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Operator: Good day, and welcome to the Danaos Corporation conference call to discuss the financial results for the 3 months ended September 30, 2025. As a reminder, today's call is being recorded. Hosting the call today is Dr. John Koustas, Chief Executive Officer of Danaos Corporation; and Dr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Koustas and Mr. Chatzis will be making some introductory comments, and then we will open the call to a question-and-answer session. I would now like to turn the conference over to Mr. Evangelos Chatzis, Chief Financial Officer. Please go ahead, sir. Evangelos Chatzis: Thank you, operator, and good morning to everyone. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected today. These forward-looking statements are made as of today, and we undertake no obligation to update them. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these detailed safe harbor and risk factor disclosures. Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, time charter equivalent revenues and time charter equivalent dollars per day to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials. With that, let me now turn the call over to Dr. John Koustas, who will provide the broad overview of the quarter. John Coustas: Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for the third quarter of 2025. As we enter the final months of the year, operating conditions remain broadly unchanged. The war in Ukraine continued with no end in sight. And while the conflict in the Middle East is in the process of resolution, transit through the Red Sea has not yet resumed and liners are waiting for more permanent signs of stability to restart the transit. The recent escalation in trade and tariff tensions between the United States and China enabled trade to resume unhindered while the redirection of Chinese exports to the EU and other countries kept trading and container traffic at an all-times high during the third quarter of the year. The charter market remains robust and the idle fleet remains at all-time low. Demand for midsized and larger vessels continues unabated, and we have secured new charters for vessels opening as far out as the beginning of 2028. Shipyard slots for 2028 deliveries are becoming scarce and newbuilding prices continue to rise. We have selectively extended our newbuilding program at below market prices, and we have already secured multiyear employment for these new orders. Following the IMO's 1-year postponement of its net zero framework, we expect conventional fuels to remain prevalent in the medium term, even long-term decarbonization trajectory is unchanged. In relation to our newbuilding program, we recently added six 1,800 TEU vessels to our order book with scheduled deliveries between 2027 and 2029 and have secured 10-year charters for 4 of these vessels with a contribution to our contracted revenue backlog of approximately $236 million. On the financing front, we recently completed a $500 million unsecured 7-year bond offering with a 6.85% coupon. This is one of the most competitively priced deals ever achieved in the shipping industry for an unsecured bond with such tenor and is a testament of our superior credit quality. We intend to use the proceeds to redeem our 2028 $300 million bond as well as prepay in full some smaller secured bank credit facilities. We have already arranged secured debt financing for the majority of our newbuilding program and our fortress balance sheet that has been solidified with the recent bond issuance considerably enhances our capacity to pursue accretive investment opportunities that can propel the growth of Danaos into the next level. Our solid performance has enabled us to continue to deliver strong profitable performance, enhance our contract backlog and fund investments to reduce the age of our fleet and further cement Danaos' leadership position in the container charter market. We also continue to opportunistically invest in the dry bulk Capesize market segment, where we expect outsized returns due to supply constraints and ton-mile demand increase. Finally, I'm pleased to announce that we are increasing our quarterly dividend to $0.90 per share, consistent with our policy of yearly increases, while also striving to continue to build long-term value for the benefit of our shareholders. With that, I'll hand the call over back to Evangelos, who will take you through the financials for the quarter. Evangelos Chatzis: Thank you, John, and good morning again to everyone, and thanks to all of you for joining this call. I will briefly review the results for the quarter, and we will then open up the call to Q&A. We are reporting adjusted EPS for the third quarter of 2025 of $6.75 per share or adjusted net income of $124.1 million compared to adjusted EPS of $6.5 per share or adjusted net income of $126.8 million for the third quarter of 2024. This $2.7 million decrease in adjusted net income between the 2 quarters is the combined result of a $6.1 million increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet and a $2.5 million decrease in dividend income, partially offset by a $4.5 million increase in operating revenues, a $1 million decrease in equity loss on investments and a $0.4 million decrease in net finance expenses. As analyzed in our earnings release, the increase in our fleet produced $11.2 million of incremental operating revenues that was supplemented by an extra $1.8 million in higher operating revenues as a result of higher fleet utilization. Those were partially offset by a $4.3 million decrease in revenues of our Container segment as a result of lower contracted charter rates between the 2 periods and the $4.2 million lower noncash U.S. GAAP revenue recognition. Vessel operating expenses increased by $2.4 million to $52.3 million in the current quarter from $49.9 million in the third quarter of 2024, mainly as a result of the increase in the average number of vessels in our fleet, while our daily operating cost slightly increased to $6,927 per vessel per day for this quarter compared to $6,860 per vessel per day for the corresponding third quarter of 2024. Our operating costs continue to remain among the most competitive in the industry. G&A expenses increased by $1.6 million to $12.6 million in the current quarter compared to $11 million in the third quarter of 2024. Interest expense, excluding finance cost amortization, increased by $0.3 million to $7.7 million in the current quarter compared to $7.4 million in the third quarter of 2024. This increase is the combined result of a $0.9 million increase in interest expense due to an increase in our average indebtedness of $121 million between the 2 periods, and that was partially offset by a reduction in the cost of debt service by approximately 74 basis points, mainly as a result of a decrease in SOFR cost between the 2 periods. We also had a $0.6 million decrease in interest expense due to higher capitalized interest on vessels under construction between the 2 periods. At the same time, interest income came in at $3.8 million in the current quarter due to the increased average cash balances on our balance sheet, partially offset, of course, by declining interest rates. Adjusted EBITDA increased by 1.5% or $2.7 million to $181.6 million in the current quarter from $178.9 million in the third quarter of 2024 for reasons that have already been outlined earlier on this call. We encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures. Let me provide a few of the highlights. Since the date of our last earnings release, we have added $745 million to our contracted revenue backlog. As a result, our contracted charter backlog has considerably improved and now stands at $4.1 billion with a 4.3-year average charter duration, while contract coverage is already at 100% for this year, 95% for 2026 and at 71% for 2027 in terms of operating days, contracted operating days. Our investor presentation has analytical disclosure on our contracted charter book. As of September 30, 2025, our net debt stood at $165 million, and this translates to a net debt to adjusted EBITDA ratio of 0.23x, while 53 out of our 84 vessels are unencumbered and debt-free. This quarter, we have declared a dividend of $0.90 per share, which is an increase of approximately 6% versus the prior dividend. And we also continue to execute under our share repurchase program, and we currently have $86.4 million remaining authority to repurchase stock under our $300 million stock buyback program. Finally, as of the end of the third quarter of 2025, cash stood at $596 million, while total liquidity, including availability under our revolving credit facility and marketable securities stood at $971 million, giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you for listening to this first part of our call. Operator, we are now ready to open the call to Q&A. Operator: [Operator Instructions] The first question comes from Omar Nokta with Jefferies. Omar Nokta: A couple of questions for me. Just a couple of questions, one on kind of the industry and then on Danaos specifically. Just first, on the container shipping chartering activity we've been seeing. It's been a bit of a bumpy year in terms of lower trade and tariffs and box freight rates have gotten lower and there's kind of growing charter perhaps of the Red Sea. Return, even though it's still very, very early and people are still cautious. But yet, despite all that, you're still seeing very high demand for charters on your existing ships. But then also despite you having said you wanted to step back from the newbuilding market, it's been kind of difficult given the contracts being awarded. I wanted to just kind of get your sense in terms of what do you think is driving all of this kind of -- I don't want to call it, say, a frenzy, but just a strong appetite on the part of liners looking for ships, whether it's what's on the water on a forward basis perhaps, but then also looking for brand-new ships that deliver in '28 and '29. Just kind of that high volume of activity, what do you think is driving that? And can we expect that to persist as we get into 2026? John Coustas: Well, Omar. It's difficult, let's say, to answer exactly what is happening. What we see is that there is -- there was this, let's say, problem with tariffs. But tariffs themselves have not changed the overall the world, let's say, production capacity. And China, I mean, during this period didn't stop producing. It's just that the goods were directed elsewhere. And what is really interesting this time is that we see the dynamism in the market happening outside of the, let's say, the usual Western areas, I mean, Europe and the U.S. The market is developing quite substantially all over the other -- the rest of the world. And that is why also demand for midsized ships has been so robust because that's really where the demand increase is coming. So yes, I cannot really say how strong 2026 is going to be. I mean, as far as we are concerned, practically, even for 2027, we are mostly fixed. It's difficult really to make any prediction. And you see we will, of course, have a better idea of where the market is heading after the canal is opening again, which we believe now that it will be maybe an event of the first half of '26, although in that kind of area, the disarmament of Hamas is not happening. And I think this is really the most crucial question to ensure that this conflict is over. Omar Nokta: Yes, definitely a lot of moving pieces, and it does sound like the trade has clearly gotten much more complex. And then maybe just kind of thinking about Danaos specifically and the investment in the Capesize vessel you bought, that's your 11th ship. This one comes after you had bought the original 10 back in '23. What's maybe triggered this investment? And then also why this age range? And should we expect more of these types of investments going forward? John Coustas: Yes. Of course, our idea was when we entered that kind of market to really grow it. I mean, as a percentage, let's say, of our fleet, not in terms of, let's say, ship numbers, but at least, let's say, in terms of investment in value, all this dry bulk investment is less than 5% of our overall assets. So it's still really nothing, I mean, practically. And we definitely want to increase it. For the time being in the newbuilding front, still these vessels do not make sense. So we're trying to expand selectively in the secondhand market and mainly trying to identify good quality vessels. Omar Nokta: Okay. And then final one, just on the share repurchase program. You have been since inception, I think, in '22, quite active with it. You're also active in the prior, say, 3 or so quarters. Not much was done. I don't think you bought any stock in the last quarter. What's behind that? And what can we expect going forward? Or what do you think about the buyback from here? John Coustas: We are continuing. We have not really stopped. It's just the pace has been kind of smaller. We still believe that our stock is greatly undervalued. And we are continuing at a smaller pace, but we have not stopped. Evangelos Chatzis: Yes, Omar, we are resuming the share buybacks in the past few weeks, and we're still at it. Omar Nokta: Okay, awesome. And also congrats on the bond issue last month. John Coustas: Thank you. Operator: [Operator Instructions] The next question comes from Climent Molins with Value Investor's Edge. Climent Molins: Following up on Omar's question on the Capesize acquisition and your commentary on maybe wanting to expand your direct exposure. Could you provide an update on how you view your investment in Star Bulk? And secondly, is there any appetite to maybe expand into other segments such as Panamaxes or Supramaxes? John Coustas: Well, as we said, we are happy with our investment in Star Bulk. We have actually increased that position last spring when we saw a dip in prices. We are continuing. We believe that there is room for appreciation. As far as the other segments, no, we are not looking into other segments at the time being. Climent Molins: That's helpful. And following up on the Capesize side of the fleet, could you provide some guidance on your Q4 fixtures to date? Evangelos Chatzis: We do not provide guidance as to charter fixtures for the running quarter. Climent Molins: I understand. Make sense. Operator: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Koustas for any further comments or closing remarks. John Coustas: Thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you on our next earnings call. Have a nice day. Operator: Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.
Operator: Greetings. Welcome to the Cengage Group's Second Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Richard Veith. Sir, you may begin. Richard Veith: Good morning, and welcome to Cengage Group's Fiscal 2026 Second Quarter Investor Update. Joining me on the call are Michael Hansen, Chief Executive Officer; and Dean Tilsley, Chief Financial Officer. A copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com/investors. The following discussion and the earnings materials contains forward-looking statements within the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as believe, expect, intend, may, could, should, will, estimate, likely or similar words and are neither historical facts nor assurances of future performance and relate to future results and events, and they are based on Cengage Group's current expectations and assumptions. Forward-looking statements relate to the future, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and you should not rely on any of these forward-looking statements. Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. You should consider such factors, many of which are subject to the risks and uncertainties discussed in the slide presentation, which accompanies this call and in the Risk Factors section of our fiscal 2025 annual report for the year ended March 31, 2025, as may be updated by our quarterly reports for the fiscal year 2026. Any forward-looking statement made during this discussion or in earnings materials is based on currently available information and speaks only as of the date of this discussion and the date of the earnings materials. The company disclaims any obligation to publicly update or revise any forward-looking statements, whether written or oral, except as required by law. On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures, definitions and the rationale for using these measures and reconciliations of each to its most directly comparable GAAP financial measure are provided in the legal disclaimer and in the appendix of the slide presentation. I'll now turn the call over to Michael for an update on the business, followed by Dean, who will take you through the second quarter and first half details before we open the call for questions. Michael? Michael Hansen: Thank you, Richard, and good morning, everyone. Our second quarter results for fiscal year '26 demonstrates strong digital acceleration in our core business, partially offset by cyclical market factors in the K-12 and English Language Learning markets. Overall, our financial performance through Q2 shows adjusted cash revenue down slightly by 2% year-over-year at $872 million, adjusted cash EBITDA down 8%. Our U.S. Higher Ed business is performing strongly. First half U.S. Higher Ed adjusted cash revenue was up 4% year-over-year, driven by continued digital growth of 7%. Our work segment is thriving, fueled by ed2go, where first half adjusted cash revenue was up a robust 28%, demonstrating the power of our education for employment mission. We will continue to invest in this business to capture accelerating demand for workforce skills, including investment into relevant courses non-English language courses, improved pipeline conversion, distribution channels, outcomes data and skills verification to drive growth and help people meet their career aspirations. The headwinds impacting our overall results were primarily in our school and English Language Learning segments. Both faced a low adoption year and funding restrictions as well as political climate challenges. Despite this slow adoption here, we continue to position the business for success for the upcoming large adoption year supported by the updated Big Ideas Learning partnership and investments in go-to-market content and technology. We remain focused on sustainable growth. Our strategy is clear and built on a belief that trusted content is considered table stakes and value is shifting to workflow tools, outcomes data and skills verification. In this context, I will highlight 3 major initiatives we are currently driving. First, we are anchoring generative AI in our curated pedagogy based content. Our student Assistant 2.0 is live in over 100 products and the Instructor Assistant is on track for a January 2026 release. Second, we are transforming our school business with the launch of our new unified digital platform Explore, which is scheduled for release in January. The new digital teaching and learning experience will consolidate our solutions and embed AI to meet key customer criteria. This is a core part of our strategy to transform the school business into a largely digital business. Finally, we are continuing to invest in Cengage work by driving higher demand conversion and preparing for the implementation of Workforce Pell in July of 2026. In closing, we are continuing to execute on our education for employment mission and have a powerful portfolio of digital platform businesses that will deliver robust growth in both top and bottom line. I will now hand the call over to our CFO, Dean Tilsley who will provide a more detailed review of our Q2 financial performance. Dean Tilsley: Thank you, Michael. I'll now walk through the specifics of our financial results for the second quarter and the first half of fiscal year '26. The second quarter saw a material improvement on our Q1 results as we move through our Q2 sales period, driven by strong sales performance in our key higher Ed and Work segments, which represent around 70% of our revenues. K-12 exposed segments, including school and to a smaller extent, ELL, that performed in line with the expected headwinds due to 2026 being a known low adoption year, but we remain well positioned in the large California and Florida state adoptions coming next year. The management team retained a clear balance on managing costs by accelerating investment in AI, digital first and work funded by efficiency savings as we simplify our operating model. The strong performance of digital sales, rollout of new AI products and go-to-market investments position the company in a strong position for sustainable and profitable growth. To help you understand