demand in high-growth areas such as hybrid cloud, AI and digital workplace solutions. Growth in Project & Solutions was driven by enhanced AI solutions targeted at key verticals such as manufacturing and retail. Revenue from TruScale DaaS and Infrastructure as a Service also increased year-on-year with notable customer wins across global markets. In addition, both support services revenue and bookings growth accelerated. Overall, SSG deferred revenue grew 17% year-on-year to $3.6 billion, providing strong visibility into future performance. With combined revenue for Managed Services and Project & Solutions now accounting for 59.9% of SSG's total revenue and AI services tripling year-on-year, we are capturing higher-value AI-led services business models. Over the past 4 years, Managed Services and Project Solutions have grown at a 25% compound annual rate significantly outpacing the addressable market. Our tech-driven offerings enable customers to optimize cost and deepen engagement, aligning with the industry shift towards subscription and consumption-based models that are gaining strong traction. Meanwhile, support services remain a solid, profit growth driver, supported by rising attach rates from devices and sustainable recurring revenue streams. We are proud to share that group continues to be recognized globally for our leadership in ESG. In 2025, Gartner Supply Chain Top 25, we ranked 8th highlighting our strong performance in building sustainable, resilient supply chains. Lenovo's factory in Monterrey, Mexico was recently added to the World Economic Forum's Global Lighthouse Network, the second for Lenovo, among only 201 leading manufacturing facilities worldwide. Our ESG scores also improved across CDP and S&P Global, and we maintain our AAA rating in the MSCI ESG Ratings for the fourth consecutive year. We've continued to build on our strong foundation of inclusion, the group was recognized as the Best Place to Work for Disability Inclusion in the U.S., the U.K. and Brazil. We're also honored as an Ambassador in the Workplace Pride Global Benchmark, reflecting our ongoing commitment to LGBTQ+ inclusion. In addition, we've deepened our collaboration with the United Nations Industrial Development Organization, focusing on circular economy initiatives. We also joined the Coalition for Sustainable AI, an initiative led by French government in partnership with UNEP, demonstrating our commitment to responsible innovation and environmental stewardship. These achievements reinforce our long-term commitment to sustainability, innovation and building a more inclusive future. Looking ahead, we are hopeful of global trade improvements. Our Global/Local model remains a key source of resilience and differentiation. We're also elevating our brand through major initiatives like the upcoming FIFA partnership and Tech World at CES 2026. With strong execution and continued focus on Personal and Enterprise AI, we are confident in translating our strategy into sustained profitable growth. Thank you. We will now answer any questions you may have. Lixi Yuan: Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions] While we are waiting for the questions, allow me to introduce the management team again. Other than our Chairman, Yuanqing Yang; and CFO, Winston Cheng, we also have the following business leaders with us today for Q&A. Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group -- of our Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. Our first question is from Albert Hung from JPMorgan. How big will the memory price impact on margin? What is our strategy to go through the memory cost hikes? And when do you expect to see the impact from inflated memory price? And what will be the memory impacts on our business segments? For these questions, I'd like to invite our Chairman and CEO, Yuanqing, to give some remarks. Thanks. Yuanqing, please. Yang Yuanqing: Thank you, Albert, for the question. So if you look at the industry and the market, so 2 key -- 2 key dynamics are top of mind. First is top of AI bubble. And the second is concerns about the supply shortages and the rising component prices. And I believe these 2 topics are related to each other. So let me give you my opinion. First, on the so-called AI bubble, my opinion is as with any major innovation, there will be intense investment and competition at the beginning, particularly in certain areas such as large language models. But overall, we do not see a bubble. The substantial investments in AI infrastructure are laying the groundwork for the next major technology wave, much like the early Internet [ field ] explosive growth in PCs, particularly actually triggered the smartphones first for sure, more PC and mobile applications as well. What's happening now is the next wave of AI democratization, spreading across both personal and enterprise use, which is perfectly aligned with Lenovo's strategy. So we are addressing Personal Hybrid AI as well as Enterprise Hybrid AI. So because this AI adoption accelerates, the supply shortages and high component costs are natural consequences of rising demand. Addressing this issue, so first, this is not new for our industry, supply shortage or supply cost up and down the normal situation for the industry. But I believe Lenovo is better positioned and more flexible and resilient than our peers to manage it effectively. So this is not just because of our scale. So indeed, we are probably one of the largest buyers in our industry, combining