the true underlying performance of the business, I will provide normalized results and nonrecurring items alongside reported financials. Trailing 12 months adjusted cash revenue came in at $1.522 billion, down 1% as reported but up 1% year-on-year when normalized for nonrecurring items. Trailing 12-month adjusted cash EBITDA came in at $511 million, up 4% as reported, but up $33 million or 7% were normalized for nonrecurring items. Moving to the quarter. Q2 adjusted cash revenue came in at $612 million, flat year-on-year as reported, but up 1% year-on-year when adjusting for nonrecurring items. On an adjusted GAAP basis, revenues were up 1% year-on-year as reported. Q2 adjusted cash EBITDA declined 1.5% year-on-year but up 1% year-on-year when normalized to nonrecurring items. On a GAAP basis, adjusted EBITDA was down slightly with higher Ed and Work segment both growing strongly, offset by lower K-12 performance. On a year-to-date basis, adjusted cash revenues reached $872 million, a decline of 2% year-on-year as reported, with Q2 performance helping offset the 8% year-on-year decline reported in Q1. Normalized to nonrecurring items, adjusted cash revenues would be flat year-on-year and on an adjusted GAAP basis, revenues are up 1% year-on-year as reported. Year-to-date, adjusted cash EBITDA of $343 million represents a decline of 8% as reported and down 5% when normalizing for nonrecurring items. On a GAAP basis, EBITDA was down 2% year-on-year as reported. Now turning to performance highlights by segment. Higher education, which represents 50% of our business leads in our digital-first strategy and is leveraging strong tailwinds within its key U.S. market. Normalizing for the change in our Latin American go-to-market model and nonrecurring items, Q2 and H1 adjusted cash revenues at $303 million to $404 million, respectively, are up 2.5% year-on-year. Q2 and H1 U.S. Higher Ed adjusted cash revenue grew 4% year-on-year, driven by 7% growth in digital sales, improved sell-through rates and growth in institutional sales and pricing. Institutional sales at over $200 million year-to-date were over 20% year-on-year and now represent 53% of U.S. Higher Ed sales. Gale performance improved in Q2 due to an uptick in renewals and demand as we get past the uncertainty in funding related to federal action that impacted Q4 of '25 and Q1 of '26. Adjusted cash revenues were down 6.7% for the quarter versus a 15% decline in Q1. International adjusted cash revenues are flat year-on-year when normalized for the change in LatAm sales channel to a third party, leading to revenues being repurposed on a net basis in '26 versus growth in 2025. U.S. Higher Ed is a business of clear focus for the company, and we continue to invest in AI tools, products and go-to market to position the business for sustained revenue growth and continuous record of improving margins. A good example of this focus has been to hire new top talent to lead our U.S. and international sales and marketing teams, further driving the strong forward momentum for this business. Higher Ed Q2 adjusted cash EBITDA is flat year-on-year as reported, reflecting flat revenue and investment into AI and go-to-market to position the segment for sustained growth. Turning now to the Work segment. The work segment is a bright spot for the company in terms of revenue growth and opportunity and benefit from operational leverage. Q2 adjusted cash revenues were up 9% year-on-year and up 5% year-to-date, powered by ed2go up 32% year-on-year for the quarter and 28% year-to-date and CTE revenues, which were up 7% year-on-year for the quarter due to strong sales in the quarter. We are building on the ed2go momentum and increasing investment to capture the accelerating demand for workforce skills training, improving our pipeline conversion and expanding the number of courses, institution, geographies and languages that we operate in. For the first half of the year, Infosec and Milady businesses declined 5% year-on-year, impacted by federal budgeting pressures, government shutdown, and the recent immigration policy. We expect these pressures to continue through the rest of the year. Top line revenue growth, coupled with cost efficiencies due to our new operating model delivered Q2 adjusted cash EBITDA growth of 13% and 10% year-to-date, taking adjusted cash EBITDA margin to 51.3%, up 270 bps on a direct margin basis. The School segment, which only represents 17% of our total adjusted cash revenues continued to be impacted by 2026 being a low adoption year. Q2 adjusted cash revenues were down 4% year-on-year, which reflects a significant improvement on Q1, where revenues were down 22%, with no large adoptions such as the $40 million and new contracts signed in 2025. The sales team will be focused on winning open territories where they retained strong win rates. Gale adjusted cash revenues have declined 15% year-on-year, in line with expectations due to federal policy, creating funding uncertainty leading to market softness for renewals and demand for databases. The focus for school this year is to position the business for the large adoption year in 2027 and '28 were California and Florida, maintaining investment into AI tools, content and go-to-market capabilities. Q2 and year-to-date adjusted cash EBITDA year-on-year decline reflected lower revenue, new loyalty and considerable delivery for the revised Big Idea of many partnerships and a one-off $4 million bad debt charge related to Baker & Taylor. Moving to the final and smaller segment, our English Language Learning. Q2 adjusted cash revenue at $41 million were down 19% year-on-year and H1 revenues are down 15% year-on-year. Year-on-year comparisons were impacted by one large nonrecurring international deal in fiscal 2025 and headwinds from government policy. Normalizing for the exit from the Ministry of Education contract in Egypt and nonrecurring international deal, H1 revenues will be down 5% year-on-year reflecting federal funding headwinds in the core U.S. market. Q2 adjusted cash EBITDA is down 10% year-on-year when normalized for a nonrecurring international deal and H1 down 7% year-on-year, normalized for nonrecurring items. Turning now to cash flow, liquidity and debt. H1 cash flow performance reflects the flow-through of lower cash EBITDA and timing impacts that we expect to create in Q3. Technical issues with the new SAP accounting system caused delays to invoices going out during our key selling season, which has in turn delayed selection. These issues have now been resolved, and we maintained strong communication with customers during the period, no contractor revenue or loss, and we anticipate strong collections in Q3 and Q4. Our success in institutional sales is driving a change in revenue mix resulting in collection timing shifting from Q2 to Q3. And faster billings for School and ELL relative to fiscal 2025, again, due to not having any large adoptions this year, plus the revised partnership with Big Ideas many impacted cash. This will be partially offset in the second half by lower reimbursement to Big Ideas learning under the new agreement. The $42 million year-on-year change in leveraged free cash flow reflects a lower cash EBITDA, higher restructuring costs due to implementing our new operating model that will lead to future savings, higher taxes as we've improved due to improving profitability, offset by lower consulting costs and lower interest payments for margin reduction achieved through the November '24 repricing. Lastly, 2 preferred equity dividend payments were made in H1 '26 versus 1 in H1 '25, which also impacted cash flow. Liquidity position remains strong, with net leverage below 3x for 5 consecutive quarters. We expect this position to improve as we improve cash collection in the second half of the year and lower restructuring costs. Net leverage ratio of 2.8x represents an improvement in our trailing 12-month adjusted cash EBITDA as the cost saving programs continue to take hold, enhance year-on-year profitability. Cumulative deleveraging over the past 24 months, reinforces Cengage's capacity to navigate macro challenges while executing growth and transformation strategies. In summary, we continue to see robust performance in our key Higher Ed and Work segment, which are both set up for strong future performance. School and to a lesser degree, English Language Learning have faced some known headwinds in the first half of the year but we are well positioned to return to growth. Our cost structure continues to become more efficient, bringing up capacity for our continued investment to AI, digital first and [ Work ] businesses, while also improving margin. and the projected improvement in free cash flow and the substantial reduction in net cash interest underscore our strong financial trajectory and ability to generate value for our shareholders. We are now happy to take your questions. Operator: [Operator Instructions] This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by, and welcome to Weibo Reports Third Quarter 2025 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Ms. Sandra Zhang from IR. Thank you. Please go ahead. Sandra Zhang: Thank you, operator. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Weibo assumes no obligation to update the forward-looking statement in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F and other filings with the SEC. All the information provided in this press release is occurring as the date hereof. Weibo assumes no obligation to update such information except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials exclude certain expenses, gains or losses and other items that are not expected to result in future cash payments or are nonrecurring in nature or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks, we'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang. Gaofei Wang: [Interpreted] Thank you. Hello, everyone. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. On today's call, I will share with you highlights on Weibo's product and monetization in the third quarter 2025. On the user front, in September 2025, Weibo's MAUs reached 578 million and average DAUs reached 257 million. In the third quarter, Weibo's total revenues reached USD 442.3 million, a decrease of 5% year-over-year. Our total ad revenues reached USD 375.4 million, a decrease of 6% year-over-year. Our non-GAAP operating income reached USD 132.0 million, representing a non-GAAP operating margin of 30%. In 2025, our overall corporate strategy continued to focus on enhancing user value sustaining Weibo's leading position in hot topics and the entertainment content ecosystem while reinforcing the competitiveness of our social products. Building on this, we also leverage large language model to enhance our recommendation feeds and search products, aiming to increase our user base and engagement. Next, I'll share with you highlights in Weibo's product operation and monetization in the third quarter. On user growth and engagement, in 2025, our key product revamp is the upgrade of the homepage information feed, which put the recommendation feed as the default core feed. The revamp has largely rolled out in all users by late July. Alongside the information feed revamp, we also optimized our recommendation algorithm, especially for video content recommendation. During the summer vacation, leveraging the active entertainment events and hot topics during the summer vacation, we saw significant improvement in user engagement of the mid- and low frequency-user group. The per capita viewership, time spent and retention of the mid- and low-frequency user group grew double digits quarter-over-quarter, which in turn drove per capita time spent in recommendation feed for the whole user group to increase for Q3 quarter-over-quarter. In the third quarter, we implemented two key strategies. First, we enhanced the algorithm of the recommendation feed to improve user satisfaction with content, which matches their real-time interest. For example, in hot topic distribution, we established user behavior linkage between the recommendation feed and the search function. We use the view and engage with the hot topics in search function. They are showing more precisely targeted content in recommendation feed. This strategy has been proven particularly effective in enhancing engagement and retention among mid- and low frequency users of Weibo. Second, we enhanced our algorithm to better integrate video content into the recommendation feed, driving deeper content consumption. With the homepage information feed shifting from a relationship-based model to a recommendation-based one, video content could be distributed through our recommendation algorithms to reach more precise and broader user group on top of the traditional social distribution mechanisms. As a result, we saw a notable increase in the distribution of original and mid- to long-form video content in the recommendation feed. The enriched mid to long form video content extending user time spent in the recommendation feed and supporting healthy development of the content ecosystems. Meanwhile, we continue to enhance our interest-based content operation, strengthening large-scale content production by content creators around user interest and thereby improving the quality and diversity of content supplied to the recommendation feed. The restructuring of the information feed was strategic significance for Weibo, which is comparable to our transition from the chronological to algorithm-based sorting several years ago. In the short term, user experience for certain user group may face some challenges. However, from a long-term perspective, the increased weight of recommendation content and video content will strengthen Weibo's core competitiveness as a social media platform while laying a solid foundation for the sustainable and healthy development of our content ecosystem. While improving the efficiency of the homepage recommendation feed, we also strengthened social discussion in a relationship feed ensuring its role as the cornerstone of Weibo's differentiated competitiveness. In the third quarter, our efforts focus on two key aspects: driving interaction between content creators and their followers, and stimulating interest-based social engagement among users to fully boost the social engagement across the platform. First, to further drive the interaction between content creators and their followers, we upgraded the core fan mechanism and optimized the content reach and distribution. This significantly improved interaction efficiency in the relationship feed which is measured by the ratio of total interactions versus total viewership, resulting in double-digit growth of this ratio, both quarter-over-quarter and year-over-year in Q3 while further driving content creators' motivation to consistently produce high-quality content in text and image. Second, to enhance ordinary user social interaction around interest-based content, we continue to develop the Super Topics community, focusing on key summer events, concert and anime conventions, which young people are interested in. We encourage users to share meaningful and emotional content around their interest, positioning Super Topics as the front-end useful space for interest-based sharing and interaction. In the third quarter, the number of users who posted and engaged in Super Topics grew double digit year-over-year. This effective initiative has strengthened Weibo's differentiated advantages in text and image, complementing the homepage recommendation feed and contributing to the solid development of the platform's ecosystem. Turning to search products. In the third quarter, we continued to reinforce AI application in search function, focusing on technical infrastructure upgrades and integration across ecosystem scenarios. First, in upgrading technical infrastructure, we continue to enhance intelligent search capability to understand user search intent and content matching capability, which effectively improve the relevance and accuracy of search results and making it easier for users to find desired content. At the same time, we upgraded the search model from conventional onetime information search to continuous exploratory dialogue, enabling users to engage in coherent conversations with intelligent search and enjoy a more intelligent and seamless information across experience. Second, the integration across ecosystem scenarios, we focused on extending intelligent search application in information feed, fostering a Search as a Service user mindset. We deeply integrated intelligent search into the content consumption experience with enhanced content verification and the content summary features. The system leveraged AI to assess the authenticity of the original post, extract key information and provide extended insights, helping users quickly access structured and reliable information while consuming contents. In the third quarter, the MAUs of Weibo intelligent search product exceeded 70 million with its DAU and search queries increasing more than 50% quarter-over-quarter. This momentum not only reflects users' recognition of Weibo's intelligent search product, but also further contribute to the expansion of Weibo search ecosystem. As a result, the total search queries on Weibo increased 20% quarter-over-quarter in the third quarter. Looking ahead, we will continue to deepen the innovative application of AI in search products. On the technology front, we aim to make search more user aware. As for user experience, we strive to deliver a more seamless and intelligent usage journey. And in terms of the ecosystem, service will become more contextually relevant. These efforts will continuously provide users with a smarter, more convenient search experience and further unlock the value of Weibo's content ecosystem. Moving on to monetization. In 2025, the ad product and sales team focused on two main priorities: first, to expand and solidify customers' mindset of choosing Weibo as a go-to platform for content marketing across more industries and clients. Second, to continuously enhance the performance and conversion capabilities of our ad products. In the third quarter, due to the high base effect from the Olympic last year, Weibo's ad revenue decreased 6% year-over-year. From the overall market perspective, thanks to the stimulus policy aimed at driving domestic demand and consumption, e-commerce platform and related industry maintain a relatively high level of advertising spend, which supported our third quarter ad revenues. According to client feedback, after several years of substantial and continuous budget allocation towards performance ad, the bidding for the commercial traffic has become increasingly intense, which pushed their cost upward. In addition, the government recently issued tax policy that limit the cap of the feed ad spend for tax deduction purpose. This dynamic has driven clients to reevaluate their ad budget allocation, placing renewed emphasis on the value of the brand advertising. In particular, marketing approaches such as celebrity endorsement have generally become a key option for clients to consider. In light of this trend, leveraging Weibo's strength in celebrity resources, we aim to better facilitate clients' needs across the full celebrity endorsement and marketing life cycle. We hope to create richer celebrity marketing playbook together with clients, helping them enhance their marketing effectiveness. Let me share more color from an industry perspective. Competitive dynamics within the e-commerce sector has persisted since the second quarter, benefiting from deep partnerships with leading e-commerce platforms. Ad revenues from e-commerce sector achieved notable year-over-year growth in the third quarter. Meanwhile, we have been gradually cultivating partnerships with other business lines within this e-commerce group promoting a more balanced revenue mix and thus laying a solid foundation for the future revenue stability. Ad revenues from the automobile sector sustained year-over-year growth trend in third quarter. Weibo has continued to solidify its strength in the new energy vehicle content ecosystem. Revenue from traditional fuel vehicles also remained stable this year, contributing to improved revenue stability for the automobile industry. In the online game and smartphone sectors, revenue declined due to overall budget contraction. As for the food and beverage, dairy products and footwear and apparel sectors, revenue fell year-over-year primarily due to the tough comparable base from last year's Olympics. However, with the recovery and strengthening of celebrity marketing in clients' mindset, ad revenues from celebrity endorsements continue to grow year-over-year. On the ad product front, we have continually strengthened the application of AI technology across the entire advertising life cycle this year to enhance ad efficiency. By the third quarter, we have deployed AI capabilities throughout the process from the ad creative production and bidding model optimization to campaign performance improvement. Notably, Weibo's AI ad creative platform, Lingchuang, launched in the second quarter has been widely adopted, enabling even scalable and personalized ad production in both text and image formats. Furthermore, in the third quarter, we have extended AI-generated ad creatives to video contents. This upgrade enables intelligent extraction of key highlights for the pre-roll segments and the generation of eye-catching cover images. This not only improved the efficiency and diversity of video ad creative production, but also enhanced targeting precision and user viewing experience. As of the end of October, AI-generated ad creatives accounted for nearly 30% of the consumption. Besides this, to address the common needs of the brand clients, we launched new products via live stream the press conference. We leveraged AI to click live streams in real time, extract the most engaging highlights and transform them into high-quality material suitable for KOL distribution. These highlights are further distributed through our feed ad product, amplifying the overall content reach and influence. This model not only addresses clients' difficulties in efficiently converting live stream content into shareable materials but also enable clients to achieve secondary distribution of valuable live stream content through a combination of high-quality materials and precise targeting. For example, in live stream product launched by a smartphone brand, AI-generated material make up 10% of all materials. It contributed towards much as 30% of total interactions. We plan to roll out this model to more brand clients hosting product launch, thereby further unlocking the potential of AI in brand marketing. In terms of ad performance, the upgraded AI-powered ad performance model has demonstrated impressive results in key scenarios. Experimental data shows that the conversion efficiency of both app download ads and form submission campaigns have improved. AI-powered performance ad models have enabled us to better deliver on client campaign objectives. Entering into the fourth quarter, we will focus on capturing marketing opportunities from sector with high budget visibility such as the e-commerce sector. We will beef up our efforts to further expand the penetration of our brand plus content marketing approach across key industries, sustain the growth momentum in the automobile sector and strive for recovery in the consumer goods. At the same time, we will continue to drive the application of AI in ad creative generation and AI placement optimization with the hope of offering smarter and more efficient advertising solutions to clients of all sizes and thus further strengthening Weibo's differentiated competitiveness in the advertising market. Next, let me turn the call over to Fei Cao for our financial review. Cao Fei: Thank you, Gaofei, and hello, everyone. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. Let me start with operating metrics. In September 2025, Weibo's MAU and average DAU reached 578 million and 257 million, respectively, with a steady improving DAU versus MAU ratio year-over-year. The modest year-over-year decline in MAU was primarily due to the high traffic base during the Paris Olympic game in the same period last year. On the user product side, in the third quarter, we completed the revamp of our information feed and prioritized the recommendation feed for content consumption. We are encouraged by early signs of improvement in user engagement with interest-based feed and video content on Weibo in addition. User scale and search queries from Weibo intelligent search feature continued to grow robustly quarter-over-quarter with intelligent search MAU exceeding 70 million in the third quarter. This growth was mainly driven by our AI technology upgrades, which allow us to better meet users' content search and discovery needs on the platform. Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. Commentary amounts are in U.S. dollar terms and all comparisons are on a year-over-year basis unless otherwise noted. Now let me walk you through our financial highlights for the third quarter 2025. Weibo's third quarter 2025 net revenues were USD 442.3 million, a decrease of 5% or 4% on a constant currency basis. Operating income was USD 132 million, representing operating margin of 30%. Net income attributable to Weibo reached USD 110.7 million and diluted EPS was $0.42. Let me give you more color on third quarter 2025 revenue performance. Weibo's advertising and marketing revenue for the third quarter 2025 was USD 375.4 million, down 6% or 5% on a constant currency basis, while value-added service VAS revenues was USD 66.9 million, up 2% Weibo's advertising business saw a modest decline, primarily due to the high base effect from last year's Paris Olympics. By industry, our top 3 verticals were FMCG, e-commerce and 3C products. In terms of growth drivers, e-commerce, Internet services, automobile and local services were the key contributors. Notably, the e-commerce sector recorded over 50% year-over-year growth, driven by similar policy amid a boosting domestic demand and consumption. We are pleased to see increased ad budget across multiple business lines within these platforms, including traditional e-commerce activities and local service initiatives. Weibo has continued to demonstrate its unique value in driving brand awareness and user acquisition for e-commerce platforms amid intensified market share competition. The automobile sector sustained solid growth this quarter, thanks to Weibo's thriving auto-related content ecosystem, a dynamic EV launch season and stable ad spend from ICE vehicle brands. On the other hand, we faced a significant year-over-year decline in the food and beverage and apparel industry, again, due to the high base effect from the last year's Olympics. And as for 3C products, this year, government-backed trade-in subsidies encouraged many consumers to upgrade their phones or home appliance earlier this year, which leads to softer shipments and lower ad spend from advertisers in the second half. Other underperforming sectors that weighed on overall top line recovery included online games, largely due to a tough year-over-year comparison and overall ad budget contraction in the sector. By ad product category, promoted feed ads remained the largest contributor followed by social display ads and topic and search placements. AI has progressively transformed the entire life cycle of Weibo's ad products from creative generation to ad placement. Notably, our real-time bidding feed products sustained double-digit growth, driven by AI-powered ad tech upgrades that enhanced conversion and ROI for advertisers, particularly for ad download and lead generation campaigns. Ad revenues from Alibaba reported robust growth of 112%, reaching USD 45.5 million in the third quarter. We are pleased with the strong momentum from Alibaba this year, driven by deeper collaboration during key marketing windows and Alibaba's increased ad spend on its local services initiatives. Value-added service VAS revenues grew 2% to USD 66.9 million in the third quarter, mainly due to modest increase in revenues from game-related business and membership services. Turning to cost and expenses. Total cost and expenses for the third quarter was USD 310.3 million, an increase of 3%. Operating income in the third quarter was USD 132 million, representing an operating margin of 30% compared to [ 36% ] last year. Turning to income tax under GAAP measure. Income tax expenses for the third quarter were USD 57.2 million compared to USD 32.2 million last year, primarily due to the recognition of USD 29.4 million deferred tax liability related to equity pick-up gains in the third quarter of 2025. Net income attributable to Weibo in the third quarter was USD 110.7 million, representing a net margin of 25% compared to 30% last year, primarily attributable to top-line pressure. Turning to our balance sheet and cash flow items. As of September 30, 2025, Weibo's cash, cash equivalents and short-term investments totaled USD 2.04 billion compared to USD 2.35 billion as of December 31, 2024. The decrease of Weibo's cash, cash equivalents and short-term investments was mainly resulted from the purchase of long-term wealth management products and the payment of the annual dividend to our shareholders and was partially offset by the operating cash flows in the past 3 quarters this year. In the third quarter, cash provided by operating activities was USD 200 million. Capital expenditures totaled USD 5.1 million and depreciation and amortization expenses amounted to USD 15.4 million. With that, let me now turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] Our first question comes from the line of Alicia Yap of Citigroup. Alicis a Yap: [Foreign Language] Can management share with us the overall advertising outlook for the fourth quarter and also 2026. So any color that you can provide in terms of the growth rate for fourth quarter? And also how should we be thinking about the overall ad revenue growth into next year? And then what is your future strategy for the overall advertising product upgrade? How is AI been helping or will be benefiting the click-through rate or even the advertising monetization and also how AI could be also improving -- help advertisers to improve their ROI. Any color that you can share would be great. Gaofei Wang: [Interpreted] All right. Thank you for the question. So according to the financial report that we have just delivered in Q3, we've been seeing the overall decrease of the ad revenue primarily due to several reasons. The first one is that we had a high base last year due to the Olympic Games. And also, second is that even if we had a poorer performance of the headset industry and the verticals of gaming, and also, we had a little bit better performance from the e-commerce and automotive. But I think that on the overall basis, this is actually the performance within our expectations. Looking forward to Q4, we have been seeing that in the second half of this year, overall speaking, the overall figures and statistics of the consumption-related figures are actually slowing down. And we've been seeing that in some certain provinces and cities, the national subsidy policies have been seeing some kind of headwinds like the limitations on the spending as well as the exiting. So I think that this is going to have a continuous impact on the headset industry as well as the automotive industry next year because we are foreseen a kind of exiting of the national subsidy policy for this industry for certain regions. Okay. So these are some of the uncertainties that we've been witnessing, but still, except for these uncertainties, we could see some of the certainties for next year and also 2026 in specifics. So you know that in 2025, we did not have any hot topics or hot trends or events happening. But in 2026, we are expecting several important events like the Winter Olympics and also the World Cup as well. So this will be actually bringing a better placement of the advertisers from the consumer goods verticals. And you know that in Q3, the decreased performance of the ad revenue primarily was due to the decreased performance of the ad placement from the consumer goods industry. Okay. So as a result, it is very difficult for me to give you a very precise prediction of our performance in 2026. Having said that, in Q4, we've been seeing some of the important things. First of all, is that there are actually fierce -- more fierce competition for the e-commerce industry, especially from the off-line scenario and targeting the life service -- lifestyle service. We used to have -- Weibo used to have actually quite low percentage of the market share in this particular segment. But still, we do see fierce competition going on for the food delivery and lifestyle service as well as the other relevant ones. So that is to say that in Q4, we are expecting a huge demand increase in this particular area. Okay. And also for the e-commerce, of course, I've been already shared some of the colors on this. And second is that in terms of the automotive industry, we believe that it will be actually performing quite good in Q4. But first of all, due to the anti-evolution policies, we've been seeing at some of the customers or advertisers from this particular industry had issues like the price competition or price war. And in the first half of this year, those advertisers did not pretty much focus a lot of their revenues on the product promotion or the mindset establishment. So I think that this situation will be getting better in the second half of the year. I'm talking about the automotive -- I mean headset and also gaming industries. For headset industry, we know that this was primarily impacted negatively by the trend of exiting the national subsidy policy. So in the second half of this year, we'll be seeing that except for Apple, the rest of the other headset makers were having a deteriorating sales volume. And that's the reason why we do see a lower frequency of the new phone launch. And for gaming industry, you could see that from a financial report of NetEase or Tencent, they did not have that lot of new game release in the second half of this year. But of course, they are claiming that in 2026, Q1, we're going to see some of the new games launched from these two major game makers. But still as for whether or not they're going to be allocating more budget on this, this is still uncertain. All right. And second point on the overall strategies. So we're talking about two directions. The first one is that in the previous years, a lot of those budget of advertisements actually was pretty much placed on the performance-based ad and we did not see a lot of spending from those advertisers on the mindset related areas. And also after COVID-19, in order to consume more ad locks, we do see the behaviors of focusing on the live stream e-commerce. So I think that this year, we've seen a very obvious trend that there are more budget allocated to the areas of establishing and building the mindset. So as the traditional advantageous platform on this particular area, Weibo is definitely going to seize this opportunity. And I think that we are going to focus on the hot topics and KOL, especially top notch KOLs in terms of the integrated marketing. So we do actually see the trend of increasing budget from these advertisers on those fronts. Okay. And the second point is on the bidding ad and also performance-based ad. So last year, we've been seeing a decrease of our overall revenue -- ad revenue contributed to the overall ad revenue from the performance-based ad. But recently, in the past years, we've been dedicating a lot of efforts in making wonderful products in the performance-based ad and also increasing and updating our technologies. And also, most importantly, we've been applying a lot of AI technologies to really have a very good boost of the revenue from the performance-based ad. So you can see that in Q3, we had a lot of increase on this area. So because -- not only because of the overall data and traffic and also the adjustments of our strategies, but most importantly, I think that the overall use of the AI technology is really important. So we will be actually expecting a very good increase of this performance-based ad. All right, pretty much for the answer for this question. Operator: The next questions will come from the line of Leo You from CLSA. Yang You: [Foreign Language] I have two questions on the product commercialization. And first is on the strategy and the progress of intelligent search. Do we have the commercialization attempts already in the fourth quarter? And what other AI application could management share? And second question is on the information feed revamp. What are the initial feedback from users' content consumption, engagement? And how would that translate into revenue growth in the future? Gaofei Wang: [Interpreted] So thank you for this question. First of all, we could see that in terms of the intelligent search, as we already said that this has been increased a lot in Q3 in terms of the overall products. So resulting in a very good performance. For instance, in September, the MAU exceeded 70 million. And in terms of the DAU and also the query number, we had a quarter-by-quarter increase of over 50%. So of course, in terms of the monetization of the intelligent search, first point is that we do see a very good increase of the overall intelligence search-based volume, and that was resulted in the performance like in Q3, we had a query increase by about 20% quarter-by-quarter. And this actually provided with us a very good traffic to actually have a better performance on this. And second point is that, of course, at the current stage, we do not have the ability of all the consumers. I mean the customers are not having this particular requirement of placing the ad precisely just based on the intelligent search results. But this did actually provide some of the impacts to the customers because, for instance, we are able to use the GEO technology to actually facilitate better product and better content creations and helping the customers understanding or advertisers in understanding the new product-related issues and some of the other important things and also issues as well. So this is going to be generating a lot of ad assets for our advertisers so that they are able to use in the near future. Of course, this is not going to be directly charging from the customers, but I think in the future, the customers and advertisers are able to put more weight on this particular part of the intelligent search. So I do think that in the future, we are going to see a very good increase, be it the brand-based ad revenue or the overall budget of the performance-based ad. And also, the second question is pretty much based on the information feed. So as we have already stated that we have an updated version or modification of this information-based feed in 2025 and already provided to the users. So we've been already finishing the first stage switch for information feed in July. But of course, it takes time for the users to get used to this and nurture their habit of using. But still, I think that this particular new information feed is going to be very useful and beneficial to the overactivity of the users and also improving the overall retention and the total time spent on the consumption as well. So I think that this is also going to be lowering the threshold for the users of using Weibo. Okay. Of course, I think that this particular kind of modification or the version update is pretty much like what happened years ago from the time spent based to the non-time spent base. And of course, at the current stage, we think that there are a lot of variations between different versions. So it still takes time for the user to adopt this new kind of a platform or it takes time for them to nurture their habits of using. But still, I think that on the overall basis, this did have a lot of benefits impacting the overall consumption behavior. And also, of course, in Weibo, we are going to continuously focusing on the upgrades and optimization of our products as well. Okay. And also, I think that this is very good to have a certain kind of improvements on two fronts. The first front is that, of course, it is going to impact some of the new users using a process of this particular product because it used to be the case that the users need to log on the Weibo and establish following a relationship before they could take any action on consumption of the content. But at the current stage, this particular process is waived so that we are at the same starting point as the other competitors for this particular part. So the users are able to actually consume a very good quality or content at the very beginning. And second is that for the existing users, of course, from an experience standpoint, it still takes time for them to be adopted -- adopting this new concept and also establishing a new using habit. But still, I think that at the current stage, this has primarily given us better opportunities, especially for those new users to take actions on consumption more frequently without even establishing a following relationship as the prerequisite. Okay. And also, I need to add another point, which is the third point that is for the video-based consumption. So we know that in the past, for those of consumers, I think that the videos are actually very difficult for the users to actually consume upon so that was impacting a lot of the original social-based relationship. And you know that in the past, for those content creators, especially the video content creators, it is very difficult for them to establish a social relationship with the users and also consumers as well. So even if on the relationship-based feed, it is also very difficult for those video content creators to expose their content in front of the wide audience. So also for the hot topic search because of the real timeliness of their content, especially the video-based content, it is also very difficult for them to expose their content as well. But now after the change, we could see that we are going to proactively recommending more video-based content to the users. And this is going to be very, very important for Weibo in the long run, be it from a growth standpoint or from the standpoint of enhancing our core competitive edge. Operator: That's the end of the question-and-answer session. With that, I would like to conclude the conference call today. Thank you all for participating. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems' VP, Investor Relations. Daniella, please go ahead. Daniella Finn: Thank you, Karen. Hello, everyone, and welcome to our third quarter 2025 earnings call. On the call with me today are Butzi Machlis, President and CEO of Elbit Systems; and Kobi Kagan, Corporate CFO. Before we begin, I would like to point out that the safe harbor statement in the company's press release issued earlier today also refers to the contents of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Kobi will begin by providing a discussion of the financial results, followed by Butzi, who will talk about some of the significant developments during the quarter and beyond. We will then turn the call over to question-and-answer session. With that, I would like to now turn the call over to Kobi. Kobi, please go ahead. Yaacov Kagan: Thank you, Daniella. Hello, everyone, and thank you for joining us today. We are very pleased to announce another set of quarterly results with double-digit year-over-year growth in revenues, backlog and EPS. Quarterly free cash flow was solid at $101 million, underscoring our healthy cash generation. I will now highlight and discuss some of the key figures and trends in our financial results this quarter. Third quarter 2025 revenues were $1.922 billion, compared to $1.718 billion in the third quarter of 2024, a solid 12% growth in quarterly revenues year-over-year and 18% growth for the 9 months ended 30th September. In the third quarter of 2025, Europe contributed 28%; North America, 21%; Asia Pacific, 14%; and Israel was 33% of revenues. GAAP gross margin in the third quarter was 24.9% of revenues compared to 24% in the third quarter of 2024. The non-GAAP gross margin for the third quarter was 25.2% of revenues, compared to 24.4% in the third quarter of 2024. GAAP operating income for the third quarter was $171.4 million or 8.9% of revenues versus $125.8 million or 7.3% of revenues in the third quarter of 2024. Non-GAAP operating income was $186.7 million or 9.7% of revenues, compared with $140.7 million or 8.2% of revenues in the third quarter of last year. We are very pleased with this margin expansion trajectory. The operating expense breakdown in the third quarter was as follows: net R&D expense were $129.1 million or 6.7% of revenues, compared to $119.9 million or 7% of revenues in the third quarter of 2024. Elbit continues to invest in R&D to secure future profitable growth, which will maintain Elbit's position as the market leader in years to come. Marketing and selling expenses were $91 million or 4.7% of revenues versus $91.3 million or 5.3% in the third quarter of 2024. G&A expenses were $86.7 million or 4.5% of revenues, compared to $75.7 million or 4.4% of revenues in the third quarter of 2024. Financial expenses were $34.5 million in the third quarter, compared to $45 million in the third quarter of 2024. The decrease in financial expenses, net in the third quarter of 2025, was mainly due to a reduction in the average net debt. We recorded a tax expense of $11.4 million in the third quarter compared to $12.8 million in the third quarter of 2024. The effective tax rate in the third quarter of 2025 was 8.2% compared to 14.6% in the third quarter of 2024. The decrease in the effective tax rate for the third quarter of 2025, was mainly due to the increase in deferred tax assets. GAAP diluted EPS was $2.80 for the third quarter of 2025 compared to $1.77 in the third quarter of 2024. Our non-GAAP diluted EPS was $3.35 for the third quarter of 2025, compared to $2.21 in the third quarter of 2024. Quarterly segment revenue for the third quarter of 2025. Aerospace, third quarter revenues decreased by 3% year-over-year, mainly due to a decrease in Precision Guided Munition sales in Asia Pacific, partially offset by the increase in PGM sales in Israel and an increase in unmanned aerial system sales in Europe. Revenues for the 9 months were up 9%. C4I and Cyber, revenues increased by 14% year-over-year, mainly due to radio systems and command and control system sales in Europe. For the 9 months, revenue rose by 15%. ISTAR and EW, revenues increased by 5% in the third quarter of 2025, mainly due to Electro-Optic systems and Electronic Warfare systems sales in Israel and high-power laser sales in Israel. For the 9 months, revenue increased by 8%. Land revenue increased by 41% in the third quarter of 2025, due to ammunition and munition sales in Israel and in Europe. For the 9 months, revenues were up 44%. Elbit Systems of America, revenues decreased by 2% due to a decrease in Electronic systems and medical instrument sales, partially offset by the increase in Maritime and Warfighter system sales. For the 9 months, revenue rose 6%. The order backlog as of September 30, 2025, was $25.2 billion, $3.1 billion higher than the backlog at the end of the third quarter of 2024, and $1.4 billion higher than the backlog in the second quarter of 2025. The increase in backlog during the quarter came mainly from new European orders. Approximately 69% of the current backlog is derived from order outside of Israel. Approximately 38% of the current backlog is scheduled to be performed during the remainder of 2025 and during 2026. And the rest is scheduled for 2027 and beyond. Cash flow provided by operating activities in the 9 months ended September 30, 2025, was $461 million, as compared to $82.5 million in the 9 months ended September 30, 2024. The cash flow in the 9 months ended September 30, 2025, was affected mainly by the strong increase in net income. On the back of the continuous strength of the company's result the Board of Directors declared a dividend of $0.75 per share to be paid on January 5, 2026. I will now turn the call over to Mr. Machlis, Elbit's CEO. Butzi, please go ahead. Bezhalel Machlis: Thank you, Kobi. Hello, everyone, and thank you once again for joining us today. As Kobi just described, these results continued the growth and margin expansion trajectory, driven by strong demand for our solutions, particularly in Europe and Israel. Elbit's seventh consecutive quarter of double-digit growth further demonstrates our global leadership on the modern battleship. Our recently tested and proven solutions position us as the leading authority in our rapidly changing industry as defense budget continued to rise globally and our customers seek cutting-edge battle-proven system to secure and protect their population. Our portfolio of ever relevant technologies support our customers pursue of advanced warfighter solution across all domains. On the back of the strong results, I am proud that we continue to improve the translation of our revenue growth in both profit and cash flow. This is the fifth consecutive quarter where we delivered positive free cash flow and improved the company's cash conversion. Yesterday, we announced the signing of an international contract for a strategic solution for approximately USD 2.3 billion. This contract will be performed over a period of 8 years. I'm extremely pleased with this announcement of the largest contract in Elbit history, further testament to the superiority of our product and technologies. We will continue to equip our customers with advanced and relevant solutions. During the quarter, Elbit received another large contract to supply a European country with a range of our solutions totaling of USD 1.625 billion (sic) [ USD 1.635 billion ] to be delivered over the next 5 years. The contract includes long-range precision strike artillery-rocket systems and broad-spectrum of unmanned reconnaissance and loitering aerial combat systems, highly sophisticated ISTAR capabilities, including SIGINT, COMINT and electric warfare system. Enabled intelligence collections and processing system will also be delivered, along with advanced electro-optic, and night-vision system, combat vehicle upgrade, and protective systems. New orders also included contracts for our Hermes 900 drones, advanced airborne munitions for the IMOD and USD 260 million contract for DIRCM system to Airbus. Following the 12-day campaign against Iran, Elbit has seen growing interest in our solutions, mainly through not exclusively for the Hermes drones, EW system and training platforms. The Hermes platforms enable us to cross-sell products for other segments and offer our customers comprehensive solutions, since its first order in 2011, the Hermes 900 has been selected by over 20 customers worldwide. In August, we successfully launched the advanced JUPITER space camera, abroad the National Advanced Optical System satellite, supporting a wide span of earth observation mission, including military operations, environmental, monitoring and scientific research, developed by Elbit System ISTAR and EW, JUPITER is one of the world's most advanced space camera, featuring a very large aperture and exceptionally lightweight design. The camera is multispectral offering a combination of imaging channels. During the quarter, we expanded our operation in Europe, opening new facilities in Sweden and Germany to enhance our local delivery capabilities to ensure more secure, faster support to our customers. Being close to our customers is crucial for us, our enhanced presence in Europe strengthen our ability to deliver modern and reliable solutions at the pace required to ensure the unforced capability to defend Europe from its offenders. In June, we launched PAWS 2, a next-generation infrared missile warning system for fighter aircraft designed to enhance their survivability and operational effectiveness. The system detect wide range of threats regardless of seeker type and provides advanced protection for fighter jets, transport aircraft, and helicopter operating in complex high-threat environment. At DSEI, we unveiled Frontier, a cutting-edge wide-area persistent surveillance system, designed to address the inducing complexity and intensity of border protection challenges. Frontier autonomously operates multiple type of sensors to visually confirm and classify threats transmitting only the most relevant analyzed information to the appropriate forces. It leverage advanced artificial intelligence to optimize intelligence gathering and decision-making across land, air and maritime domains. All this notable achievement would not have been possible without our dedicated employees whose day and night, commitment to Elbit is truly unique. I would like to thank each and every one of our outstanding employees for their continued professionalism and dedication. And with that, I will be happy to answer your questions. Operator? Operator: [Operator Instructions] The first question is from Jordan Lyonnais of Bank of America. Jordan Lyonnais: So with the ceasefire now happening, how enduring are you guys thinking about the domestic demand? And if we do see a slowdown in the domestic bookings, how are we -- how should we think about the trade-off with margins as orders start to skew more towards international? Yaacov Kagan: Thank you, Jordan. So your question about the domestic demand, we can look at this quarter. We had an increase of $1.4 billion in our backlog, $200 million in Israel and $1.2 billion outside of Israel. We are looking at that as some kind of the nature of the growth of the backlog for the future. We are targeting around flattish backlog in Israel and growth outside of Israel, predominantly in Europe. That will be the growth area, which -- we see our funnel, we see our opportunities, and we see the demand that's coming out from Europe. And we think that this is the place that predominantly will provide the growth in the future in the backlog. Operator: The next question is from Seth Seifman from JPMorgan. Seth Seifman: I wanted to ask about when we think about the Aerospace business from here, and we saw the decline in the quarter. How should we think about the trajectory in that business going forward? I know you called out some decline in sales to Asia but also some drone orders during the quarter. So kind of where does that go from here? Bezhalel Machlis: It's Butzi. I believe that we will continue to see growth in this segment as well. We -- first, I would like to mention that our avionics is embedded on top of most of the Western platforms. It includes our helmet, but not only that, also quite a lot of other equipment from us is embedded in each -- in many, many platforms, all -- in many, many countries, not just in the U.S. So we enjoy from revenues coming from international sales of Boeing and Lockheed and other OEMs of all the platforms they bought. So I really feel that this -- I really believe that this market will continue to grow for us. And I would like also to mention UAVs. There is a huge demand for UAVs, for loitering munition. We have 20 international customers who bought till now, the Hermes 900 from us. And we provide not just a platform. We provide an integrated solution, which includes all our sensors and payloads from the company, and we have a very unique offering to our customers. And they see a growing market for UAVs or main UAVs, but also for small UAVs and for loitering munition, which are all under the Airborne segment. So I believe that this segment will continue to grow the company in Israel and mainly abroad. Yaacov Kagan: And Seth, this is Kobi to further add on Butzi's answer, we -- if you look at the 3 quarters over 3 quarters last year, Aerospace segment grew 9%. And we think that the relevant growth number for the Aerospace is a single-digit growth in revenues, because this segment is leaning predominantly on the U.S. budget with a lot of revenue coming from the U.S., which is a single-digit budget growth. And for that reason, that is the number that we think is relevant for this quarter -- for this segment. Seth Seifman: Okay. Excellent. Excellent. If I could add one follow-up question. Can you talk a little bit more about the opportunities that are emerging in directed energy. We've seen some of the progress on IRON BEAM. Are you seeing a lot of opportunities emerge for directed energy solutions outside of Israel as well? Bezhalel Machlis: Yes. The answer is yes. As you know, we are part of the Israeli program for ground high-power laser systems. The laser source is coming from us, and the first system should be deployed by the end of this year, the IRON BEAM system. And there's going to be -- I believe that next year, we'll see many more orders here in Israel for ground high-power lasers. Based on the success of Israel, there's a lot of interest in many other places for high-power lasers and for ground high-power laser system, and we are part of this solution. Here in Israel, we lead the airborne high-power laser system. It's still in the development phase. And actually -- and I believe that there is a very big potential for us, for the system. I think that high-power lasers in the air will be a game changer in the way countries are fighting against ones and against drones and against cruise missiles. And this is still under development, but also, it's only -- it's still in development, there is a lot of interest for that for many, many customers abroad. We are not developing just high-power lasers. We have other type of energy weapons, which are in a very advanced phase of development, which are -- some of them are confidential, but I can tell you that they are very unique. We really believe that this energy weapon activity is a very important growth engine for Elbit for the future. Operator: The next question is from Ellen Page of Jefferies. Ellen Page: Just the margin was very strong in the quarter on a year-over-year and sequential basis. Can you discuss the drivers of that? And was there any element of mix that supported profitability in the quarter? And how do we think about the progression of margins from here? Yaacov Kagan: Ellen, if you notice, there is a very strong expansion in margin this quarter, as you indicated, which comes as 0.9% improvement, a 1%, shy of 1% in the gross profitability of the company, an additional 0.5% on the operational expenses. So we are looking at a 1% expansion in the gross profitability and 1.5% expansion in the operational profitability. Those two are the fruits of improvement in our backlog profitability and for using a lot of operational excellence both investments and also processes that were inaugurated in the company, including using AI for different purposes of operational use. And that is driving our -- not just our operational profitability but also our gross profitability up. And this is the first quarter that we see this kind of expansion in both the gross profitability and the operational profitability. Including -- on top of that, we are also doing CapEx investments, which are yielding fruits. As we discussed many times in the past, the ERP system that is fully operational, the one ERP system that is fully operational in the company and also robots and cobots that we are also using now mainly in the ammunition and munition factories. And on top of that, if I can summarize everything, we can see that we have our advantages to the size, which with the increase in revenue, we are doing better conversion to profits. Ellen Page: Great. That's very helpful. And how do we think about the impact of less operational disruptions assuming the ceasefire hold. Is that an opportunity for another step up from here? Yaacov Kagan: So we see that -- we are very happy with the ceasefire, of course, and that is -- we prayed, everybody here prayed for that after 2 years of that -- this conflict. And we all hope that this quiet will be maintained here in Israel. And of course, in -- for the company, it allows us to regroup, people to come back for mobilization, and to get back to normal business which is, as you know, Elbit is mainly predominantly working outside of Israel, that this is our strength of doing around 70% of the business outside of Israel. It allows us to invest more in the business outside of Israel and to focus, of course, more about doing the ordinary business as we did before this 7th of October conflict. And of course, this is an opportunity for the company to receive more opportunities and more new business to strengthen our backlog. Operator: I'm passing the call to Daniella Finn. Please go ahead. Daniella Finn: Thank you, operator. We have a couple of questions from [indiscernible] from Excellence. [indiscernible], thank you very much for your questions today. The first one is, has there been any update to the company's profitability target for 2026, 10% operating profit following the expansion of the order backlog and the improvement in gross margins in the current quarter. Yaacov Kagan: Thank you, Daniella and [indiscernible]. We -- as you know, we're not giving specifically targets and providing guidance. Saying that, we will still maintain our internal targets to continue to improve our profitability. And this is, of course, a strong target in the company as well as the cash conversion, which is a very -- is the principal target in the company to continue the improvement in cash conversion in the company. Daniella Finn: Thank you, Kobi. And the second question from [indiscernible], how does Elbit plan to generate added value from the significant expansion in the U.S. DoD's budget. Specifically, is there a concrete plan to pursue an M&A transaction in the U.S. and/or to expand into verticals such as drone swarms or border protection applications? Bezhalel Machlis: Thank you, Daniella and [indiscernible]. The U.S. market is very strategic to Elbit. We see the U.S. as our home market. And we are -- I'm very pleased with our performance in the U.S. The last two positions we made, the night-vision activity and Sparton, the sonobuoys activity. Both of them are very successful, both of them are growing. And we certainly look for opportunities, for acquisitions in the U.S., we are exploring the market. I would like to say that in the past, we delivered a system to the CBP for border protection, and our system is deployed along the borders. And we are -- certainly, we believe that the current need for additional systems along the borders are very relevant to us, and we are planning to pursue it. And we have -- the rest of our activities in the U.S. are very successful as well. Our avionics activities are growing, and our Active Protection System is doing very well in the U.S. on top of the Bradley [ light ] tank, and we see -- we will continue to invest in the U.S. We will continue to recruit additional people, and we would like to expand our position in this very important market forward. Daniella Finn: Thank you, Butzi. Operator, if there are no more questions, we can wrap up. Operator: Before I ask Mr. Machlis to go ahead with his closing statement, I'd like to remind participants that a replay of this call will be available 2 hours after the conference ends. In the U.S., please call 1 (888) 782-4291. In Israel, please call (03) 925-5900; and internationally, please call (972) 3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement? Bezhalel Machlis: I would like to thank everyone on the call for joining us today and for your continued trust and support of Elbit. Have a good day and goodbye. Operator: Thank you. This concludes the Elbit Systems Ltd., Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