PC, smartphone, server storage business together. But also, we have the best supply chain in our industry. So we are very proud of that. So actually, we are ranked #8 as again global supply chain -- top supply chain is [indiscernible]. And we have a much stronger and better relationship with the suppliers. And typically, we signed a long-term contract with some top upstream suppliers. So that we are very confident we can manage this situation better than our competition to ensure not only we have enough supply, not just for short term, but for entire year, next year. But for sure, hopefully, the demand will not grow too fast than we forecasted. But also we believe we can get the most competitive cost so that we can remain competitive in the market while protecting our profit and margin. More specifically, for the next 2 quarters, we are very confident we can continue to drive double-digit growth in both our PC business as well as our server and infrastructure solution business. Meanwhile, we are confident that our margin and profitability will not be impacted during this period. Last but not least, from a longer-term point of view, so we have the mechanism in place to adjust the price and continue delivering on our commitment to ensure the market competitiveness while maintaining our margin and profitability. Thank you. Lixi Yuan: Thank you, Yuanqing. The second question is on PCs, and we also have a few questions on PCs as well. So we've got Anthony Leng from JPMorgan and Leping Huang from Huatai, asking about the PC outlook for the next year. And from Leping, he mentioned congrats on the industry-leading 7.3% OP margin in IDG and looking ahead, how do you assess the headwind from the rising storage memory component prices? Are you confident in maintaining this margin profile via pass-through? Luca, can I invite you to answer the questions. Luca Rossi: Thank you, and thanks, Anthony. Thank you, Leping. So maybe I'll start with the demand side. And here, I will say that we are definitely more optimistic than what we are seeing from some of the industry analyst reports. So with the visibility, order visibility we have, as of now, I think we are confident to continue that we will continue to grow at double digit, at least for the next 2 quarters and also for the remainder of calendar 2026, on top of that, Lenovo will continue to grow at a premium to market, so faster than the market while maintaining industry-leading profitability, which brings me to the second point and our Chairman and CEO already mentioned it. So regarding the memory SSD commodity cost up trend, first of all, I want to remind to all that this is something we have been able to manage several times in the past, in the previous many years, generally speaking, always successfully expanding our market share without impacting our profitability trajectory. And that is coming with the combination of our strong procurement power, strategic inventory preparation that you can bet we made and definitely also the ability to understand each single market globally so that we know how to price correctly. So I think the combination of all these things bring me to say that we will price in the right way to expand the market share, to continue to gain market share, like we did in the past. Now it's 9 consecutive quarters that we are gaining market share and maintaining our industry-leading margin and our industry-leading profitability. Thank you. Lixi Yuan: Thank you, Luca. The next question is from Cherry Ma from Macquarie. So this is on smartphone. She's asking the smartphone outlook for 2026 and what is our strategy for new product launches and the pricing given the component price increases? And what's the market to focus on given emerging market demand would tend to be weak when phone prices go up? So can I invite Sergio to address this question? Sergio, please? Sergio Buniac: Yes. So thanks for the question. I think, I mean, no different than what Luca mentioned. I think, number one, we expect the market next year to go single digit, a little faster in value for the price adjustments. We are not changing our strategy. So we have been 9 quarters premium to market. I think in the last few years, it's not the first time we see component pressures. We have navigated those cycles very efficiently given Lenovo supply chain position. Our strategy continues the same. I mean we are going to double down in double-digit market, share markets, continued expansion in B2B that is growing double digit, and we will continue to accelerate premium. We believe the premium devices will be a little less affected by the component costs rising. Our Edge and Razr franchises are growing 28% year-over-year. We continue to see much faster growth in that segment. And we are now further investing in the [ $400 to the $700 segment ] and above [ $700 ], you'll see some announcements. We also will continue to double down on ecosystem. It's a fast-growing segment for us, and not less important to continue to invest in monetization. Now market-wise, we are more diversified now. So we believe our footprint is not -- we're not going to change. We are seeing strong growth in markets like India, Japan, Italy, Middle East, Latin America, North America. So I think the footprint is appropriate for what we see ahead of us in the next 18 months. But our expectation is to continue to grow premium to market in the next quarters. Lixi Yuan: Thanks, Sergio. We've also got another question on SSG. So how do you capture opportunities in hybrid