John Crosse: Good morning, and welcome, everyone, in the room and joining online or on the phones. Thanks for joining us for our FY '25 results. Just a few housekeeping things before we kick off. There are no planned fire alarm tests today. So if the alarm does go off, for those in the room, it's a real one. And you can see the fire exits just behind you marked in green. And then finally, just wanted to draw your attention to the usual disclaimer in the presentation. We've got for you this morning. So without further ado, I would like to hand over to Lukas. Lukas Paravicini: Thank you very much, John. And good morning, and a very warm welcome to all of you here in the room, and a very warm welcome to you all who join us online. Today marks another exciting day on the journey of Imperial Brands. I'm very pleased to share with you another year of strong performance, and I'm very excited about this being my first time in the role of CEO of the group, a true honor and a true privilege, which I don't take lightly. I'm joined today by Murray McGowan, our newly appointed Chief Financial Officer; and John Crosse, our Head of Investors Relation. I'll start off by giving you the highlights of fiscal year '25. Murray will then join us and share more about the financial performance and the outlook for '26. I will then come back, talk a bit more about our operational delivery, our transformation and also to reconfirm our strategic ambition that we set out in March this year. At the end of that, we look very much forward to all your questions. And with that, let me get down to business, and let's start the presentation. What I really would like to do today is highlight 3 things. First, the quality of our performance during this past fiscal year and how this builds on our growing track record of consistent growth. Second, how our evolved strategy is not just a confident evolution, it is also a step change in our capabilities and a commitment to delivering further significant value to our shareholders. And third, our own personal excitement at the opportunities that lie ahead of us. Since the half year results in May and the announcement of our new roles, Murray and I have been spending a lot of time with our people across our global businesses. This included face-to-face events in all regions attended by more than 600 of our leaders. We've been discussing our recent achievements, our refreshed strategy and how we can make an even bigger impact over the next 5 years. What's been really energizing is the sheer enthusiasm of our colleagues about where we are going next. And it has reinforced my belief that we have the right plan and the right people to make the step change we highlighted at the CMD in March. We'll come back to those plans later. But first, let's look at our fiscal year '25 dashboard. Once again, all the key metrics are delivering in line with our commitments. You can see here how consistent operational delivery is underpinning improvements in our key financial measures and in turn, driving shareholder returns. In combustibles, we maintained share in our priority markets while also delivering another year of strong pricing. In NGP, we recorded a further year of double-digit revenue growth with share growing in all categories. This progress at an operational level has translated into revenue growth of more than 4% and an improvement of more than 9% in earnings per share. This has also been a year of strong cash flow. All this has supported material increases in our -- in both our underlying dividend and our ongoing share buyback. During fiscal year '26, we further intend to make total capital returns in excess of GBP 2.7 billion. These results add to our consistent track record of growth. You can see here how each year of incremental improvement adds up to a powerful cumulative effect over the past 5 years, a 48 basis points improvement in aggregate market share. NGP revenue up 73%, EPS up 1/3, and the GBP 10 billion in capital returns. That's equivalent to 2/3 of our market cap when we started our 2021 strategy. So that's what we have delivered. Even more important is how we have delivered. As you have heard us say many times, the unifying theme behind our success is our challenger approach. These things is about 3 things: getting really close to our consumer, staying focused on the most important drivers of growth and investing to become more agile. During the CMD, you've heard us talk in more detail about how we brought to life this challenger idea. For example, investing in new consumer capabilities, prioritizing must-win market battles, developing a high-performance culture, investing in technology and harnessing our self-help opportunities. It was these investments, these changes, which helped us turn around our tobacco business and build an NGP business where we now have attractive products across all consumer categories. At this point, I would also like to take a moment to thank Stefan, Stefan Bomhard, for his leadership in the turnaround of Imperial Brands over the past 5 years. He leaves behind a strong platform for future growth. Looking ahead, you'll see us continue to play our important distinctive role as a challenger business in this sector. And as we said at the Capital Market Day, our purpose remains unchanged. We're still going to be forging a path to a healthier future for moments of relaxation and pleasure. In this way, we will continue to deliver strong performance for shareholders. I will now hand over to Murray. And when I come back, I'll take a closer look into our strategic ambition and how we transform our business to actually achieve them. Murray, over to you. Murray McGowan: Thank you, Lukas, and good morning, everyone. As many of you know, I joined Imperial Brands just over 5 years ago, heading up Strategy and Corporate Development. And in that role back in 2021, I led the development of our previous strategy, which we shared in January '21. And more recently, I led the work to develop our evolved strategy that we shared in March of this year at our Capital Markets Day. Now I am really honored to have the opportunity to step up to be Chief Financial Officer for Imperial Brands, and I absolutely share Lukas's excitement about the opportunities that we have ahead of us. As I pick up the CFO baton from Lukas, I'm pleased to show you another positive year of financial results and a year of strong delivery. As Lukas said, we've maintained aggregate share in our 5 priority markets, whilst delivering strong pricing. We have again delivered double-digit net revenue growth in NGP and strong operational performance has enabled us to deliver group adjusted operating profit in line with guidance, up by 4.6%. This, together with the GBP 1.25 billion share buyback, enabled us to deliver high single-digit EPS growth that we committed to. Leverage of 2x is in line with the target of being at the lower end of our 2 to 2.5x range. And this has been driven by cash conversion near the upper end of our 90% to 100% range, delivering robust free cash flow of GBP 2.7 billion. Turning to volume and price mix at the regional and group level. Once again here, we can see the strength of the tobacco value model in action. Our investment in brand equity and improved sales execution enabled strong pricing across our footprint, shown in orange on the chart. Price/mix has more than offset volume declines shown here in gray to deliver tobacco net revenue growth of 3.7%, a similar rate to last year. Volume declines in Europe and AACE improved relative to historical rates and strong pricing in Europe helped deliver net revenue growth of 4.2% in this region. In the U.S., we saw strong price/mix of 9.9%, more than offsetting volume declines, which were slightly more moderate than the prior year. Moving on to adjusted operating profit. Tobacco performance has been the main contributor to group adjusted operating profit growth, supported by NGP and Logista. In tobacco, the strong pricing I just described has driven higher profit. As usual, we benefit from the operational gearing as we move down the P&L. In NGP, losses remained at a similar level to last year as we increased investment in certain parts of our portfolio, for example, Zone in the U.S. We're making good progress towards building a sustainable and profitable NGP business as we continue to build scale. Overall, tobacco and NGP adjusted operating profit grew 4.9%. At Logista, performance was behind prior years with growth from tobacco price increases offset by performance in the long-distance transport sector. So overall, I am pleased with the 4.6% growth in group adjusted operating profit. Now as CFO, I will always be transparent about items that we classify as adjustments. Today, we are disclosing 2 charges related to our 2030 strategy. The first is an impairment charge related to our recent announcement that we will cease production at our Langenhagen factory. The second relates to the initial cost of our wider transformation program. These costs are within the guidance we gave at our Capital Markets Day back in March, and the remaining costs related to transformation will be adjusting items in future years. Strong adjusted operating profit growth, coupled with the share count reduction has driven earnings per share growth of 9.1%. The increase in tax reflects a slightly higher adjusted effective tax rate at 23.3% with higher net finance costs in line with our guidance. There was a small increase in minority interest, reflecting the strong performance in Africa. These impacts are more than offset by the benefit of the reduced share count. During the year, we repurchased just over 5% of our share capital, bringing the total repurchase since we began the share buyback program in 2022 to 15.8%. Turning to cash and capital allocation. Our operating cash conversion was 97%, enabling strong free cash flow generation of GBP 2.7 billion. This means that over the past 5 years, we generated cumulative cash of GBP 11.6 billion. Now disciplined capital investment remains a key part of how we create value. And let me assure you that I remain committed to our capital allocation framework as I step into the CFO role. Our first priority is to invest in the business. As a reminder, our approach is primarily organic. We have committed to invest in transformation, but we will also consider bolt-on acquisitions where they support the delivery of our strategy. Second, we maintain a strong and efficient balance sheet. Third, we deliver progressive dividends. And fourth, we're committed to returning surplus capital to our shareholders. As we announced on the 7th of October, we've increased our FY '26 share buyback to GBP 1.45 billion. As Lukas said, we've now returned over GBP 10 billion to our shareholders since FY '21. This represents 2/3 of our market value when we launched a previous strategy in January 2021. And going forward, we are committed to an evergreen share buyback throughout the next 5-year strategic period. Our expectations for the coming year are in line with the medium-term guidance that we set out at the Capital Markets Day in March 2025. We will continue to invest to support low single-digit tobacco and double-digit NGP net revenue growth on a constant currency basis. Given the strong momentum in our NGP business, we'll continue to invest to drive growth while balancing our objective to build a sustainable and profitable business. Group adjusted operating profit is expected to grow in the 3% to 5% range, driven primarily by the continued profit growth of our combustible business. In line with previous years, because of the phasing of combustible pricing and investment, performance will be weighted to the second half. Free cash flow generation is expected to be at least GBP 2.2 billion after investments in our transformation. The growth in adjusted operating profit, combined with the ongoing share buyback is expected to deliver at least high single-digit EPS growth, even after slightly increased tax, finance and minority interest costs. At current rates, we expect foreign exchange translation to be a 2% to 2.5% tailwind to profit. As usual, there is a slide in the appendix with guidance on the specific items. Now, I believe the results we are delivering today demonstrate the strong foundation that we have built that will enable us to continue to deliver over the next 5 years and generate value for our shareholders. Thank you. I'll now hand back to Lukas. Lukas Paravicini: Thank you very much, Murray. And in this part, I'll start off by giving you a bit more details about our operational delivery and how they underpinned our fiscal year '25 performance. I will then turn back to our strategic ambitions, and I'll explain how in our opinion, the distinctive combination of actually consistent in-year delivery and an accelerated transformation add up to a compelling investment proposition. So let's start with the tobacco business. We have driven pricing successfully and created significant value. This pricing has been achieved while also maintaining stable share in our priority markets. Our portfolio has been performing in line with our strategic objectives. The times where we were the largest owner of market share have gone for good. Our overarching priority is to balance aggregate share, pricing and long-term brand building to generate sustainable value. In any given year, we may make deliberate decisions in individual markets to monetize share gains made in previous years. The U.S. and Germany, our 2 largest markets, which together account for about half of our revenue and profits. And we have grouped them on the same slide because they share key characteristics. In both markets, we are benefiting from long-term investments in our sales force, which have improved effectiveness and coverage. In both markets, we are competing successfully at the premium end with iconic brands like Gauloises and Davidoff in Germany and Winston and Kool in the U.S. In both markets, we are also capitalizing well on our consumer down trading into the discount segment. Both markets continue to be highly affordable for consumers, and we see attractive opportunities for the future. In Germany, we have continued the improving share trajectory of last year after a decade of share declines. Aligned with our strategy in the U.S., we delivered stable share in what is a highly competitive marketplace. Our U.S. business also has a strong mass market cigar franchise, led by our premium Backwoods brand. And this has continued to grow well over the past year. Turning to the other key markets. In Spain, we took a conscious choice to monetize share gains over the past 4 years. We see this market as continuing to be highly affordable and attractive over the next 5 years and beyond. As we have always said, the U.K. and Australia both face rising excise rates, leading to growing illicit trades. And we expect these trends to continue into fiscal year '26. Having spent time in both markets recently, I've been impressed by our team's ability to continue to generate value. In Australia, for the first time, we moved into the #1 position in terms of market share. And in the U.K., the team managed our tobacco business skillfully, while also making good progress building a meaningful NGP franchise. And our Africa cluster contains diverse markets from Morocco in the Northwest to Madagascar in the Indian Ocean and accounts for 10% of our operating -- our tobacco adjusted operating profit. As you would expect, in any emerging markets business, the performance of individual countries can vary. But in aggregate, these markets have been growing strongly and consistently. And we expect it to become an even more material contributor to the group over the next few years. So let me talk now about NGP. We continue to see share growth across all categories. In modern oral, we are excited by the significant growth we are delivering with Zone in the U.S. We have established a national share of 2.8%, and the product is now available in 100,000 stores. And we are committed to ongoing investment in building this brand. In the Nordic markets, we are also growing strongly with Skruf. Here, targeted innovation in flavors and the design of our pouches is paying off with a positive response from consumers. Our vape business is performing well. We're focused on Western Europe where vaping is established as a dominant category. Across our footprint, we are growing share. And in the big 3 European markets, the U.K., France and Spain, we now have well-established double-digit positions. I've been particularly pleased to see the agility with which we adapted to regulatory changes. Our new pod-based blu Kit ranges was rolled out at pace during the year and has already become the big driver of our growth. In heated tobacco, we have made further progress. Here, we are growing share in our focused footprint. While it is early days, our new Pulze 3.0 device is winning positive feedback from the trade and consumers. So it's been a strong operational performance, which builds on our solid record. I'm proud of what our teams have achieved over the past 5 years. Their success gives us a firm foundation for the next strategic period. But I want to be clear, absolutely clear, this management team is not resting on its laurels. As we said at the CMD, we know we need to go further, and we need to go faster. And we are confident we have the right plans to deliver continued strong performance for our shareholders. At one level, our strategy is a confident evolution. As I said earlier, we will continue to follow the challenger approach, which has underpinned our recent success. Our strategy will further drive significant sustainable value in our combustible business and build an NGP business operating at scale. This is a combination, we believe, create material value for shareholders over the next 5 years. These are the twin priorities, which sit on the top of our strategy wheel. But this is more, more than just an evolution. Delivering these ambitious priorities will require a further step change in our capabilities. And the 3 elements on the bottom half of our wheel, our strategic enablers explain how we will achieve them. Taking these elements together, the big opportunity is this. We are a business that was stitched together from many acquisitions over several decades. Over the past few years, we have made progress towards building a consumer-centric, simplified and more joined-up business. And we have assembled a fantastic team of people with a unique blend of broad consumer experience and deep knowledge of our consumer, our markets and our industry. But this journey, this journey remains unfinished. During the next few years, by investing further in our consumer capabilities, our technology and data and by equipping our people with the right skills, we are setting ourselves up for success. We will, at last, complete our long transition from a loose collection of businesses to become a true challenger business, which leads the industry in consumer intimacy. And we will become an agile, data-led and high-performing organization. And at that moment, we will fully unleash the brilliant talent we have brought together. An important element of this new team is our 1,000 strong global consumer organization. Our investment in people and capabilities has enabled us to continue deepening our insights into the consumers we need to target. This enables us to build more sharply differentiated brands, which create passion among our consumers and drive material commercial outcomes. A fresh capability we have added over the past year is our new brand building framework. This adds more rigor to how we identify target consumers, build compelling marketing campaigns and ultimately, deliver share and revenue. An early output of this work has been our new "Touch of Blue" campaign for Gauloises in Germany, which is already helping drive an improvement in the share trend. We are applying the same processes to our NGP business. For example, here, you can see some of the work we are doing with our Zone in the U.S. and blu here in the U.K. Armed with a clearer view of our target consumers and their needs, we are getting more intentional in how we innovate in tobacco and NGP. For example, by mapping the flavors preferred by our Moroccan consumers, we discovered we were missing an important opportunity. To meet that need, we launched Gauloises Rich Gold, and it's performing well. In vape, the new blu Kit range I mentioned earlier was in response to our consumers expressing a need for more authentic tasting flavors and a differentiated quality design. In O&D, in close collaboration with consumers, we've revamped the format, creating a new pouch that delivers superior flavor, faster nicotine release and a smoother mouth feel. And excitingly, as you will have seen in the area outside this morning, today marks the official launch of our nicotine pouch in the U.K. market under the Zone brand. And the latest iteration of our Pulze heated tobacco device is another example of highly focused innovation. We know our consumer wants convenient, all-in-one package, which closely replicates the experience of a cigarette. And the early signs are that this is going to be a winning proposition with our consumers. Over the past 12 months, we made further progress in transforming the other elements of our business to simplify our organization and become more efficient and data enabled. Our 5-year program to build a new ERP platform is on track, and we recently went live in our first large production site. We've launched a stronger and more integrated business planning process. We continue to drive efficiency through manufacturing excellence. And in October, we took the difficult but necessary decision to withdraw from Langenhagen factory in Germany. We're also continuing to drive sales excellence, investing in technology and the skills of our sales teams to become the trade partner of choice. Right now, it would be fair to say we are still playing catch-up with other consumer businesses, which started transformation years earlier. Over the next strategic period, though, we can accelerate our progress by learning from the journeys taken by our peers. We can leapfrog technologies and we skip unnecessary development steps. I think of the opportunity as being a little bit like those emerging countries, which successfully jumped from coins and banknotes, straight to mobile wallets. At future results presentations, I look forward to providing more detail of our transformation plans and updating you on the progress we make. As we grow and transform our business, we want to do so in a responsible, sustainable way. We continue to invest in consumer insights and scientific research to develop our understanding of how we are contributing to harm reduction. Our most recent research looked at the behavior of adult smokers with no plans to quit when introduced to blu vapes. It was very encouraging to see that 6 months into the survey, between 1/3 and 40% of participants had either significantly reduced smoking cigarettes or stopped completely. And we are committed to incorporating these kinds of insights into how we market and develop our future product ranges. Also today, we are announcing further reductions in CO2 and waste. Now let me draw all these trends together. It's been another year of consistent broad-based growth. Strong foundations are in place for the next 5 years, and we have a clear strategy for value creation. Our focused approach to getting close to our consumers and building differentiated brands works well. We now have a stronger, more sustainable combustible business. And in NGP, competitive products across all categories, and we are building scale and margins. But we are never complacent, and we take absolutely nothing for granted. That said, as we look to fiscal year '26, we feel confident that we can continue to deliver sustainable growth. At the same time, we are excited about the opportunities to further transform this business to deliver a step-up in our capabilities. It's a transformation that will ensure that we can deliver sustainable growth in the years to 2030 and well beyond. We think that when you stand back, what we are offering is a highly attractive investment proposition, broad-based operational delivery, which translates into growing revenues and profitability with strong cash generation and significant capital returns at what is still a very attractive valuation. As we always say, if you are invested in us, we thank you for your support. And if you aren't yet a shareholder, well, we think this is a great time for you to take another look at what we are doing and where we are going next. Thank you very much. And with that, I would like to ask John to open for our Q&A session. John Crosse: Great. Thank you, Lukas. I think as usual, we'll start with questions in the room first. We've also got questions on the phone for those of you who joined by telephone and also on the webcast as well. [Operator Instructions] But as I said, let's take the first question from here in the room. Do you want to go at the front? Can you please state your name and your organization as well, please, just for those listening on the webcast. Mirza Faham Baig: It's Faham Baig, UBS. First question, I appreciate Imperial has transitioned away from a share donor. And sorry for being pedantic, but the volume share performance in the U.S. and Germany has turned slightly negative in the scanner data. And the question is, as competitive activity rises in the deep discount segment, how are you thinking about balancing aggregate share stability versus value delivery? And the second question on Zone in U.S. nicotine pouches. I appreciate that you've been able to keep share relatively stable as the category has become more price competitive. The question is 2 part. Where do you believe if you stand with Zone's product -- Zone's product quality versus that of incoming launches? And would you maybe look to use some of the duty drawback benefits to reinvest into price? Lukas Paravicini: So those are 3 questions. I'll try to answer them in sequence. Please remind me if I forget one. Let's start with market share. Listen, as you pointed out, I think what you have seen over the last 5 years is that we have clearly moved away from being the biggest donor of market share in the industry, if you go back 5 years to where we are today. I don't think that has happened by accident. That has happened because we have invested in our capabilities. We have built a muscle. And that capability is all around starting with the consumer, starting with the consumer, understanding our consumer better, hence, being able to build more differentiated brands, invest into better innovation, which you have seen over the last years coming to market. We have invested in our sales force. We have actually extended sales coverage in Germany and the U.S. We have increased significantly productivity by adding technology to that. And I think we have been very agile in also managing our portfolio of brands and portfolio of markets to always achieve a stable market share across our aggregate 5 markets, which is our goal. And the goal is stable market share. That's what is in our model. And I think we have shown that capability, that agility to balance off well market share and pricing or revenue. And I'm convinced, I'm confident in those same capabilities that going forward, we can still generate very much value out of our combustible business without losing share. Okay? I'm sorry, that was the first one. I thought it was it. There was sort of relief of that question. Yes, U.S. Zone. Well, we are really excited about U.S. Zone in the U.S. Actually, our growth has actually accelerated in the second half. And you all know there has been quite a bit of aggressiveness, which we would never follow. And so we are pleased. We gained -- we started 18 months ago. We came from nowhere to 2.8% market share. We're in 100,000 stores. And we have a proposition that our consumers really like. We maintained our market share throughout the summer and throughout September, throughout that competitive pricing. This is a growing category, and it is highly competitive. We always expected more competition to come in. We are confident in our product proposition, and we are confident in building a significant business in the U.S. continuing to grow at our pace on the long term. So that's the second one. The third one was duty drawback. Listen, now that we have clarity with duty drawback in the U.S., as you know, in summer, there has been some legislation passed through Congress in the U.S. We have very agilely put ourselves to work. And it is not as easy as -- it's not a thing you do overnight. But as a global organization, we are well placed to take opportunity and benefit of that duty drawback scheme. We do have to certify certain lines and certain factories abroad for U.S. imports. We do hope -- so it's less a question of if, it's more a question of when. We -- I mean, we -- let's be clear. We hope that this year, we still see a little benefit, but we'll for sure ramp it up next year. So that will come. I think that covered everything. John Crosse: Next question in the room. Damian, you want to take it down the front. Damian McNeela: So Damian McNeela from Deutsche Bank. First question, just following on from Faham's question on Zone. I think you indicated you're in about 100,000 stores. Just can you talk about whether -- what your expectations are for further distribution gains behind Zone for the coming year? And then just in terms of NGP profitability, it was broadly stable in the year just finished. Given the sort of expectations for sort of relaunch of Zone in U.K. and U.S., how should we think about NGP profitability next year? And then just the last one on the NGP side. European NGP revenues growth slowed in the second half, obviously, because of lapping launches in the first half. But can you sort of indicate what we should expect in the second half, please? Sorry, for FY '26... Lukas Paravicini: '26. Yes. So let me go back. I'll quickly answer the Zone question. I'll also touch on the NGP in '26, and then Murray will answer the question on the profitability. So listen, we've been in 100,000 stores. There's a bit more to come there. There's some more distribution we can harness. Ultimately, we want a weighted distribution of north of 85%. Well, there's some to be hold there. But I think that's one element of our growth and our confidence. The other is that we have a proposition that our consumer, which we target very precisely, does enjoy our products. And there is confidence that by continuing to invest behind the brand, we will be able to continue to grow at our pace that product. In general, when you go back at NGP and the growth you highlighted or asked for in Europe, I just want to step back again and share our excitement of where we are with NGP. Let me just remind you where we are 5 years ago. Many of you in this room would not give us very much credit for NGP. Since we almost doubled the net revenue, we have a proposition in all 3 categories. Over the last 3 years, we have grown double digit in NGP, and we have grown share in all 3 categories. And we have committed to build or we have an ambition to build a meaningful business over the next 5 years. And we have underpinned that commitment with a double-digit growth. Now we've pointed out in the CMD that growth will be different depending on regions and categories. We knew that vape is a category which is more mature, which goes through regulatory changes in the years we are in the middle of. And hence, you will see a different growth rate from O&D -- sorry, nicotine pouches and heated tobacco. But if you look at Europe, the point you make, if you look at '25, our modern oral nicotine pouches in Nordics grew very, very well. Our heated tobacco in Italy grew very well. But yes, vape is in the middle of a transition from a disposable vape to a rechargeable, reusable pod-based system, which obviously has that effect of slowing down growth. Okay. Sorry, you wanted -- I keep forgetting that there are other questions. Murray McGowan: In terms -- profitability -- as we said in the Capital Markets Day, we're really clear that we want to build a sustainable, scaled next-generation products business that generates both profit and cash and contribution to the group. What we're not looking to do is set an average time line as to when we'll hit that profitability. As we look at our businesses now, we see opportunities to invest to drive growth, whether it be Zone in the U.S. or Zone in the U.K. or other vaping opportunities or heated tobacco in Southern Eastern Europe. What we do believe is those we can see healthy margins, healthy gross margins across our portfolio of next-generation products. And if you look in the appendices of the presentation today, we share the margins across each of the different platforms. So we believe the right call for us is to invest to grow and to grow towards profitability. But we are confident that by the time we get to the end of the plan, it will be a good contributor to the group overall. In terms of your specific question about profitability next year, I wouldn't expect a significant shift in terms of level of profitability for next year. But in the grand scheme of our P&L, we think it's a sensible investment from a shareholder perspective. John Crosse: [Mariah Deshnov] from Barclays here. Just thinking about your agreement with TJP, does that prevent you at all from launching Skruf as a product in the U.S. if there was interest? And also, if there were to be any PMTAs of any new products in 2026, would that have to be done through TJP or how would that work? Lukas Paravicini: So TJP Labs is our partner. We were very agile a few years ago, and that was a good demonstration on how we look at bolt-on acquisitions, how we move agile when it comes to opportunities and where we want to enter new market. And we have a contract manufacturing agreement with them. We bought the products. So the products are ours. They are under in the PMTA. So the question whether we want to launch a product that is used on the Skruf in the U.S. has nothing to do with TJ Lab. It has to be with the PMTA process that you would have to require a PMTA. And then that is a more complicated undertaking. So TJ Lab is our contract manufacturer, but has nothing to do with the choices we make on products. And there was -- no, that's it. Yes. John Crosse: We'll take another question in the room. And then we'll go to the phone lines. There's one waiting. Bastien Agaud: Bastien Agaud from Bank of America. On the next tobacco product directive, experts say that we should have something probably next year calling for potentially normalization at the European level, whether with some restriction on the flavor. So given the opportunity on the potential geographical expansion, whether with restriction on the flavor, is that an opportunity for you? Or how should we think about it given potentially more country where you can open or whether with more restriction on the flavor? And I'm thinking about modern oral particularly. Lukas Paravicini: So I think I remember when I joined this group, the first thing that I learned is that there is regulation and there's a lot of noise around regulation. But I also learned quite quickly that regulation has been with this industry for the last 30, 40 years. And the industry and ourselves have built a muscle to adapt and live with regulation, which we fully understand and support. So I think that's the first point. We are a company that is accustomed to operate in a regulated market, and we will adapt, and we have adapted well to that like the others in the industry. I think the EU TPD that you are referring to is a well-established, long process. We have now finally seen the basics or the proposal. As you know, there's lots of differences around the 29 markets or 27. I'm not sure really how many in the European Union, I apologize for that. But in the conglomerate of all those markets, there's all different kind of opinions. And so it will take at least to your point, we believe it's a good year for this to harmonize to find a solution. But we know the direction and the direction actually helps us also put a framework. We've always been in favor of some thoughtful regulation that allows adult smoker to get to those products that help them get off smoking, but also prevent you getting to those same products, which we do not market to. So we'll see what comes out. We are confident that we'll continue to operate well in that framework. And as you said, more regulation that is thoughtful will actually help us going forward. John Crosse: Great. Thanks, Lukas. We go to the phone lines now. Sharon, do you just want to remind people on the phones again how to register? Operator: [Operator Instructions] I will now hand back to you, John. John Crosse: Thanks. So we do have some questions in the queue. The first one is David from Morgan Stanley. Unknown Analyst: David [indiscernible] from Morgan Stanley. I just had one question on cash flow looking forward. How should we think about working capital in '26 and outer years? Should we expect an inflow or outflow? Murray McGowan: Thanks for the question, David. Working capital, we try to ensure we maintain a tight control on working capital as a group. In terms of guidance going forward, look, we guide on free cash flow as a business. We're very clear the guidance for the business in the meantime in the medium term is from GBP 2.2 billion up to GBP 3 billion by the end of the strategic period. Working capital, we're not expecting any significant shifts plus or minus during that period of time at this stage. So we don't guide on that. I think the focus more on the free cash flow commitment, so at least GBP 2.2 billion next year. John Crosse: Great. Thanks, David. We do also have one question that's come through online from [John Guy]. John, I think we've answered that. Your question was around the building blocks of driving double-digit growth in NGP next year. I think we covered that early on. John, do drop us an e-mail and get in touch if you feel you need a bit more detail, but I think we've answered that already. So come back into the room if there's any other questions in the room. No. Okay. There's no other questions online. So with that, I hand it over to you, Lukas, to wrap up. Lukas Paravicini: Thank you very much. It's been a pleasure to have you here. Thanks for your interest. And again, as I said, we are very excited with not just what we have delivered this year, what we have delivered over the last 5 years. Again, also thanks to Stefan, who is not with us today, but has always been instrumental in delivering the last 5 years. But also very excited about how we continue our confident evolution in delivering against a good tobacco business, sustainable value there, why we build an NGP business at scale and also very excited how we're going to step up our capability built around getting closer to consumers, invest further in technology to underpin our strategic ambitions. Thank you very much, and hope to see you soon again. Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Leumi's Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 18, 2025. The presentation that we will be using is available on the IR section of the bank's website. I would like to remind everyone that forward-looking statements for respective 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, risks in 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 filing with the various securities authorities. I would now like to turn the call over to Ms. Hagit Argov, CFO and Head of Finance Division. Please go ahead. Hagit Argov: Good day, everyone. I'm very pleased to be here with you today and to present our strong third quarter 2025 financial results. So let's get started with Slide 3. First, some key takeaways. Bank Leumi continues to present high and stable results over many quarters. This quarter, ROE was 16.3% and net profit was ILS 2.7 billion. It is worth noting that if the excess capital were reduced to the bank's internal CET1 target of 10.6%, the ROE would stand at 19% in the third quarter. In addition, we continue to manage costs effectively while maintaining a strong efficiency ratio. Credit quality metrics further improved and they have been consistently among the best in the sector over a number of years. We continue to present significant excess capital and healthy liquidity ratios. Following the Bank of Israel approval to increase the payout ratio up to 75% of the net profit in the third quarter, Leumi announced a combined dividend and buyback of ILS 2 billion. So all in all, we delivered strong, consistent and high-quality performance. Let's take a quick look at Slide 4. Here, we can see our financial targets for 2025 and 2026 published as a strategic plan in our 2024 annual report. So far, Leumi is well on track to meet our financial targets. Before we dive into the details, let me start with a brief overview of the macroeconomic environment. For this, we move to Slide 5, which highlights the key macro indicators. In Q3, the economic indicators showed an expansion. The Bank of Israel estimates real GDP growth of 2.5% for 2025, mainly impacted by the implications of the military conflict against Iran and 4.7% GDP growth in 2026. The GDP growth is driven by domestic demand and fixed investment. In addition, export of high tech services, which is the key growth engine of the Israel economy has accelerated in recent months. And recently, inflation got back to the target range of Bank of Israel between 1% to 3%. In October 2025, a high-tech agreement with Hamas, including the return of the Israeli hostages was achieved. If fully implemented, this development would have positive implications for the Israeli economy and global sentiment. Moving to Slide 6, which provides a snapshot of our quarterly performance. I will let the numbers speak for themselves. As mentioned, net income for Q3 2025 was ILS 2.7 billion and ROE was 16.3%. The cost-to-income ratio was especially strong at 27%, down from 31.1% in Q3 2024. This was supported by higher income and lower costs, thanks to our advanced technology. Our cost-to-income ratio continues to lead the Israeli banking sector and is among the best globally. Credit loss expenses were 0.03% in Q3, reflecting, among other factors, a positive development in the geopolitical environment. Credit portfolio grew by 1.3% quarter-on-quarter, supported by continued demand, mainly from the corporate and mortgages segment. The book value per share of the bank increased by 2.7% in the quarter and is up 12.7% over the past 12 months to ILS 45. Quarterly earnings per share were up almost 20% year-on-year. Now let's drill down to some key numbers on Slide 7, which shows the breakdown of income and expenses. Net interest income decreased 1.6% year-on-year, mainly driven by a lower CPI compared with Q3 2024. Overall, finance income grew strongly by 10.5% year-on-year, supported by higher noninterest income, mainly from capital markets compared with the parallel quarter last year. Expenses declined, reflecting our tight cost control. As a result of the above, pre-provision net revenues increased year-on-year by 14.3%. In addition, as part of the Bank of Israel program to distribute benefits to customers that was launched in April 2025, Leumi continues to benefit its customers. This totaled ILS 172 million in the third quarter. A brief view of Slide 8 summarizes our 9 months 2025 results. As you can see, 9 months results followed a similar trend to those for the 3 months period in the previous slide. Another brief metric on Slide 9 highlights our fee. Fee income was partly affected by the benefits granted to customers in the Bank of Israel program. Excluding these benefits, fees grew strongly by 11.4% quarter-on-quarter, driven mainly by securities activity and credit growth. 9 months 2025 over 9 months 2024 displayed similar trend. On Slide 10, we clearly see the bank's continued improvement in our multiyear cost income ratio. Our cost income ratio continues to be strong at 27% in the third quarter and 28.6% in the 9 months. Turning to Slide 11. The development of credit loss expenses in Q3, which shows us that specific provisions reflect our high-quality credit portfolio with an income of ILS 74 million coming from net recoveries. That means collections minus provision increases. Collective provisions were lower than in the parallel quarter, reflecting an improvement in the macro environment in light of the positive development in the geopolitical situation. Overall, total credit loss expenses in the quarter were 0.03% of gross loans compared with 0.28% in Q3 2024 and maintain our coverage ratio. Slide 12 presents a significant metric. It is the high quality of our credit portfolio. Credit quality further improved in Q3 with troubled debt declining to 1.34% of gross loans. NPL was also at a low level of 0.41%. The coverage ratio, as I mentioned before, remains stable, while the rate of provisions to NPLs increased 3.3x. These parameters are among the lowest in the banking sector. Now we turn to Slide 13. This shows our strong credit growth. Credit growth over 9 months was in line with our targets and stood at 8.8% with a 1.3% rise in Q3. This was supported by the ongoing resilience of the economy with growth coming from corporates, including real estate, infrastructure, mortgages and middle market. The next slide, Slide 14, shows the bank's diversified deposit base. Total deposits were up 3.7% in 9 months 2025, while deposits from private individuals grew by 1.4%. Liquidity ratios remain robust with the LCR ratio at 128%. Let's now move on. Slide 15 shows our healthy capital and leverage ratios. The core Tier 1 ratio increased by 5 basis points in the quarter to 12.33% with the bank's capital buffer now standing at more than 2% or ILS 11 billion. The total capital ratio was stable at 14.87%, which is also well above the Bank of Israel minimum requirement of 13.5%. Going on to Slide 16, we see the bank's capital return. Because the limitation on the capital return was partly by the Bank of Israel, Leumi declared a total payout of ILS 2 billion, of which ILS 1.5 billion is a cash dividend and the rest is in buybacks. This represents 75% of the quarterly net profit and an annualized return of 8.2% at the current share price. In conclusion, we turn to Slide 17. Let me just summarize our presentation. The bank continues to present consistent and strong financial performance with high ROE even during macroeconomic and geopolitical uncertainty. We remain highly disciplined on costs, resulting in consistent efficiency improvement and the best cost-to-income ratio among Israeli banks and probably one of the best globally. Our technology transformation doesn't stop. Nearly 90% of our private customers carry out their activity through digital platforms. The bank's strong profitability and healthy capital buffer enable us to continue growing in our target segments and also allow us to share higher returns with shareholders through dividends and our buyback program. With that, I will now open the call for questions. Operator? Operator: [Operator Instructions] The first question, funding plans. Do you plan to come to the market in the near term to issue USD senior bonds or AT1s or Tier 2s? Hagit Argov: Okay. Thank you for the question. Regarding the senior, we constantly issue senior bonds depending on our liquidity ratio. And if it will be in U.S. dollar, it depends in the price and in the conditions. So we consider it when we issue. Regarding the Tier 2, let me point out that our total capital ratio is significantly above the requirement. So there is no specific need to refinance it in the near future. As for the bond seniors in the U.S. dollar with the call date in January 2026, the final decision will be during 2026, depends on our capital ratio. Operator: The next question, what are your refinancing plans for the Tier 2s callable in January 2026? Hagit Argov: The same question, I covered it in my answer. Operator: The next question, could you provide some color on the trajectory of net interest income and net interest margins as we approach the end of this year and look ahead to next year? Hagit Argov: Okay. So about this quarter, the NIM was affected mainly by the higher share of institutional in our deposit portfolio. These deposits carry lower margins. They are usually short term. So the current level of the NIM will not necessarily remain the same in the coming quarter. And of course, affected by the competition. About the future, we expected the Bank of Israel to announce an interest rate reduction. And according to our financial statements, a 1% decrease in interest rate would affect our results by around ILS 8 million, which is approximately 0.8% in ROE terms. So we believe that this will be the effect in our financial statement. Operator: The next question, I'd appreciate your perspective on the normalized cost of risk. There was a noticeable decline this quarter with COR at 9 bp for the first 9 months compared to 16 bp last year. Any insights on the drivers behind this change? And any guidance going forward would be very valuable. Hagit Argov: Okay. Thank you for the question. First of all, it is important to note that during the war, we accumulated a large excess provision due to concern about the geopolitical situation. Secondly, in this quarter, there is an improvement in the geopolitical situation. And as I mentioned in my presentation, in our credit quality parameters. And finally, our specific provision, we continue to record income from recovery, net recovery. It means we have more recoveries than write-offs. So consequently, total credit loss provisions were low, amounting to ILS 3 million. I want to mention that our NPL coverage is about 3x and is one of the highest in the system. And also, we maintain our coverage ratio, which means our provisions to our credit. So if I have to appreciate what will be in the future, it's, of course, depend on the geopolitical situation and our credit quality parameters. So if the situation will continue to improve and there will not be any deterioration. So I believe that it will be in the same level of provisions. Operator: The next question. A question on regulatory risk. There have been media headlines about an increased tax rate on the banks and separately by the Finance Minister to subsidize mortgage. Does the bank have any take on that? Hagit Argov: Actually, we heard about this plan at the same time as you did, and we don't have any further information. Such a process would require, of course, legislation. And yet, we don't see any official document. So if the issue develop further, we will be able to respond accordingly. Operator: The next question, how much more operating leverage is there? And how should we be looking at expenses going into next year? Hagit Argov: Okay. So as you know, Leumi has continued year after year to increase its income and decrease its expenses. Our motto has been doing more with less, and this is reflected in our financial parameters, in our cost-income ratio. We have achieved and we'll continue to do this mainly by advanced technology. By the way, to the best of my knowledge, it is the best of all the Israeli banks and probably in the world, and we are very proud of it. We continue our tight control of expenses, and we continue with our technology, and I believe we can maintain it at least in the same level. Operator: [Operator Instructions] There are no further questions at this time. This concludes Leumi's Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Ultralife Corporation Third Quarter 2025 Results Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Jody Burfening. Please go ahead. Jody Burfening: Thank you, Latanya, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's Earnings Conference Call for the Third Quarter of fiscal 2025. With us on today's call are Mike Manna, Ultralife's President and CEO; and Philip Fain, Ultralife's Chief Financial Officer. The earnings press release was issued earlier this morning. And if anyone has not yet received a copy, I invite you to visit the company's website, www.ultralifecorp.com, where you'll find the release under Investor News in the Investor Relations section. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenue from key customers, delays or reductions in U.S. and foreign military spending, acceptance of new products on a global basis, disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather or other factors not under the company's control. The company cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralife's financial results is included in the company's filings with the Securities and Exchange Commission, including the latest report on Form 10-K. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to Mike. Good morning, Mike. Michael Manna: Thank you, Jody. Good morning. Welcome to our call on Ultralife's Q3 operating results. Earlier this morning, we reported Q3 sales of $43.4 million with an operating loss of $1 million, including a onetime adjustment of $1.1 million for various costs related to the final services transition of Electrochem and the planned closure of our Calgary location, which resulted in a GAAP net loss of $0.07. In Q3, we saw revenue growth year-over-year, but faced several challenges with gross margin, primarily due to incoming supply chain quality issues, which affected product mix and line efficiencies in our Battery & Energy business. Our Communications business continues to weigh on earnings as new products are launched and sell-through gains momentum. Our overarching strategy of diversification through M&A and new product development remains critical to stabilizing and improving the profitability as many of our existing products service components or accessories within our customer systems, giving us limited control over order timing, volume and mix. As we've grown through M&A, periodically, we need to review our infrastructure and align it properly to serve our customers in a cost-effective manner. With that said -- with that in mind, we have decided to close our Calgary location which is a smaller facility supporting oil and gas battery packs acquired with the Excel acquisition, with production being relocated to our Houston facility. Additionally, we are progressing through a company-wide rebranding initiative with the first phase targeted for completion in Q4. This effort will emphasize the Ultralife brand as our unified market identity, enabling more cohesive marketing efforts, stronger brand equity and reduced redundancy. Ultimately, this alignment will enhance our global position as a leading critical power provider. With that said, because of the investment in new products and our M&A activity, we continue to see large opportunities develop on both sides of our business with favorable discussions with various partners and customers. With our leveraged business model and reduced facility count, we can add significant revenue with minimal increase to overall costs. I will now turn it over to Phil to talk through the detailed numbers. Philip A. Fain: Thank you, Mike, and good morning, everyone. Earlier this morning, we released our third quarter results for the quarter ended September 30, 2025. We filed our Form 10-Q with the SEC yesterday and have updated our investor presentation in the Investor Relations section of our website. As noted in our November 7th press release, we requested an extension to file our Form 10-Q with the SEC to allow for the completion of our accounting close for Electrochem. The service agreement under which Electrochem's former parent maintain their books and records concluded in the third quarter, and we have now transitioned Electrochem to Ultralife's information systems. A summary of our third quarter results follows. Consolidated revenues totaled $43.4 million compared to $35.7 million for the third quarter of 2024. Revenues from our Battery & Energy Products segment were $39.9 million compared to $32.5 million last year. Excluding third-party sales for Electrochem, which we acquired on October 31, 2024, sales for the segment increased 1.9% year-over-year. Government Defense sales for the 2025 quarter increased 19%, reflecting strong demand from the U.S.-based global prime. This growth was partially offset by a 5.7% decrease in commercial sales resulting from declines of 13.3% in oil and gas sales due to macroeconomic and geopolitical factors and 10.4% in medical battery sales due to the timing of orders. The sales split between commercial and government defense for our battery business was 70%-30%, almost identical to 69%-31% reported for the 2024 quarter, and the domestic to international split was 72%-28% compared to 56%-44% for the 2024 period, reflecting our acquisition of Electrochem and the heightened domestic shipments of our government defense products. Revenues from our Communications Systems segment of $3.4 million increased to 8.2% from the $3.2 million we reported last year. On a consolidated basis, the commercial to government defense sales split was 65%-35%, almost identical to 63%-37% for the 2024 third quarter. Our total backlog exiting the third quarter was $90.1 million, a 6.5% increase over the $84.5 million exiting the second quarter. The replenishment rate remains diverse in nature with commercial customers comprising approximately 55% of the backlog and government defense customers comprising the remaining 45%. Our consolidated gross profit was $9.6 million, an increase of 10.8% over the $8.7 million for the 2024 period. As a percentage of total revenues, consolidated gross margin was 22.2%, a 210 basis point decline from the 24.3% reported for last year's third quarter. Gross profit for our Battery & Energy Products business was $8.8 million compared to $8 million last year, an increase of 9.6%. Gross margin was 22.1% compared to 24.7% last year. The year-over-year reduction resulted from manufacturing inefficiencies, primarily due to quality issues associated with key incoming raw materials and components that disrupted our operations and to a lesser extent, sales mix, reflecting the declines in generally higher-margin medical and oil and gas sales. For our Communications Systems segment, gross profit was $0.8 million compared to $0.6 million for the year earlier period. Gross margin was 23.3% compared to 20% last year. Operating expenses were $10.6 million, an increase of $2.4 million or 29.4% from the year earlier quarter. The year-over-year increase is comprised of $1.3 million related to the inclusion of Electrochem and $1.1 million of nonrecurring costs. The onetime costs include a $0.5 million provision to close our Calgary facility, costs related to our transition of Electrochem to Ultralife information systems and litigation costs for our cyber insurance claim. We anticipate annual savings from our closure of Calgary of approximately $0.8 million throughout 2026. As a percentage of revenues, operating expenses were 24.4% compared to 22.9% for last year's third quarter. Excluding the onetime costs, operating expenses were 21.9% of revenues for the third quarter of 2025. Operating loss was $1.0 million compared to operating income of $0.5 million last year, reflecting the decline in Battery & Energy Products gross margin due in large part to quality issues on incoming materials, the onetime nonrecurring costs totaling $1.1 million and Communication Systems delayed sales orders. Other expense reported below operating income was $0.8 million for the quarter compared to $0.2 million for the year earlier period, primarily resulting from the increase in interest expense on the acquisition debt and the impact of foreign currency fluctuations. Our resulting tax benefit for the third quarter was $0.5 million compared to a provision of $0.1 million for the 2024 quarter computed on a GAAP basis at statutory rates. Net loss was $1.2 million or $0.07 per share on a GAAP fully diluted basis. This compares to net income of $0.3 million or $0.02 per share for the 2024 quarter. Adjusted EBITDA, defined as EBITDA, including noncash stock-based compensation expense and onetime acquisition and other costs not reflected of our ongoing operations was $2.0 million or 4.7% of sales compared to $1.9 million or 5.4% for the prior year quarter. Adjusted EBITDA on a TTM basis is $15.5 million or 8.3% of sales. Turning to our balance sheet. We ended the third quarter with working capital of $66.9 million and a current ratio of 3.0 compared to $67.9 million and 3.3 for 2024 year-end. Our liquidity remains solid. In the first 9 months of 2025, we have reduced our debt principal by $4.1 million, which already exceeds the $2.8 million amortization required