AI infrastructure, both in and outside of China? And what medium-term targets do you have for managed AI compute under TruScale? Yes. Ken, would you like to address this question? Kin Hang Wong: Yes. Thank you. Thanks for the question, Jim. Well, so when we look at the deployment of AI, and there's a lot of customer feedback in terms of key consideration, right? I mean those key considerations are cost, latency, sovereignty, privacy. And that's why I think our hybrid AI strategy resonate a lot with our customers. And also, as you can see, it's proven in our performance. So that's number one. Number two, that is why we introduced the hybrid AI advantage, which is basically 3 important components. One is about the AI factory. Second is for the AI factory to power the solution, the AI solution for our customer. And lastly is to put together by all these things by our AI services in order to help our customers to accelerate their AI journey and help them to achieve the fastest time to token, right? I think this is so important in AI deployment and also getting ROI out of it. The other thing that we focus on is that there's a lot of requirement on agility and flexibility. And that is why when we put the TruScale as a service on top of our AI factory, I think that is even more resonate with our customers. So with that, if you look at the market and especially on our performance, I think this part of the business is actually growing much faster than the overall market. If you look at the overall IT services market, it's growing at about low single digit, but this part of the business is actually growing at double digit, and we are for sure much faster than the market. So thank you for your question, Jim. Lixi Yuan: Thanks, Ken. So previously, we've also got a question from Randy from UBS asking, can we sustain the strong growth and margins on SSG? And moving forward, are we considering separating the warrant business? Would you like to take this question, Ken? Kin Hang Wong: Well, thank you for the question. If you look at our business, I think there are 3 parts of our business. One is definitely the attached business, right? The attached services is basically to make sure to elevate and enhance our hardware experience from pocket to the edge to the cloud. The other part of our business is an extension of the attached business, right, into managing all the hardware and software and services in the workplace, which is digital workplace solution. Second is based on our compute leadership, right? We help our customers to build hybrid cloud. And lastly is the sustainability business. I think this is one of the most sought after all over the world, right? And the last part is our AI services, which is, as I answered earlier on, this is what is every customer is asking for. But when I look at all these businesses, they're actually interrelated, right? If you look at AI services, I think it's AI are all powered by hardware, powered by compute, right? So you need to make sure you have the world-class hardware as well as the world-class experience in order to deliver AI ROI, right? So my point of view is it has to be integrated and each part of our business plays an important part of the overall AI solution. Lixi Yuan: Thank you, Ken. The next question also comes from Leping Huang from Huatai Securities. It's on our Alat strategic partnership. So could you share a timeline for the MEA manufacturing hub coming online? And when can we expect material financial contribution? Can I invite Winston, our CFO, to answer this question? Winston, please? Shao-Min Cheng: Sure, thank you, Lixi. Thank you Leping for the question. I think in February, our Chairman, YY actually went to do the opening ground ceremony. And last month, he also visited the Saudi and saw now a group over a very well developed plant. So I think I personally was there as well, very much amazed by the progress. I think this is even fast for China standards. So amazing progress in the foreign land. The plant is one of the most complete for us in the international market. We will have desktop PC, mobile and server. So one of the most complete plants that we have in our supply chain. In terms of the timing, we'll start testing next month with volume production really by the middle of next year. I think we are doing quite well in the business, particularly in the PC space, where we have a #2 position there and really continue to gain. And so I think from that basis, we're looking to expand our business there by way of server and also mobile, where we will now have a more focused opportunity. So a lot of dialogue, a lot of excitement for our plants, which have been recognized locally there as the most complete end-to-end manufacturing, not just simple assembly. So I think we expect to have quite a bit of traction and market expansion opportunity with the made in Saudi products coming out. Thank you. Lixi Yuan: Thanks, Winston. We've got more questions on ISG. So can you update us on the ESMB initiatives on ISG to drive profitability improvement? And how much should we factor offsets from the component cost? This question is from Randy Abrams from UBS. Can I invite Ashley to answer this question? Ashley, please? Ashley Gorakhpurwalla: Sure. Thank you for the question. Maybe I'll also address the general server market as well as part of that. Today, we're experiencing strong momentum in the ISG business. That's mainly driven by accelerating demand for AI infrastructure, various new customer engagements and also definitely our unique dual CSP and ESMB strategy. And we think this momentum will provide a strong foundation for our commitment to long-term sustained profitability in our ISG business. If I elaborate in CSP, we're seeing our industry-leading scale and our unique Lenovo R&D deliver strong growth across the customer base of hyperscale to now emerging neo cloud AI providers. And in ESMB, we saw a solid 30% year-over-year revenue growth, reflecting much stronger than market momentum. This is driven by our focus on new transactional models, commercial AI growth and Lenovo's high-performance infrastructure portfolio. We saw Lenovo's AI server growth at high double-digit year-over-year. And we are really proud of the growth in our Neptune direct liquid-cooling solution, which grew well over market at 150-plus percent year-over-year. So for all the reasons that YY mentioned earlier, we believe the server and data center infrastructure market will expand over the next year by high double digits in year-over-year revenue in the CSP segment and by high single-digit percentage year-over-year in the ESMB segment. We remain very optimistic that the compelling value of our AI portfolio and services continue to drive our ISG growth momentum and improving profitability. Thank you. Lixi Yuan: Thank you, Ashley. We've also got some follow-up questions on the general server demand in calendar year 2025. And how do you think the general server demand will trend into the next calendar year? This is from Howard Kao from Morgan Stanley. Perhaps if you can give a little bit more color on the general server demand side. Ashley, please. Ashley Gorakhpurwalla: Sure. Thank you for the question. As I said earlier, I think if we segment the server market through our lens of CSP and ESMB, we believe we'll see continued high double-digit growth in the CSP segment and high single-digit growth in the ESMB segment, which would include for us general server marketplace. What we believe that as YY mentioned, AI democratization is a very compelling transformation and productivity enhancement for our customers, along with our capability to deploy in a very quick manner with our services capability. And we think this market remains impacted by AI going forward. And so we remain optimistic that the general server growth in the marketplace that we see this year will continue in the next calendar year. Lixi Yuan: Thanks Ashley, great answers. For AI PC, we've seen some interest from analysts and investor communities. So Lenovo appears ahead in AI PC penetration versus our peers. So what is the strategy driving this competitive edge? And how durable are these competitive edge to us? This is from Jim Au from DBS. Can I please invite Luca to answer this question? Luca? Luca Rossi: Thank you. Thanks, Jim. So I will say we definitely have been working hard to build our AI PC franchise. And currently, as you probably know, we are the #1 in Windows AI PC with over 30% of share. I would say that the current results come from our innovation capability, combined with time-to-market, combined with the best-in-class cost structure and then our operational excellence and our unique, what we call Global/Local business model. So I think all these advantages that I mentioned, they are structural and they will continue to serve us in the future. But additionally, we are also not standing by, and we look forward to what will be the new AI native device era. And here, we will leverage our unique position for the breadth of our offering, PC, tablet, smartphone, IoT devices, all part of a single ecosystem driven by our vision of One AI, Multiple Devices. So on this front, you will see us doubling down with new innovations, a lot of new innovation coming at the Tech World at the Sphere in Las Vegas coming soon in January 2026 during CES. So I believe that this innovation -- new innovation will also serve us to help us to solidify our competitive advantage. So to be frank, our ambition is to continue to expand our market share above and beyond where we are today while expanding profitability at the same time. Thank you. Lixi Yuan: Thank you, Luca. So back to ISG. We don't really break down the CSP and ESMB, but what is Lenovo's expectation on the growth rate in these 2 segments in the coming 2 years? So this is from Robert Cheng from Bank of America. So actually, we've also got additional question from Jim Au from DBS and asking how do we capture the ISG opportunity through our Neptune liquid cooling service. Perhaps you can help address these 2 questions, Ashley. Ashley Gorakhpurwalla: Thanks for the question. As I said earlier, I think we remain pretty optimistic that the democratization of AI through both personal use and use by enterprise customers is a very compelling reason for our customers and what they tell us to drive enhancements in their infrastructure. And so we don't break out, as we said, our segmentation revenue. But we see double-digit and high double-digit growth in the CSP market that we serve in that segmentation and high single digit in general or the ESMB space as well, mainly driven, of course, by many workloads with AI really becoming one of the most important workloads that our customers are deploying. We believe that one of the factors in AI deployment for all customers, enterprise, small and medium business, global hyperscale Tier 2, it doesn't matter. It's really making sure that power consumption and the efficiency of power usage and cooling remains a factor within