for the full year under our debt agreement. While we do not have any draws on the $30 million revolver portion of our debt agreement and no present plans to do so, our balance sheet provides the borrowing base capacity for this amount. In closing, we have initiated several actions, which Mike will cover, which position us to improve our gross margins, reduce redundant facilities, consolidate operations, diversify our supply chain and better promote our Ultralife brand on a global basis. These actions better position us to more fully realize the profitability leverage associated with our increasing sales funnel. I will now turn it back to Mike. Michael Manna: Thank you, Phil, for the detailed review of the Q3 2025 results. As mentioned in our last call, our priorities remain clear for 2025. First, completion of the Electrochem transition, which over the last few quarters has been completed in full. We continue to expand vertical integration opportunities enabled by the acquisition of Electrochem, allowing us to incorporate Electrochem cells into existing pack assemblies and broaden our addressable market in areas such as pipeline inspection, seismic telemetry and sonobuoys. We are qualifying cells with several oil and gas customers to enable transition of their battery packs to utilize Electrochem cells and expect to see benefit of these efforts in 2026. Secondly, we remain focused on strengthening our sales opportunity pipeline to drive growth through 2026 and beyond, while continuing to strategically diversify our business and customer base. Our efforts are aimed not only at expanding the overall size of the funnel, but also prioritizing opportunities that can generate consistent, repeatable annual revenue. We have been reviewing our multiple brands and market initiatives and have started a company-wide branding alignment. We currently have a complex and confusing number of brands and trade names for a company of our size. This effort will reduce the redundant cost of supporting and justifying multiple brands and trade names, short messaging both internally and externally to customers that we are a global critical power provider of energy and RF products. Third, we are intensifying our efforts at improving and stabilizing gross margin through pricing, material cost deflation and lean productivity projects in both the Battery and Energy and Communications businesses. As we enter Q4, we have an external expertise to drive targeted lean exercises and process improvements at our Newark location to increase gross margin. We are closing our Calgary location which is focused on providing production -- are focused on providing production centers of excellence with all the necessary systems to support our customers and prepare for expected growth. Switching to development projects. We continue to invest in products on both sides of the business to drive revenue and opportunities for organic growth. The Communication System business is expanding the ruggedized server case portfolio to service new programs and server variants, which will provide greater opportunity to expand the market share in the ruggedized computing environment. We completed an initial design for the latest next-gen communication and control solution, utilizing our ruggedized server expertise and HPE's line of exceptional servers for AI and edge computing. Several military programs are using this solution now for possible fielding as components to the broader readiness initiatives. We showcased our new amplifier and Crescent server products at the Defense Security Equipment International Show in September, which is one of the UK and EU largest defense trade shows, where we met with multiple OEM and governmental representatives. We have sample amplifiers out with specific partners for trials currently with expected orders inbound and production shipments starting in 2026. Crescent server continues to evolve, and we have received critical feedback and direction to fully develop this tip of the spear compute capability for forward field applications with initial production expected in 2026. Meanwhile, we are finalizing the design of our next high-performance amplifier, targeting advanced radio platforms with the latest high-speed waveforms utilized by the U.S. and Armed Forces. We have preproduction parts in-house for bench testing and final validation and expect to have preproduction units for evaluation in Q1 2026. Lastly, on the communications side of the business, we received an initial PO from an international customer for prototype electronic warfare amplifiers. This is our first project, leveraging our amplification expertise to counter electronics in the battlefield. On the Battery and Energy side of the business, we have a great deal of activity across several products with new business being the key focus. But first, I will mention we received the BA-53 battery award in Q3 for $5.2 million, which will be delivered throughout 2026, our first sizable award for this product in over 4 years. On the new business side, I will start with the conformal wearable battery, where we have now begun shipping production quantities. We've quoted multiple large volume opportunities, mainly for international customers with expected awards for 2026 deliveries. We've passed 2 critical quality audits in our China location, the most important one being for our high-capacity thionyl chloride D cell with an opportunity in the metering space. Testing continues to go well, and we expect UL testing and validation testing to complete in Q4 with initial production volume commitments to come soon after. On the 123A side of our business, we have received a follow-on PEO from a major illumination company, which will begin deliveries in Q4 and throughout the first half of 2026. We're working on several new products for battery packs utilizing our XR123A cells, which offer a 30% increase in energy density over the standard 123A cell. As mentioned earlier, we established initial production capabilities for our thin cell technology to support customers in the medical wearable sector in various item tracking applications. The sales pipeline continues to strengthen with several projects now in the qualification phase. We are investing additional development effort in this product line with the unique cell designs that further reduce the thickness of the product while reducing manufacturing complexity with an eye on large-scale automation as we expect thin wearable sensors will continue to proliferate. We have expanded our family of X5 medical car products with the release of our latest product, a portable power bank that provides power to pole-mounted equipment or any other item that requires extended run time utilizing USB-C, mostly targeting tablet and portable computers. Production validation and certification are finishing up, and we have samples out to key partners in support of product quotations. Investing in new product development is essential to diversifying and strengthening our product portfolio, driving future growth and building our legacy of delivering critical power solutions. Our priorities remain converting long-term development product, development efforts into revenue, advancing vertical integration where possible and maintaining a strong focus on the operational efficiency initiatives. I continue to focus on the long-term projects and future of the business. And although we've had a challenging 2025, I'm confident we are making the right moves to stabilize and grow the business over the long term. As we go through the end of the year, we will enter 2026 with the Electrochem transition completed, the largest number of new products for sale ever in our Communication Systems business, multiple large opportunities for both sides of the business, a reduced North American facility count, unified back-office systems across most of North America and a strong brand architecture evolution underway. I believe we are well positioned for future growth with overall reduced operational costs. We'll go back to the operator for questions. Operator: [Operator Instructions] And I am showing no questions at this time. I would now like to hand the call to Mike for closing remarks. Michael Manna: All right. Well, thanks, everyone, for listening to today's call. We look forward to talking to you again next time during the Q4 2025 earnings call. Bye now. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Pedro Courard: Good morning, good afternoon. My name is Pedro Courard, I'm CEO of Atlantic Sapphire. And today, together with Gunnar Skinderhaug, our CFO, we will present the third quarter operational update of the company. The company has been performing according to plan during the last quarter. In terms of production, achieving 1,400 tonne HOG in the third quarter at an average weight of 3.1 kilo HOG. And in terms of prices, we achieved $8.6 per kilo, let us say, 19% above the U.S. price index. We have continued the process of operational improvement in all areas, allowing us to keep our ambitions in terms of future production. As we are finishing the operational upgrades started in 2025, we are now realizing the positive impact of having more stable systems. While our feed conversion remains stable in 1.3, we have been constantly increasing our feed consumption rate permitting us sustain our future production plans. Losses were slightly higher than in previous quarters, but still within normal ranges and very low. Keeping our trend for 2025. During the third quarter, we increased our harvest maintaining good average weight, reaching premium prices. Following market tendencies during the quarter, we had a decrease in prices compared to previous one. Both net and standing biomass are showing stable levels for the last 2 quarters, in line with our expectations. Gunnar Aasbo-Skinderhaug: Efforts are currently on Phase 2. improving biological and financial performance. Phase 1 harvest data improving, sales performance is improving. As Pedro mentioned, and profitability measures are on track. All efforts are currently on Phase 1. Phase 2 investments are preliminary cost as we focus all our efforts on improving Phase 1. The profitability measures are on track and will drive down unit costs in the coming periods, mainly from 3 areas. Scale is increasing as volume increase, scale effect is increasing. Current harvest volume is expected at 5,400 metric tons for 2025, growing to 7,000 metric tons for 2026 and 7,500 metric tons for 2027. Another improvement area is cooling and energy as new measures allow more efficient water cooling on the facility. The third main area is maintenance as Pedro mentioned the maintenance program is executed and completed and will drive down unit costs going forward. Beyond the ambition, we see further potential going forward. Also through scale, increasing from 7,500 and beyond, we see optimized Phase I operating at 8,500 tonnes annual harvest weight. We also have further potential to improve cooling and energy usage and also improve FCR. This will drive down unit cost in an optimized Phase 1 further. And Phase 2 will allow further scale on the facility, allowing even further reduced operational costs per kilogram harvested. Now we open for Q&A. Gunnar Aasbo-Skinderhaug: [Operator Instructions] We have one question from IntraFish. When do you expect to be able to move to Phase 2 and how have costs for this changed? Pedro Courard: Well, first, it's important to mention that today, we are 100% focused on Phase 1. Our goal is validate Phase 1and everything is going in that direction. Once we are able to validate Phase 1, we will continue spending resources in Phase 2. So far, we don't have yet a cost estimation for this step. Gunnar Aasbo-Skinderhaug: We have no further questions posted. We are open to receiving questions also on e-mail. We will reply as quickly as we can. There is 1 here from DNB. What measures will you take to improve net biomass growth to target 2,200 to 2,500 live weight per quarter? And when do you expect to get there? Pedro Courard: Today, we are running according to the plan. The measure are the normal one. We are increasing the feed consumption per day, our goal is to be at around 32 tonnes per day, and now we are moving directly in this path. So we expect that in the first month of 2026 will be in that level of standing biomass. Gunnar Aasbo-Skinderhaug: There are no further questions posted. As mentioned, we will answer questions also on e-mail. Thank you, everyone, for attending this Q3 presentation. Wish you all a great day. Pedro Courard: Thank you very much.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Mizrahi Tefahot Bank Third Quarter 2025 Business Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 18, 2025. With us on the line today are Mr. Adi Shachaf, CFO; and Mr. Menahem Aviv, Chief Accountant. We would like to draw your attention to Slide #1 of the financial statement for the third quarter 2025 presentation, which includes general comments regarding legal responsibility, including that the information contained in the presentation constitutes information from the bank's 2025 quarterly reports and/or immediate reports as well as the periodic quarterly and annual reports and/or immediate reports published by the bank in previous years. Accordingly, the information contained in the presentation is only partial, is not exhausted and does not include the full details regarding the bank and its operations or regarding the risk factors involved in its activity and certainly does not replace the information included in the periodic annual and/or quarterly or immediate reports published by the bank. In order to receive the full picture regarding the bank's 2025 quarterly and annual reports, the aforesaid reports should be pursued fully as published to the public. The bank's results in practice may be significantly different from those included in the forecasting information as a result of a large number of factors, including inter alia, changes in the domestic and global equity markets, macroeconomic changes, geopolitical changes, legislation and regulation changes and other changes that are not under the bank's control, which may lead to the estimations not realizing and/or to changes in the business plan. The forecasting information may change subject to risks and uncertainty due to being based on the management's estimations regarding future events, which include inter alia, global and local economic development forecast, particularly regarding the economic situation in the market, including the effect of macroeconomic and geopolitical conditions, expectations for changes and developments in the currency and equity markets; forecasts related to other various factors affecting exposure to financial risks, forecasts with respect to changes to borrowers' financial strength, public preferences, changes in legislation and provisions of regulators, competitors' behavior, the status of the bank's perception, technology developments and human resources developments. Mr. Shachaf, would you like to begin? Adi Shachaf: Thank you all, and welcome to the Mizrahi Tefahot Q3 2025 Analyst Call. As you all know, the last 2 years were very unusual for Israel. From the first day of the war, the bank has taken a pro-client approach trying to offer immediate relief to its clients beyond the mandatory relief plan of the Bank of Israel, and we're adapting the COVID experience and best practice to the current situation. As for the bank, it is much more boring, as you can see from the report on the results and without any material one-off. I think the most conspicuous item in this report is the very strong credit growth. This growth is across the board along most of the asset classes, including mortgages, corporate and middle market and is part of our strategic plan. Since life is not always linear. Many of the deals we are working on materialized in Q3. So it would be reasonable to assume that the work on [ toward ] closing and growth rate in Q4 would be lower. This growth should help us to create a nice starting point for 2026. We think that our credit metrics reflect a balanced credit portfolio with adequate risk management. You can see provisioning was relatively standard for this period. And then for the other items, please let me use this call to further highlight a couple of points. CPI contribution to financing revenues is traditionally high in Q3, and that was also the case this time. CPI contribution in Q4 is, of course, expected to be lower. The net profit and the return on equity reflects the strong balance sheet and the good efficiency ratio. Our cost-income ratio for the quarter is below 35% and in line with our strategic plan. On the expense side, you can see the continuation of 2024 being a notch down compared to 2023 levels. And as always, salaries are also affected from variable remuneration related to the bank's results. It is also very noticeable that the results have been reached despite the relative extra tax Israeli banks are paying in 2025 and despite the extensive Bank of Israel client relief outline. Our implementation of the outline is targeting more financing, interest paying or saving benefits to clients and less operational benefits, and one can easily estimate the impact of these 2 items on the results. Liquidity is very robust with high share of core deposits and capital ratios are in tandem with the profitability and growth. Demand for mortgages is healthy and we continue to follow our strategy to retain our market share in the market. We think that it is reasonable to assume that today's balance sheet growth will materialize in the coming quarters, and we do expect to see further responsible credit growth in the coming quarters. We will distribute 50% of Q3 profit to dividends. All in all, since we are following our boring yet effective path and accommodating to the new environment. Thank you very much for your attention. And with that, I leave you with the hands of Mr. Menahem Aviv, our Chief Accountant. Menahem Aviv: Thank you, Mr. Shachaf. Let's overview the main figures in the financial statements. The net profit in Q3 2025 reached ILS 1.483 billion. The net profit in the first 9 months of 2025 reached ILS 4.26 billion. The return on equity in Q3 reached 17.6% and in the first month of 2025 reached 17.2%. The equity amounted ILS 34 billion. The cost income ratio reached in Q3 2025, 34.2%. The financing revenues from current operations in Q3 reached ILS 2.822 billion. The total revenues in Q3 reached ILS 3.830 billion. Operating and other expenses totaled to ILS 1.310 billion. The ratio of provisions to loans in Q3 reached 0.04%, and the ratio of Tier 1 reached 10.14% and the total ratio reached 13.03% (sic) [ 13.04% ]. Adi Shachaf: I think we can go now to Q&A. Thank you, Mr. Aviv. Operator: [Operator Instructions] The first question is from Tavy Rosner of Barclays. Tavy Rosner: Just a couple of short questions, if I may. I saw the announcement from Bank of Israel earlier this week, allowing banks to distribute higher capital as long as it meets the capital requirements. What's your take about the announcement? Do you feel that there is room to distribute more? Or are you comfortable with the current level for the time being? Adi Shachaf: Thanks, Tavy. We're comfortable with the current level. As you can see, we use this capital for our growth and credit growth. And we think that, for example, in this quarter, a 50% dividend alongside a return on equity of 17.6% reflects the good mix and balance between these 2. And we think that we would keep on with our strategic plan and grow our credit, and we need this capital. Tavy Rosner: Got it. And then on the business side, on the mortgage aspect, do you feel any change in the competitive dynamics? Any other banks or institutions competing actively on prices? Or how should we think about mortgages in the near term? Adi Shachaf: We're not allowed to refer to prices, but we see a very competitive market on the mortgage arena for many, many quarters. Our strategy is to retain our market share, and we were able to do it despite the heavy competition. Tavy Rosner: Okay. Got that. And then just a housekeeping one. How should we think of expenses growth the next couple of quarters? Is it still like mid-single-digit type of growth? Or are you expecting to kind of lower it at some point? Adi Shachaf: So can you please repeat it, Tavy, I couldn't hear you. Tavy Rosner: Yes. Just about the expenses in general, salaries and so on. Should we expect mid-single-digit growth through the cycle as like a normal run rate? Adi Shachaf: Yes. Operator: There are no further questions at this time. This concludes the Mizrahi Tefahot Bank Ltd. Third Quarter 2025 Business Results Conference Call. Thank you for your participation. You may go ahead and disconnect.