how they deploy, how they use, what they can afford. And so this is where a multi-decade development of industry-leading direct liquid-cooling and water-cooling system, Neptune, which we're now on our sixth generation of development of has become a very important engagement with our customers through services and capability. We believe that we've helped the most customers in the industry convert data centers over from air cooled to liquid cool, and that's reflected in our very, very high growth rates going forward. We continue to invest in the business and in the R&D and technology on behalf of our customers. And so over the next 2 years, we believe this will become one of the dominant factors in choosing Lenovo AI infrastructure going forward. Lixi Yuan: Great. Thanks a lot, Ashley. Next question is on our smartphone. So what is our smartphone AI strategy in leveraging Lenovo's strong PC installment? What is the current monetization road map for Moto AI? Sergio, can I invite you to answer this question, please. Thank you. Sergio Buniac: Thanks for the question. Well, our strategy, One AI, Multiple Devices, so full leverage across Lenovo AI capabilities. Our mobile monetization strategy is anchored in providing our customers a differentiated and integrated experience, which will drive growth for the business. So our approach links devices for multiple partners, Microsoft, Google, Perplexity, many others. And these efforts are fully integrated into the group AI strategy. So we believe the cross-device experience is going to be the key differentiator for our solutions in the future. Now in terms of monetization, we are looking to the device value uplift. So AI features drive premium attach rates, AURs and volume increase, preloads and ads and of course, very strategic AI partnerships with shared revenue. So a lot happening, and a lot of leverage from the broader group, and our vision is fully integrated with One AI, Multiple Devices. Lixi Yuan: Thank you, Sergio. We've got one more question on ISG. So in AI servers, you talked about the AI inferencing being a significant market opportunities. What is Lenovo's strategy to capture the potential growth upside? Ashley, would you like to answer this question, please? Ashley Gorakhpurwalla: Thanks for the question. In addition, as you mentioned, with the inference being a significant market opportunity, we think we're only in the beginning of that market opportunity. We see through our -- especially through our CSP business, we're able to work with customers on foundational frontier model training, and we're beginning to see the move into production AI models, agents and capabilities into the enterprise, which requires a focus on inferencing services capability and infrastructure. As an example, today, our recent addition to the portfolio of the NVIDIA RTX 6000 Pro family across, for instance, today, we're delivering on our ThinkSystem, SR675 V3 and the SR658, V4 has already become a significant portion of our AI server demand and delivery. And so we expect as we continue to build out the world's best inferencing capability, as Ken said, really delivering time to token that this becomes a very important part of our business and of into our customers. Lixi Yuan: Thank you. We've got one more question. So on the overall outlook, it's from Randy Abrams from UBS. How are our business tracking into the year-end? And what is the initial view for first quarter versus our normal seasonality? I think with this question, I would like to invite our Group CFO, Winston, to answer it. Winston, please? Shao-Min Cheng: Sorry, the question is -- can you just repeat? Lixi Yuan: The overall group outlook into the year-end. Shao-Min Cheng: As stated earlier, and I think we reaffirmed today by our business leaders, I think we are reaffirming what we have in the Street estimates even prior to the recent changes by some of the analysts, in particular due to the DRAM cycle. So we continue to see strength in the order, particularly for PCs, as Luca mentioned earlier. So we are confident of the estimates out there. I think they may be slightly lower, but haven't tracked in the past few days given some revisions in the target price, but maybe not the estimate. I don't -- this part of me I have not changed the check. But I think overall, we are reaffirming what we had outlook a couple a month ago or even before. So I think consistent with the [indiscernible]. Lixi Yuan: Thank you very much. I think for the next question, we would like to invite Luca to answer. This is from Goldman Sachs, Verena Jeng, and she was asking if there's any plan for AI or AR glasses or new devices outside of our existing portfolio. Luca, would you like to give a few comments on this? Luca Rossi: Sure. So as I alluded before, we are not standing by. And obviously, with this AI revolution that is in front of us, we are getting ready for that. That includes more AI native devices, more AI sensing devices. But of course, today, I will not launch or announce anything, but I will invite all the analysts to follow us at Tech World in the Sphere in Las Vegas, in January. We -- that will be the beginning of a journey where AI ecosystem -- One AI, Multiple devices, will be at the epicenter. Thank you. Lixi Yuan: Thank you very much, Luca. It's an exciting journey ahead, and we're very looking forward to our Tech World next year. So this is the end of our earnings announcement and webcast, and thank you, everyone, for joining this webcast. Thank you. Goodbye.